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Johan Erikson: Demand for Natural Diamonds will always remain strong

20 december 2021

johan_erikson_xx.pngFirst Element is a fully independent Diamond Services Company registered in Belgium and South Africa which has become one of the premier diamond valuing, marketing, and cleaning companies in the industry.

First Element is committed to providing a world-class diamond service aimed at adding value to the entire supply chain from the daily recoveries recorded on the mine(s) to the presentation of the diamonds on tender, thus optimizing the value of the diamonds sold.

In this interview with Rough & Polished First Element’s Managing Director Johan Erikson talks about the pandemic impact on diamond trade and the tenders his company managed to hold and intends to continue, as well as about future polished prices and diamond marketing.

Has the COVID-19 pandemic affected First Element tenders?

Initially yes. At the beginning of last year during the onset of the pandemic, the uncertainty around the market did affect our tenders. However, since September 2020 we have seen prices at our tenders rise exponentially and have continuously achieved extremely impressive results since.

What are the next scheduled First Element tenders?

Right now, we are hosting an Alluvial Tender from our Johannesburg offices. It closes on the 26th of November.

Our final sale of the year will be held in Antwerp at the Antwerp Tender Facility. This will run from the 6th to the 10th of December and will include production from Jagersfontein and Rooipoort Developments and also a number of South African and South African Alluvial Productions.

Our first tender in 2022 will be held in South Africa from the 19th to the 25th of January.

In your opinion, how will the prices of diamonds change in the near future?

Currently, prices are extremely strong. We believe it is safe to assume that these market conditions will hold as primary production supply issues are still a factor in the market and demand is only going to increase as inventories will now need to be prepared for the upcoming holiday seasons.

Please tell us about the project of cooperation with GIA Antwerp on tracing the origin of diamonds.

Transparency has always been an extremely important aspect of our business and we pride ourselves in our industry partnerships with major roleplayers who support this. 

We have enjoyed a public-private partnership with the Antwerp World Diamond Centre now for almost ten years and are extremely proud to now also work with GIA Antwerp.

GIA’s process and methodology for confirming country of origin are scientifically driven and a culmination of over 60 years of gemological research.

With the Diamond Origin Program, GIA scientists record a rough diamond’s unique characteristics – including spectroscopy, growth structure, and inclusions.

Once manufactured, the diamonds from the same rough are carefully examined to determine if they match the characteristics of the original rough. After successfully matching, GIA issues a grading report recording the cut gem’s country of origin.

GIA’s Diamond Origin Program further tells the story of how natural diamonds support jobs, education, and healthcare and protect the environment in and around local mining communities.

Any successful buyers at a First Element hosted tender may request that diamonds won be included in the program. First Element will ensure the steps and correct documentation are followed in order for the diamonds to be included in the GIA Diamond Origin Program correctly thus optimising the experience for the client. 

Could we say that the diamond market is slowly recovering?

We would have to say that it has recovered quicker than anyone had expected. In fact, prices being achieved today are well above those achieved ‘pre-pandemic’. We haven’t seen prices as we are seeing today since the highs of 2012, and even in comparison to that we believe it is a more stable, stronger, and sustainable market now.

What are the main drivers of market growth now?

Shortages around the world are the major driver for these escalating prices as all role players are needing to fulfil stock levels to keep up with increased demand.

The shortage stems from mines closing as well as De Beers and Alrosa making adjustment to their production levels by lowering it.

Many believe that more and more buyers will be turning towards tenders to fulfil these shortages.

It is important to note that almost all producers and manufacturers seem to be in a far stronger financial position at the moment than what they were pre-covid. 

When, do you think, it will be possible to speak of a full-fledged market recovery?

The market has already recovered and recovered stronger than before. It is in a much more stable condition at the moment than ‘pre-covid’.

All over the world, Generation Z has become a supporter of lab-grown diamonds and jewelry with them. Do you see the need to develop a new strategy aimed at popularizing natural diamonds among the "Internet generation"?

Demand for Natural Diamonds will always remain strong. Recently prices for Lab Grown Diamonds have come down and this will deter many potential buyers due to poor investment opportunities. Natural Diamonds will always remain the first choice when it comes to protecting your investment. 

To what extent do you think laboratory diamonds can threaten the natural stone market?

The biggest threat to natural diamonds is undeclared lab grown diamonds which are said to be natural. As soon as consumers lose confidence in the source of their diamonds this will become a problem. Thankfully, partnerships such as ours with the GIA in Antwerp nullifies this issue as they have full transparency of the origin of their goods.

What awaits the industry in the long term in a situation where large diamond deposits have not yet been found?

As mentioned, it will only increase the demand currently seen in today’s market and will be a major price driver in the future. Prices will reach a premium as it will become harder to fulfil orders and inventories. The secondary market can fulfil some of the demand, but original mine production will always remain a priority.

The industry is in its healthiest position it has been in for years. Producers, Dealers and Manufacturers are all contributing to a stable market which is seeing high demand. However, it is their responsibility to ensure that these conditions remain for the foreseeable future by conducting their business practices efficiently which will result in a sustainable market environment for all.

Alex Shishlo for Rough&Polished