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Trau Bros: “Price will ultimately be the pivotal factor for any rough dealers to buy Russian goods or not”

27 july 2009

Trau Bros established in 1890 has since been a key diamond manufacturer in the heart of Europe, Belgium, expanding its diamond art worldwide through a network of 10 globally positioned offices. Directly linked to the world’s largest suppliers of diamonds - the DTC and ALROSA – the company is a solid source for consistent diamond assortments. Since 1988, Laurent Trau, Philippe and Didier Amiel, as well as David Trau represent the fifth generation of diamantaires working with the company. Philippe Amiel has kindly agreed to give this interview to Rough&Polished dwelling on some of the rough supply problems in the current economic downturn.

Could you share you opinion about the sale systems of such rough diamond producers as De Beers, ALROSA, BHP Billiton, Rio Tinto and Harry Winston in the current uneasy environment on the diamond market? Could you give a more or less detailed description of positive and negative aspects of their sale systems and sale strategies?

First let me state that I am very pleased from the upturn we are seeing in diamond sales primarily in the rough department. However, I believe that we are still very much in the midst of the global and industry financial crisis. We will all have to proceed with much caution and responsibility for quite some time.

As for ALROSA, I greatly respect their responsible response to the abrupt and sudden global crisis by halting sales. This prevented an unnecessary extra financial burden on the industry as well as sudden and volatile price adjustments. Nonetheless, I do believe that the market has been equipped for a gradual return to rough supply from ALROSA for several months already. Especially for manufacturers, a very cautious administration of rough supply must be maintained in order to allow consistency and healthy operations of the facilities and their staffs.

De Beers on the other hand, had never ceased offering goods and marketing rough during the crisis. This meant that, when the time came, they were available with goods immediately in order to help the market start climbing out of the slump. However, this was challenging for many DTC sightholders.

One must remember however, that despite all that could have been improved, De Beers has never tired throughout the crisis in emphasizing the long term value diamonds carry as a rare commodity underscoring their predominance in luxury goods as the most sought after gift of love. One can not appreciate enough the importance this reassurance carries for our market both on B2B as well as B2C platforms.  

We were genuinely disappointed with BHP Billiton’s approach in handling the crisis. In our opinion the sudden drop of prices while continuing sales caused damage to the rough market.

We are not familiar enough with other rough sources in order to comment one way or the other.

As a rough buyer, what kind of difficulties or inconveniences do you come across and is there something which worries you?

We can identify three major factors in building a healthy and long lasting business in rough diamond trade:

A. Consistency in Assortments - Consistency in supply assortments is crucial in order to create a steady and strong downstream relationship with both rough buyers and certainly for manufacturing sake.

B. Consistent and Gradual Pricing - Consistency in prices is paramount in building and sustaining healthy business. Fluctuations in pricing must be gradual as sudden and frequent change in prices is extremely detrimental to the business.

C. Adequate Margins - Taking a long term approach and vision must take into consideration and prepare slower periods and weaker markets such as the current financial crisis we are experiencing. Adjusting pricing accordingly in order to allow robust margins serves as a buffer zone and security net with which the client can rely upon to weather stormy conditions.

A lack of these three elements is typical of unstable and volatile industries resulting in weak and inconsistent clients in good times and stock piles in bad times.


As for concerns in the current market, the strong upturn in the rough market, while the polished goods recovery has not shown anything similar to this, is definitely a cause for concern. We could be witnessing an artificially inflating market which might easily burst.

From your point of view, what is to be done to improve the sale system of rough diamonds?

I see two areas which can improve rough diamond sales systems: stability and consolidation.

Stability has been addressed in your previous question. By saying ‘consolidation’ I mean the following:

Our industry dealing in such a rare product on the one hand is suffering to a great extent from being overly fragmented. The spread-out supply creates a buyers’ market and receding prices. A more consolidated list of clients as well as concentration in terms of type of goods and categories will create fewer but stronger players and protect prices from volatility.

Being a polished diamond manufacturer, you probe the market for rough diamonds giving you an optimal price/quality ratio and then turn them into polished diamonds which have a new price/quality ratio as an end product. How often when buying diamonds you later discover that the second ratio does not correspond to the first one? Why does it happen? How much do you lose on this?

We often see a disparity between the rough and polished markets. One must remember that rough is dealt completely on a B2B arena while polished is ultimately governed by consumer demand. This causes a string of different factors which influence the two markets. We find that the availability of credit plays a much greater role in rough for example than in polished. The rough market lends itself much more easily to speculation while polished goods are much more linked to consumer demand.

However, let’s not be mistaken. The rough diamond market does not stand on its own. Sooner or later demand at the consumer level will trickle upwards and have an effect on rough prices. At the end of the day rough is there to be processed and sold to an end consumer. It may enjoy short periods of unrelated behavior however, if rough does not get funneled out through polished – eventually, it will react accordingly.

Probably, it would be much easier to sell and buy rough diamonds, if there were a universal and globally acknowledged certification system, which would make the rough market transparent like the gold market. To your mind, what is to be done to achieve this?

I tend to disagree with the premise of your question. Diamonds are not gold. By nature they are worlds apart. There is but one type of gold albeit at different levels of concentration. This can easily be objectively priced. Diamonds however, are subjective by nature. There are endless different nuances in rough diamonds. The uniqueness of diamonds - even in the rough form - with endless sizes, shapes colors and qualities makes it impossible to create a standard for all.

Additionally, rough diamonds are unique from other raw materials in that the applications of other raw materials are much broader providing stability and a spread of risk. Having one end product – the ultimate luxury item - prevents it from being a freestanding article with objective and visible prices.

What do you think about the system of long-term contracts between diamond miners and manufacturers? In what way is it convenient and inconvenient for the latter?

We are very much in favor of long-term contracts. The stability in terms of Assortment Consistency, Pricing Consistency and Forward Planning  mentioned earlier that such a system has to offer will undoubtedly work for the benefit of both the Supplier and Client - if implemented correctly.

What kind of sales system for rough diamonds would you like to see – to make it acceptable for wholesale buyers as much as possible?

The preferable system in order to build and sustain a long term business is a Consolidated Group of Wholesalers which provides Stability in terms of Assortments and Pricing allowing reasonable Margins.

In your opinion, will the coming De Beers sights be able to supply enough diamonds for the next Christmas and other festivities?

As I said earlier one must proceed with much caution. We are far from having this financial crisis behind us. Especially when one looks at the demand at consumer levels and rumored intentions of DTC to increase their supply in the coming sights it would not be wise to anticipate an extreme shortage of rough.

Many experts say that Russian diamond fields are yielding diamonds of a very high quality. What is your point of view in this respect?

Russia is undeniably known for the high quality of diamonds and their colors its mines yield. Indeed, Russia is blessed in this respect. As such, any rough trader would be thrilled to be able to purchase these goods.

How many heavy-weight players on the diamond market will be interested in Russian rough diamonds? To what extent?

Price will ultimately be the pivotal factor for any rough dealers to buy Russian goods or not. This is even more the case with manufacturers. As stated earlier rough is not a freestanding commodity on its own. Ultimately, the stones are polished and lose their “Russian” identity. At this point, what matters is polished prices. With regard to quality, rough is only reflected in terms of prices of the polished yielded thereof. The industry has seen origin-based marketing promotion campaigns (Canada for example). However, these require enormous amounts of funding and the bottom line success of these campaigns has not been clearly proven.

Thank you.

Alex Shishlo, Editor of the Rough&Polished European Bureau, from Antwerp