The World’s Leading Diamond Hub

Avi Krawitz

Competition is rising between the diamond trading centers. Not only are there new kids ‎on the block vying for a greater portion of the global rough and polished trade, but the ‎diamond distribution channel is constantly changing. No longer are New York, Antwerp, ‎Mumbai and Ramat Gan the obvious destinations for the diamond business as Dubai, ‎Hong Kong, and Gaborone increase their relevance.‎

A number of factors are contributing to this shift. Foremost among them, globalization ‎has resulted in a re-centralization of wealth, bringing with it significant diamond demand ‎from emerging markets, particularly China and India. Even through the economic crises ‎of the past four years, wealth has grown, but more significantly, it has shifted. So while ‎the U.S. continues to be an important market, there has developed an urgent need for the ‎diamond trade to develop, expand and promote consumption in these emerging ‎economies.

Simultaneously, access to these new consumers became easier as the Internet brought ‎the world closer together. The Internet has enabled small companies and isolated ‎countries to conduct international business. Operating an office in New York as well as ‎one in Antwerp, Hong Kong and Dubai is not as complicated as it used to be and no ‎longer requires the logistical capabilities of a large corporation. ‎

The ease of global communication, now with mobile technology leading the charge, has ‎helped streamline the way in which international business is conducted. Cost and ‎efficiency count, and countries with diamond hub ambitions have to ensure that same ‎ease of doing business to gain a competitive edge. ‎

A number of countries have recently fallen short in this regard. India’s new 2 percent ‎import duty on polished diamonds has all-but killed the opportunity to attract foreign ‎companies to operate or sell to the domestic market. Police raids carried out on behalf of ‎tax authorities in Israel and Belgium have raised caution in their respective diamond ‎sectors and resulted in a backlash against their leadership. ‎

The greater the regulation and control, the less willing diamond companies are to ‎maintain a presence in any particular center. And it has become easier nowadays for ‎them to relocate. Already, foreign companies are eyeing tax havens such as Dubai to ‎facilitate their trading. In recent years, a number of companies, largely Indian, have ‎relocated from Antwerp to Dubai, including the recent move of a high profile sightholder.

Dubai is marketing itself while focusing on enhancing its profile as a rough trading hub, ‎particularly as De Beers relocates its Diamond Trading Company (DTC) unit from ‎London to Botswana. Peter Meeus, chairman of the Dubai Diamond Exchange, told ‎Rapaport Newsthat Dubai’s long-term goal is to be the destination of choice between ‎Africa and India. ‎

The DTC move to Botswana and beneficiation in Africa is important,” he said. “We ‎believe we have the strong assets to support this development and become a hub.” ‎Meeus listed these capabilities to include: excellent logistics, a favorable fiscal policy, a ‎busy airport with direct flights to most destinations – though, not yet to Gaborone – ‎affordable real estate, and its close proximity to India, where the majority of rough ‎diamonds is destined for manufacturing.

Still, the extent to which DTC’s pending move to Gaborone will impact the global trading ‎network remains to be seen. An obvious beneficiary will be Botswana, where all DTC ‎goods will be distributed to sightholders by the end of 2013 (see Rapaport Magazine July ‎‎2012 edition). In addition, around 4 million carats per year of Debswana rough will be sold ‎by the state-owned Okavango Diamond Trading Company, when the sales are launched, ‎expected within the year.‎

Almost overnight Botswana will become a major rough distribution center. Even with the ‎inconvenience to get there, sightholders will travel to Gaborone – via Johannesburg – to receive their rough. Current market conditions aside, they will do what it takes in order to ‎satiate their hunger for goods.‎

But that is for primary supply. The question of where the goods will subsequently be ‎traded on the secondary market is more pressing.

Some Antwerp dealers dismiss that their physical proximity to London, as opposed to ‎Botswana, has been a factor in maintaining its market position until now. However, they ‎are concerned that Antwerp has become over-regulated, presenting an opportunity to the ‎likes of Dubai and Gaborone to poach its members.

The Antwerp World Diamond Centre (AWDC) has responded by launching its ‘Project ‎‎2020 Antwerp Diamond Masterplan,’ in an attempt to maintain its relevance as a diamond ‎trading hub. According to its manifesto, the strategy aims to tap new opportunities in the ‎polished market, particularly in China; enhance its ‘Diamonds From Antwerp’ brand; ‎promote hi-tech polishing; launch an electronic trading platform; establish a jewelry ‎wholesale market; and expand its rough diamond trade – with plans to open a rough desk ‎in Africa.‎

In short, Antwerp is seeking to diversify its diamond sector as it faces new competition in ‎its typecast role as a rough trading center. But the fact is that fewer goods will be traded ‎in Antwerp as a result of the DTC move and the AWDC is correct to think long-term in its ‎strategic planning.

Other centers should take note. Certainly, Johannesburg’s diminished diamond industry ‎has an opportunity to revive its secondary rough market and the industry there should be ‎thinking how it can capitalize on Botswana’s growth. After all, hundreds of diamantaires ‎will be traveling via Johannesburg to buy rough in Gaborone on an almost monthly basis. ‎There ought to be incentive to encourage their trade while in transit.

Polished trading centers also need to improve their standing. New York’s Diamond ‎Dealers Club is and is working to attract large jewelry ‎retailers to buy polished local. The club is also planning a trip to Dubai to sell New York as ‎a vibrant source of polished diamonds.

Israel’s industry has done well to penetrate growth markets in the Far East over the past ‎decade and maintain its strong position in the U.S. polished supply. But it appears to be ‎lacking a strategic plan to evolve with the changing market dynamic. After all, local ‎activity has shifted and Israel is not the significant cutting center it used to be as many ‎large Israeli companies have relocated their operations elsewhere. ‎

Rather, Israel has become a niche market for recuts and high-end goods. However, ‎while one doesn’t see the scores of international buyers that once defined the trade, ‎Ramat Gan still offers a powerful trading environment as dealers there are ‎knowledgeable, service-oriented and savvy risk-takers. Israel’s industry leadership needs ‎to take advantage of those strengths in light of the changing global distribution network to ‎ensure its long-term relevance.

As each center strengthens its niche, they are also diversifying their activity as market ‎developments dictate. The global diamond industry is shifting, both as globalization trends ‎continue to drive economic growth and as its distribution networks evolve. ‎

Therefore, centers ought to consider their strengths and ensure that they offer the most ‎attractive and hassle-free environment possible to do business. No matter what worked in ‎the past, there are new and better alternatives competing for the trade. As each lays ‎claim to being “the world’s leading diamond hub,” there’s an increasing number of centers ‎vying for the title.

Source Rapaport