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Conditions are still very difficult - Ernie Blom

23 october 2017

ernie_blom_xxn.jpgErnie Blom, the President of the World Federation of Diamond Bourses (WFDB) for the third term, has served on a range of industry bodies as an executive as well as chairman for many years, including Chairman, Diamond Dealers Club of South Africa; Chairman, Rough Diamond Dealers Association; Chairman, Master Diamond Cutters Association; Chairman, Jewellery Council of South Africa, South African Diamond Board; and is a Special Diplomatic Advisor to the Belgium government on trade with Africa.

Here, in an interview with Rough & Polished, Ernie Blom speaks on various issues currently plaguing the global diamond industry.

Can we say that the diamond market has finally recovered after the market dive in 2014-15?

I believe that the situation has definitely improved from the point reached during that period. However, conditions for our members are still very difficult. As I always say, though, we need to be optimistic and look forward to better times. Diamond industry members need to be continuously on the lookout for new niches to enable them to expand.

Do you think that a future rough diamond shortfall is possible?

According to the graphs that we see from the large diamond producers, this is due to happen sometime in the next 5-10 years. I remember that before the financial crisis of 2008, it was due to happen around now, but was delayed due to a decline in demand as the economic situation took a real dip.

There are no large mines coming on stream, which would support the argument for a shortfall. However, there are mines with fairly significant production, such as the Renard and Gahcho Kue mines in Canada. And there are expansions taking place at mines, such as Jwaneng in Botswana and the Venetia mine in South Africa.

I believe there will eventually be a shortfall, but I would not want to give an estimate of when it will start happening or by how much.

What is the best way to keep the existing balance between supply and demand?

Well, this is simply related to demand at the retail end. If there is demand, then goods will be needed. If there is a reduced demand, then producers need to reduce their supply. Unfortunately, we know that this does not always happen because manufacturers need to keep their operations running – and that is because they are often huge factories producing very large numbers of polished goods. We need the industry's members to work carefully and prudently.

Do you agree with the opinion that since polished diamonds are not daily necessities, it is highly probable that people would prefer to buy living essentials or other popular luxury items should their disposable income improve even slightly?

I don't believe that anyone would seriously argue that diamonds are a daily necessity – that clearly is not the case. However, they symbolize very powerful human emotions: especially those of long-lasting relationships, love and commitment.

We know that younger people, especially, are keen on purchasing the latest high-tech gadget or a luxury handbag. But the industry needs to show that these are items with a limited shelf-life. Diamonds, by contrast, are units of value that remain and that can be handed down from generation to generation. They are not items that you buy every year, but they are very much objects that are bought to symbolize the milestones of life.

What is required to support the reputation of diamonds?

As you know, the diamond industry is probably the best example of a self-regulated industry that there is. We have taken very big steps in the last decade and a half to ensure that trade in conflict diamonds is stamped out.

We have also shown – and continue to show – that we have zero tolerance for synthetic diamonds being illegally mixed in with real, mined diamonds, or the examples we have seen in several trading centres of coatings being applied to diamonds in a bid to ensure that they receive a higher grade from the industry's labs.

We must all act forcefully where there are instances of wrongdoing to ensure that transgressors are not only banned from doing business at the WFDB-affiliated bourses, but that they are also punished to the full extent of the law.

Do you share the view that the diamond industry faces a growing challenge from recycled diamonds?

The issue of recycled diamonds is an interesting but rather difficult one to assess since nobody has a very strong and grounded estimate of their value within the sector. We know from anecdotal evidence and media reports that after the 2008 financial crisis, people were selling diamond jewellery, particularly in the United States, in order to raise money to cover basic bills and expenses.

Is that continuing? Common sense would suggest that it has dropped off sharply since the financial situation is no longer as desperate as it was in 2008-2009.

Can we say that the global gems and jewellery business is facing liquidity issues?

The situation as far as financing and credit remains highly challenging. Banks have left the diamond sector and that has been very disappointing to see since we are not a high-risk industry that we have been painted as. Our members have learned – especially since the financial crash of 2008 – to work in a highly prudent way, dealing only with stock they need immediately and slashing the consignments/memo system.

Unfortunately, the price of rough goods remains distressingly high and is preventing members of the industry from making a satisfactory profit.

Alex Shishlo, Editor of the Rough&Polished European Bureau in Brussels