September 1998


Diamond Voices

Producers and diamantaires detail the state of the industry at Israel's Rough Diamond Conference

The changing dynamics of the diamond industry set the stage for discussion at the International Rough Diamond Conference, held June 23-24 in Tel Aviv and Ramat Gan, Israel.

Distribution and demand were the major focuses.

While De Beers used to control virtually the entire diamond distribution pipeline, some new producers have shaken up the market by considering selling their diamonds in other ways. Even some long-time members of the De Beers network are leaving or demanding the right to market some of their production on their own. Meanwhile, other long-time and new producers have pledged allegiance to De Beers in hopes of market stability.

In fact, stability is one factor that everyone agreed on at the conference. For its part, De Beers is already shoring up prices by limiting supplies in certain diamond categories.

In the long-term, however, questions remain. Will other producers be able to curtail supply in synchronization with De Beers? Will they be able to navigate the delicate balance of limited supply and shareholder pressure for profits?

The answers lie in the "demand" side of the diamond market equation. Consumer demand for diamonds (or lack of it) fuels the market. And while diamond jewelry sales are strong in the U.S., they've suffered in Japan and Asia, two very big markets. The very essence of diamonds as a store of value is at stake.

The following quotes are excerpts from speeches by De Beers executives, other major producers and Israeli diamantaires at the conference. Read them for a look into the tone and mood that exists in the larger diamond market today.

De Beers

Anthony Oppenheimer
President of De Beers' Central Selling Organisation

"No other material [diamond] enjoys the protection against price volatility which is provided by the CSO a very important consideration for developing countries whose economies are often critically dependent on a predictable income from this natural resource. It also protects the market from hazards of oversupply a key one being the thought in the consumer's mind that he might be able to buy a diamond more cheaply tomorrow than today. That protection, based on the CSO's unique willingness and financial ability to hold stock, is as important to diamond manufacturers as it is to producers."

Stephen Lussier
Director of De Beers' Consumer Marketing Division

"The world is littered with cultural icons which are no longer. Thirty years ago when I was growing up in Boston, my mother would not go out on Friday night without her mink coat; my father with his Brooks Brother's suit would unquestioningly buy a new Cadillac every three years ... Now, to differing degrees, some of these products have lost their ability to be cultural symbols. Consumer marketing must ensure this does not happen to diamonds at a time when the competition from other luxury goods has never been more fierce and the consumer choice more varied."

The Producers

Lev Leviev
Part owner of Catoca Diamond Mining Co., Angola, and CEO of LLD Ltd., Israel

"The world is changing fast and so is the diamond industry. We are looking with some trepidation, but also with anticipation to new Canadian production and some other mines that may soon come on stream. The fact that so many present and future miners are here today [at the conference] may well represent a turning point in relations between manufacturers and miners. It is important for miners to know the diamond manufacturing industry, to understand the problems of profitability, of marketing and of consumer markets. All the factors involved in the diamond pipeline deserve to expect a decent return for their work, on their investment and on the risks they are taking. Two key factors will ensure our future: stability and profitability."

R. John Robinson
Chief executive, managing director of Ashton Mining Ltd. (Mines in Australia, Canada, West and South Africa, Finland)

"The global scope of diamond exploration has dramatically expanded in recent years ... illustrated by the increase in the number of companies exploring predominantly for diamonds. The number has grown from 23 before 1992 to 74 at the beginning of 1998 ... A protracted weakness in the general mineral commodities market, particularly in the gold sector, has probably contributed to the increase in diamond exploration. Although suffering from its own difficulties, the diamond business is perceived by some as the only game in town."

Sergei Oulin
Chief executive of ALROSA (Almazy Rossii-Sakha), Russia

"Over the past two years, intensive negotiations have been conducted during which Russia has determined its strategy will be that of continued cooperation with De Beers ... As a result, the relationship of the Russian diamond industry with other diamond producers has been developing steadily over the past few years, and this is expected to continue."

Blackie Marole
Permanent secretary of the Ministry of Minerals, Energy and Water Affairs, Botswana

"In determining its role in the diamond industry, the first thing Botswana would like to see is stability in the market ... Like everyone in the industry, we get concerned about the prices our diamonds fetch, especially when our revenues are further reduced because we cannot sell all that we produce. I believe Botswana is playing its part, and I believe it's playing it well ... but there are others in both producing and manufacturing who are riding on the system but not supporting it."

The Israeli Manufacturers

Zvi Shur
General manager, Israel Diamond Manufacturers Association Ltd.

"Since the 1990s, the Israel diamond industry, just like the world diamond industry, has suffered a prolonged crisis of profitability. In light of the high labor and manufacturing costs, the Israel diamond industry has changed to manufacturing medium-sized and large diamonds. The crisis is not over. It is now predicted that in 1998, for the first time since 1991, there will be a decline in exports from Israel."

Moshe Schnitzer
Chairman of the Israel Diamond Institute and president of Moshe Schnitzer & Co.

"The diamond business has cycles just like any other industry. And after each temporary period of recession, the diamond business has come out stronger and healthier, ready to book even greater success. But there is one precondition which is essential to this success. The diamond market can flourish only if it enjoys stability in the supplies of rough. Stability and continuity."

by Robert Weldon, G.G.

For more on events and topics discussed at the Israel Rough Diamond Conference, please see "World Diamond Producers Convene in Israel," Professional Jeweler,August 1998, p. 142.

Copyright © 1998 by Bond Communications.


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