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Issue of Synthetics High on Agenda at Third Dubai Diamond Conference

13 november 2017

The third edition of the biennial Dubai Diamond Conference had the theme of “Shaping the future of an interconnected marketplace.” The two-day conference, which took place in Dubai's Almas Tower, which houses the Dubai Diamond Exchange, brought together international leaders of the diamond industry ranging from African Ministers to traders, financiers and world-renowned jewelers.

Conference organizers, the Dubai Multi Commodities Centre (DMCC) and the Dubai Diamond Exchange (DDE), set out to hold an all-inclusive review of the issues facing the global diamond trade. And they certainly lived up to the promise. The meeting covered the major issues affecting the industry, with leading diamond trade figures from across the world covering all areas of the diamond pipeline. In less than two days, the conference discussed issues from sustainability to undisclosed lab-grown diamonds, financing and the lack of profitability, reviewing the work of the Kimberley Process, the effect on the industry of the marketing trend of selling diamonds at tenders and auctions, and the impact on the trade in Dubai and India of the Value Added Tax (VAT) and the Goods and Services Tax (GST), respectively.

The critical role the Dubai Diamond Conference has taken on in monitoring developments in the industry and providing pointers for how it should tackle challenges as it moves forward were at the heart of the comments made by the DMCC’s Executive Chairman, Ahmed Bin Sulayem, in his welcoming remarks. “Diamonds have long played an illustrious role in Dubai's heritage as a gateway for global trade. And, in just 15 short years, Dubai has become the third biggest diamond trading center in the world. It didn’t happen by accident. It happened because we designed an environment that is safe, business friendly, and that conveniently links producing and consuming markets.”

One of the major subjects debated at the conference was that of lab-grown diamonds and their disclosure. Panelists spoke about the large rise in the quantity and quality of lab-grown stones in recent years, whether the detection equipment is sufficiently powerful to detect loose and diamond-set jewelry and if sanctions against transgressors is a powerful enough deterrent.

The GIA’s Executive Vice President and Chief Research And Laboratory Officer, Tom Moses, said: “Synthetic diamonds are not only not going to go away, but production will continue growing. The GIA has developed equipment to detect them that is reasonably inexpensive, and our technology continues to develop. I would point to the example of synthetic gemstones, such as rubies and emeralds, which did not take off because consumers wanted the real thing", suggesting that the industry should perhaps not at this stage get carried away with the belief that lab-grown diamonds will necessarily be attractive to consumers. Moses spoke about the large scale of synthetic diamond production in China, although he pointed out that most of the output is aimed at industrial uses rather than for jewelry.

Moses asked if the industry is strong enough to act against transgressors. "It is critically important that consumers know exactly what they are buying and that illicit activity is not allowed to take place."

He added that the GIA began grading synthetic diamonds around 10 years ago. The decision was made in order to allow the grading lab to be able to see as many stones as possible to get information about them and how they are created. However, the number of such stones that are being graded is tiny. "Last year, we graded about 350-400 stones out of the millions of carats of diamonds that were graded overall."

Meanwhile, WFDB President Ernie Blom said: “We don’t have a problem with synthetics as long as they are disclosed. Lack of disclosure is our main concern. We rely on out 30 affiliated bourses to aid us in this. This is illegal and transgressors should be prosecuted by the local authorities. The WFDB, as an organization, does not have a stand on the issue of what should be the policy of its affiliated bourses regarding trading of lab-grown diamonds within their bourses. Each exchange is free to decide its own policy.

"The WFDB's Charter 'on disclosure of synthetic, treated natural and natural diamonds' obliges traders to print a statement on their invoices providing a proper description and declaration attesting to the nature of the diamonds sold: namely, that all the goods sold are guaranteed to be natural and also untreated. Perhaps we need to ask ourselves if synthetics, as long as they are disclosed, are the threat that we automatically believe them to be. Production is constantly increasing, both in quantity and quality, but we should bear in mind that it is estimated that just 3% of global consumption is of synthetics, so we should keep this in perspective.

