In this regard, speakers at the three-day meeting noted that the most urgent are the following issues:
1. Lack of profit in the middle part of the diamond pipeline.
2. Reduction of bank loans for the industry and the opinion of banks about its high risk.
3. The overestimation of the characteristics of stones during certification and the temporary change in the color of diamonds.
4. Mixing of undeclared synthetic diamonds with natural diamonds.
5. An appeal to increase competition and transparency among companies serving the industry, with a special emphasis on the Rapaport price list.
Times are really difficult. Although WFDB and IDMA already have systems to solve some of these problems and are discussing other issues, the industry remains at a loss for profitability.
The clearest directive at this meeting was the call of Ernie Blom, president of WFDB, to the industry participants not to buy diamonds at a high price.
"We are our own worst enemies," Blom said at a press conference at the close. "We buy diamonds at a price at which it's impossible to make money."
Still, most of the disappointment was ironed out during this meeting. Although there have been constant calls to work with the diamond mining sector to find a solution to the profitability problem, it is unclear what the market expects from diamond producers.
Diamond companies have very clear plans for obtaining their own profit, since they must give answers to their shareholders long before they start trading. In his address to the participants of the Presidential meeting, Philippe Mellier, CEO of De Beers, tried to mitigate what he had said before a somewhat sensational statement that "we all should receive our own profits." But his softer explanations still meant the same thing. "Nobody can do business better than those who live and breathe it every day, and absolutely every diamond-diamond company in this huge industry must make its own choice about how to succeed in this new world," he said.
After all, every business - and sector, for that matter - is responsible for its own profits, as it should be.
Therefore, dealers and diamond manufacturers need to clarify their own plans for the prices of rough diamonds. What does the middle part of the diamond pipeline expect from the diamond mining sector?
In a weak market, diamond mining companies face two choices. First, they can reduce the offer in an attempt to maintain a relatively stable price for diamonds. But they will sell whatever they can, at prevailing high prices, and keep stocks (in land or in storage), if necessary, until the market returns to their diamond prices. Or they can dramatically cut prices to stimulate demand, thereby affecting prices to reflect a weakening in demand levels.
From the conclusion of the Presidential meeting it seems that the diamond production and diamond mining sectors have similar interests. Both want to maintain more or less stable prices for rough diamonds and cut supply during the current weak market.
Shmuel Schnitzer, president of the Israeli Diamond Exchange, said that a sharp decline in diamond prices would have a negative impact on the market. "What we can ask the diamond producers is to cut their supplies, although I'm not sure that they will do this for a long time," he said.
So far, diamond miners have done just this year. Rapaport estimates that De Beers diamond sales in the first half of 2015 fell by almost 28 percent year-on-year to about $ 2.5 billion. The company ALROSA, which reports data in Russian rubles, sales volumes decreased in the first quarter by 29 percent to 9 million carats, although its final figures grew due to the weakening of the currency.
Dealers in the middle of the diamond pipeline and diamond producers prefer to reduce supply and stable prices for diamonds and are afraid of sharp adjustments for two reasons: a) they are worried that a decline in diamond prices will cause a further decline in the price of diamonds, and b) a sharp reverse price movement may devalue Their existing reserves.
But the problem with the stable prices for diamonds is that the profits of the diamond producers can be further reduced if the prices for diamonds continue to fall. Shmuel Schnitzer stressed that "if the prices for diamonds remain the same as they are, and there will be a drop in prices in the Rapaport price list, we will lose even more than today." At the same time, the author of these lines, of course, hopes that any transparent and competitive diamond trade network or price list reflects the true state of the diamond and diamond market - both in good times and in difficult times.
The real situation in 2015 is that prices for diamonds keep the trend to decline. The markets of the Far East have slowed down, and the United States market is at best stable. Andrei Zharkov, the newly appointed president of ALROSA, stressed in Tel Aviv that the main problem is that there is a surplus in the supply of diamonds on the market. This means that the proposal needs to be reduced, but also that demand is weak.
The index RapNet Diamond Index (RAPI ™) for diamonds weighing 1 carat, which have been laboratory certified, are still stable in June, but RAPI indexes for diamonds of 0.30 carats, 0.40 carats and 0.50 carats fell by almost 1 percent. It seems that the rate of profit will also continue to decline.
Probably, the answer is to stimulate consumer demand, with which everyone must agree, and yes agree. Ultimately, the new generation of consumers of the third millennium makes purchases in a different way, and is currently not very attracted to buying diamonds.
In this regard, the industry is pinning its hopes on possible marketing campaigns with the aim of heating demand. Current efforts are concentrated in the framework of the World Diamond Mark, established by the World Federation of Diamond Exchanges, as well as within the possible participation of the newly established Diamond Producers Association.
But it should be noted that although species marketing will increase the desire of consumers to have diamonds, this does not necessarily mean that it will increase the profits of participants in the middle part of the diamond pipeline. As consumer demand grows and prices for diamonds increase, diamond prices will also rise.
Currently, with a reduction in supply, diamond prices do not reflect the same real situation on the market as diamonds. In such a protracted non-profit situation, the middle part of the diamond pipeline will continue to consolidate.
In order to restore the profits of diamond producers and dealers, diamond prices must fall sharply to make the diamond business again viable - both now and especially when the situation on the market again improves. When prices for rough diamonds are falling, diamond suppliers should be disciplined and keep a firm price for their diamonds. They must reassess their inventories at a lower cost of replacement, if necessary, instead of valuation at actual cost, and resume trading on an uptrend. And they must continue to refuse to buy diamonds at a high price.
http://www.diamonds.net/News/NewsItem.aspx?ArticleID=52624&ArticleTitle=The%2BBiggest%2BChallenge
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