US Holiday jewelry sales expected to skyrocket

According to Mastercard SpendingPulse, US jewelers can expect revenue from jewelry sales in the US between November 1 and December 24 will grow 59% compared to the same period last year.

17 september 2021

Australia becomes world’s biggest producer of gold for first time

Australia has become the world’s biggest producer of gold for the first time, having played second fiddle to China for the last decade. Australia unearthed 157 tons of gold in the first half of the year, pipping China by four tonnes.

17 september 2021

Nigerian minister mulls death penalty for gold smuggling – report

Nigeria’s deputy minister in charge of mines and steel development has called for the death penalty for gold smuggling in the West African country.

17 september 2021

Gemfields back to black

Gemfields is expected to register a net profit after tax of $23.8-million in the first half of the year compared with the net loss after tax of $56.7-million, a year earlier. Earnings per share are expected to be 2 US cents from a loss per share of 4...

17 september 2021

Debmarine Namibia's new diamond recovery vessel to arrive in SA next week

Debmarine Namibia’s new N$7 billion diamond recovery vessel, Additional Mining Vessel #3 (AMV3), is expected to arrive in Cape Town, South Africa next week ahead of commissioning early next year.

17 september 2021

After the Crisis: Restructuring and Consolidation

15 june 2009

Over the past thirty years the Rosy Blue Group has transformed itself into a global conglomerate and is currently one of the pace-setting firms in the diamond jewelry industry giving jobs to over 10,000 people and managing a $1.8 billion dollar business. The company’s CEO Dilip Mehta recently bestowed the title of baron by the Belgian government for his service in the diamond industry has kindly agreed to give an interview to Rough&Polished correspondent Alex Shishlo in Brussels.

There is a certain positive shift currently observed on the rough diamond market toward its recovery. However, we can't say there is parallel upward movement in polished sales. Can you give some comment on this situation?

We have fine-tuned both our buying and selling activities so that each transaction and derivative processes add value. This means that we have tightened our inventory position, improved our manufacturing efficiency and concentrated our efforts in servicing our best clients so that we may deliver more value to them. We have actually been preparing for well over a year by focusing more on profitability and less on gaining market share by being very selective about buying as well as selling opportunities. This being said, we admit not having anticipated the tide turning quite so abruptly in the third quarter. However, because of our drive to instill operational discipline, we were much better prepared to face market turbulence.

The participants of the rough diamond market have so far been able to keep it on a hungry ration fearing a collapse in prices for rough and polished diamonds. Nevertheless, many people point to artificiality of such a market. Quite nearby there is a different example of gold which is in free circulation but never too cheap. May it be that such fears are groundless since diamonds as gold are scarce?

Producers including Alrosa have acted very professionally by either holding back sales to the market or by reducing the production by putting mines on hold (maintenance). One might say that this is artificial; however, we believe managing the market is normal like a business like ours and other natural products by curtailing oversupply to the market, which in turn help the producers as our product is neither perishable nor going out of fashion.

Gold has enjoyed years of investors’ confidence, which was even better in current circumstances. As suggested by Alrosa’s president, diamonds are beginning to go in the same space. We fully subscribe to that view as we are seeing the trend, especially in the Indian subcontinent as well as in the Middle East. We also believe that diamonds will find its space throughout the world.

In the post-crisis period banks keeping in mind the accumulated diamonds stocks may become more wary toward them as credit collaterals. May such action developed by all banks have its impact on diamond prices?

Banks are very supportive of our industry. Actually they might have more diamonds as additional collateral. However those diamonds are made available to clients to sell to suitable buyers. This will hopefully not have any significant impact on the rough or polished prices, even if we have some failures.

In your opinion, what kind of changes may occur on the rough market after the economy will recover from crisis?

The most important measure for the diamond industry to adopt is to exercise self discipline and conduct business responsibly. This means that the industry should buy rough diamonds based on real needs, pay fair market price instead of making speculative purchases at unsustainable prices, and make sensible decisions when selling. Avoiding loss starts with buying responsibly and intelligently. We should have the courage to blame ourselves for the eagerness to overpay for rough.

Diamonds are a store of value. As rough production diminish with insufficient number of new mines being discovered and existing ones becoming depleted, diamonds are assured to remain an excellent store of value. However, we must promote consumer confidence in diamonds by buying and selling responsibly and rationally, without creating unnecessary and irrational market volatility.

What is your forecast for the two years to come?

If there is a positive outcome from the global financial crisis in the context of the diamond industry, it would be the industry’s restructuring and consolidation.

There has been and will be several company failures but people like to stick around and not face the reality. The current crisis could well be the final nail in the coffin that would lead to a consolidated, sustainable diamond industry, where there are fewer but sustainable players and profitability is restored.

We need people on the wholesale level who understand and work together with retailers. That’s the key to a win-win situation for both wholesalers and retailers.

Another outcome of the crisis will be a smaller retail market, with the global retail market shrinking by 10 to 12 percent, once the crisis clears out over 2008 which was about 7% down already. Data from De Beers reveals a similar trend: retail in the United States will be down by 22 percent while global retail will be down 15 percent.

Companies will be cautious about opening new stores over the next few years, and would focus on managing their inventories. I believe that the industry should put in more efforts in promoting itself, investing in marketing and advertising, and building up consumer confidence.

Rough&Polished