"In addition, with their prices continuously dropping, can they really be compared to diamonds as a store of value, I think not. Synthetic diamonds are made by machines, so there is no limit to how many can be produced and as more are made their value will continue to decline. Compare this with diamonds formed billions of years ago in the Earth which are finite and which will, therefore, have an ever-increasing value.

"Perhaps synthetics can be a catalyst for higher sales of mined diamonds? Maybe they can bring new buyers to the diamond jewellery arena – specifically younger consumers and the so-called Millennials of 30 and under adults – for whom jewellery is way down on their list of wanted items after smartphones, tablets and exciting and experiential vacations. In rapidly changing times, we must be open to new ways of thinking and doing business. Sticking with long-held beliefs is usually unhelpful.

"But we believe that diamonds can't be made, you have to find them. Each one is unique. And this sums up perfectly the difference between mined diamonds, and lab-grown stones made in a production line. I have also been concerned with the dubious advertising methods of the synthetic producers who claim diamond mining causes damage. Not only is this false, but they don't mention the huge good that diamonds do for poor communities across the world and which certainly is not the case concerning factory-made stones. It is disingenuous to promote one product by dubiously denigrating another as is the case here.

"The recently established International Diamond Monitoring Committee initiative of India’s Gem and Jewellery Export Promotion Council and the Bharat Diamond Bourse is a very positive step forward. It aims to eliminate undisclosed mixing of lab-grown diamonds in packages of natural diamonds as well as other objectives, including the monitoring of trends and instances of non-disclosure of synthetics, threats to the polished diamond sector, and agreeing on the most effective detection devices for trade members. In addition, I would repeat what I have said before: that I would be more than happy to meet with the producers of synthetics in order to create a healthy dialogue between us."

Kevin Ryan, COO, Damas Jewellery LLC, which has 250 stores in the Gulf Cooperation Council states, said that reputational risk is clearly important and that so the industry needs to take action before the issue becomes even larger. "From a retail perspective, the integrity of our supply chain is critical. There is a system of warranties that suppliers have to sign. We source where we can from suppliers whose supply line we can see from end to end. Secondly, we believe that education is important – both from the point of our staff and of our customers – so we have an GIA education program to educate customers. Finally, we have an in-house quality control team checking the diamonds being bought and the jewelry being made."

Gemological Science International Co-Founder Debbie Azar agreed it was vital to have qualified staff who also need to stay at the forefront of developments. "The equipment of today is good for today but not for the future," she added.

In addition to the topic of synthetics, the gathering also looked at the issues of sustainability where Sir Mark Moody-Stuart, the Chairman of the Global Compact Foundation, delivered a keynote speech focused on the United Nations Global Compact initiative and how the diamond industry can implement its sustainable development goals to build a more just, more equitable and more sustainable future for all.

The first day of the conference tackled two major industry issues: “Uniting the industry to accelerate initiatives driving the sustainable development agenda forward,” and “How diamonds fit in the new era of millennials.” Following an update by Diamond Producers Association CEO Jean-Marc Lieberherr on the work they do to promote diamond jewelry sales, particularly among younger buyers, the much anticipated panel debate on diamond jewelry and Millennial buyers. The panelists discussed the vital importance of attracting Millennials, a market sector which in the United States alone is estimated to have a spending power of $65 billion. Lieberherr reported that the DPA's research shows that Millennials are looking for authenticity in their lives, and that diamonds are seen by them as representing something real.

The second day of the conference provided participants with a substantial amount of food for thought. Following opening remarks by DDE Chairman Peter Meeus, there were press conferences announcing the launch of the Nemesis International diamond polishing plant and the display by Christie's and De Grisogono of an extraordinary 163-carat diamond to be offered for sale by auctioneer Christie's.

