The Presidents’ Meeting that took place in Tel Aviv this week highlighted five challenges facing the diamond industry, but the issue of profitability was the most pressing. Constituents of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA), which hosted the meeting, are fighting for survival as they’re unable to make money from polishing rough diamonds.
In that context, speakers at the three-day event noted that their most pressing issues were:
1. The lack of profitability in the midstream;
2. Declining bank credit to the industry and the high-risk perception that the banks have about the trade;
3. Over-grading and the temporary color treatment of diamonds;
4. Undisclosed mixing of synthetic diamonds; and
5. The call to increase competition and transparency among service providers, with particular reference to the Rapaport Price List.
Tough times indeed. While the WFDB and IDMA already have systems in place to tackle some of those challenges, and debated solutions for others, the industry remains at a loss about profitability.
The clearest directive at the meeting was WFDB president Ernie Blom’s appeal to the trade not to buy high-priced rough.
“We’re our own worst enemy,” Blom said at the closing press conference. “We buy those diamonds at prices at which it’s not possible to make money.”
We’re our own worst enemy. We buy those diamonds at prices at which it’s not possible to make money – Ernie Blom
Still, much frustration was leveled at the mining companies during the meeting. And while there was a consistent call to work with the mining sector to find a solution to the profitability problem, it’s not clear what the market expects of the producers.
The mining companies have a clear agenda to drive their own profits, as they have to answer to their shareholders well before the trade. In his address to the Presidents’ Meeting, De Beers CEO Philippe Mellier tried to soften his previously stated, somewhat infamous, “we must all make our own margins” remarks. However, his toned-down clarification still made the same point: “No one is better placed to run a business than those who live and breathe it on a daily basis, and each and every diamond company in this great industry must make its own choices about how to succeed in this new world,” he said.