The diamond industry is being battered by a “perfect storm” of problems, from decreased manufacturing profits to a tarnishing of the industry’s brand, attendees agreed at the biennial meeting of presidents of the major industry associations, held this week in Tel Aviv, Israel.
Ernie Blom, president of the World Federation of Diamond Bourses, one of the groups meeting at the conference, said, “I don’t think many of us can recall a time when there was this ‘perfect storm’ of challenges that has hit our industry.”
Falling manufacturer profitability was the biggest concern, Blom said.
“The diamond producers have a responsibility to take our concerns extremely seriously and act upon them,” he said.
But he added that some manufacturers had brought their problems upon themselves by paying for unprofitable goods, an action he called “irresponsible and unsustainable.”
He stressed the industry also needed to be on guard against illegal behavior, as consumers are becoming more knowledgeable about what they buy.
“If customers are checking where their fruit and vegetables and tea and coffee were grown, be sure that when they go to buy an item of diamond jewelry that costs thousands of times more than those everyday provisions, they will have done their homework thoroughly,” he said.
Maxim Shkadov, president of the International Diamond Manufacturers Association, the other group meeting in Israel, also called manufacturer profits a major concern, noting the fate of his members hangs “in the balance” if something isn’t done.
Israeli Diamond Exchange president Shmuel Schnitzer lamented that many banks have decided the diamond industry “no longer suited them,” due to stricter regulations and anti-money laundering laws. He dubbed this attitude “totally unjustified” and called on financial institutions to increase their financing of the industry.
He also pronounced the Rapaport Diamond Report, the widely used price guide for the industry, non-transparent, noting many found recent price decreases unjustified. He said his group would enter into a dialogue with founder Martin Rapaport.
In his speech, De Beers CEO Philippe Mellier said that his company’s fortunes are intertwined with its clients’, and added his company had thought “long and hard” about how to maximize both parties’ profits.
He also responded to criticism of his January interview with JCK.
“There really is no ‘silver bullet’ that will provide sustainable returns for all participants in the diamond trade,” he said. “When I have said in the past that ‘we must all own our margins,’ this is the point I was trying to make.”
On the subject of consumer demand, Andrey Zharkov, president of Russian producer Alrosa, worried that diamonds have lost their “symbolic value.”
“[A diamond] has its own special emotional meaning, which cannot be substituted with any other jewelry or fancy item,” he said. “A diamond can’t compete with iPhone, exotic travel, and the beauty industry. If the diamond is not the one and only, it will lose the battle for the consumer.”
He said the industry’s future lies in the hands of Millennial consumers, who “want to see a positive story behind their purchases, and understand the source and the integrity of the product they are buying.”
He called the formation of the Diamond Producers Association “a major breakthrough,” and hoped the new group will work with other industry organizations.
“Diamond producers cannot do this job alone,” he said.
Other notes from the meeting:
– Israeli prime minister Benjamin Netanyahu visited the event and stressed the diamond sector’s importance to his country’s economy.
– The World Diamond Mark Foundation, a WFDB- and IDMA-backed effort to increase diamond demand, recognized The Museum of Named Diamonds as the industry’s official registry of named diamonds.