The official launch of the Nemesis International diamond cutting and polishing plant started off the day. This state-of-the-art facility is seen as completing the range of services that Dubai's diamond trade can offer by providing the highest level of diamond cutting. "We now have the complete package, or one-stop shop," said DMCC Executive Chairman, Ahmed Bin Sulayem. "Dubai has become a major importer of rough, which can now be cut and polished by master craftsmen. This joins the world-class facilities that the Almas Tower offers, including Customs, insurance, banking, a Kimberley Process office, and international tenders of a wide range of rough diamonds."

Meanwhile, Christie's displayed the 163.41-carat emerald-cut diamond owned by the Geneva-based luxury jeweler, De Grisogono. The auction house said it is the largest D-color flawless diamond to ever come to auction and will be offered for sale on November 14 as a highlight of Christie’s Magnificent Jewels sale in Geneva. The diamond, cut from a 404-carat rough discovered in February 2016 in the Lulo mine in Angola, was displayed at the conference as part of a world tour. It is the 27th biggest rough white diamond ever discovered and the largest in Angola, stated Fawaz Gruosi, founder of De Grisogono, who purchased the rough diamond. A team of 10 diamond-cutting specialists were involved in mapping, plotting, cleaving, laser-cutting and polishing the extraordinary diamond, which took almost a year to cut.

Following speeches from the Mining Ministers of important African diamond producing states: the Hon. Walter K. Chidhakwa, Minister of Mines and Mining Development, Republic of Zimbabwe; the Hon. Keketso Sello, Minister of Mining, Kingdom of Lesotho; the Hon. Leopold Mboli Fatran, Minister of Mines and Geology, Central African Republic; and Dr. Obolokile Obakeng, Acting Permanent Secretary, Minerals, Energy and Water Resources, Republic of Botswana, the keynote speaker of the second day of the conference was former British Prime Minister, David Cameron.

He delivered a strong message on globalization and sustainability to a room of international leaders of the diamond industry. He praised the UAE for its pro-business environment, saying: “It is impossible to visit this country without being wowed. It is a towering example, quite literally, if you look outside, of what can be achieved.”

"Lots of people questioned whether all of this investment in the desert would ever work, but your airports are international hubs, your tourist industry is a model for others to follow, you’re a business location of huge standing, there are over 100,000 of my fellow countrymen living here today, and I know that they don’t just come for the big attractions – the tallest building in the world, the biggest shopping mall in the world, the top seven star hotel in the world – they come here for the opportunities. They hope that, in this global success story, they can write their own success stories.”

In discussing what business can do to correct the course that globalization is currently taking, Cameron said: “I believe in responsible capitalism; growth has to be felt in people’s lives... We need business, big business, to step up to do far more, to deliver a fair economy, the more just society, and the sustainable environment that we want to see.”

Following Cameron's speech, there was apanel debate on bankability, transparency and innovation, with a range of banking figures discussing the reasons for the increasing difficulty faced by diamond firms in securing credit. Bankers agreed that further efforts to boost transparency were needed. The conference then moved on to discuss the issue of “KP Reform: A reality or a never ending story?” where the discussion focused on how far the KP has advanced in the 14 years since it came into being and what should be its future path. Following that, the impact of VAT or GST on wholesale diamond trading in the UAE and India, respectively, was the next discussion in “Diamond trading centers – working together to create global wealth,” with participants providing insights as to the likely impact of these taxes. The final panel of the international gathering examined the issue of “Tender or auctions: temporary phenomenon or new business of the future?” The panelists looked at this relatively new marketing method and how it is affecting the prices being paid by the industry for rough goods.

DDE Chairman Peter Meeus, who announced that he would be leaving the organization after 12 years, during which time he helped establish the exchange, which now has more than 1,000 members, said the conference once again illustrated its importance and the ability of Dubai to bring together a wide assortment of international leaders of the diamond industry. The conference provided an opportunity to build relationships between companies and governments in producing and consuming countries, further highlighting the pivotal role that Dubai plays in the global diamond trade for diamonds.

By our Israel correspondent Abraham Dayan