World Diamond Council Report: Synthetics, Maurice Tempelsman—and Blueberries

Laying out the diamond business’ main challenges

Last week’s World Diamond Council (WDC) meeting at the Waldorf Astoria in New York City proved unexpectedly interesting—a credit to the reborn, more “professional” group.

Receiving the most plaudits was the characteristically eloquent speech by Lazare Kaplan chairman Maurice Tempelsman. In the past, we have seen nasty, embarrassing fights over the scope of the WDC (its official remit is representing the industry in front of the Kimberley Process). But Tempelsman’s speech went way beyond the KP to address what he sees as the industry’s three biggest challenges.

First, the veteran diamantaire talked about the shift in power from upstream to downstream—from the “production end…to the consumption end.”

Consumers are now “spoiled for choice,” he contended, but the production end has not recognized this new reality. Instead, “upstream pricing policies… have pushed the supply chain as a whole into crisis.”

[N]o one knows what the impact of acute price volatility—sharp rises reversed by sharp falls in times of repeated crisis—would be on the psychology that underpins our product. In the diamond industry, everyone has a “long” position—from the producers whose in-ground reserves take years to bring to account, to the manufacturers and intermediaries who buy for cash and hold and extend inventory on credit, to the end consumers who believe they are buying a “forever” product of timeless sentimental and monetary value. 

The second change is “heightened financial scrutiny,” which he said, was now a “permanent part of the landscape”:

What this means for our industry is: no more black boxes, no more inscrutable transactions or markets where money can be laundered through fictitious operations or valuations. It doesn’t matter that only the tiniest, remotest fringe of the diamond business may in fact be using these techniques to finance terrorism; the techniques themselves have to stop, not only because they are wrong but because they can no longer slip under the expanded radar of our security agencies.

In perhaps the most commented-upon part of the speech, he addressed “those who govern the main diamond trading centers, particularly the newer centers, which have aggressively pursued market share”:

… [W]e must make sure the race does not become one to the bottom—to a lower standard of accountability and transparency. An “enabling environment” must not come to mean a place where the worst tendencies of our industry can find refuge, but rather a domain of best practice. I applaud those diamond trading centers that have squared up to this reality but remain concerned about others, because in today’s world it takes only one weak link in the chain of integrity to expose our industry as a whole to systemic risk.

While Tempelsman did not single out any centers, many believe he was admonishing Dubai. (Speaking of which: The current chair of the KP was a notable no-show. He is in Africa, his spokesperson said. The Australian vice chair attended and spoke.)

And finally, Tempelsman talked about synthetic diamonds. First he declared that he doesn’t feel synthetics are a threat from a marketing standpoint.

The story of natural diamonds, properly told, is strong enough to hold its own, although certain market segments are likely to yield ground to synthetics as the economics of laboratory production improve.

The real threat, he feels, lab-grown diamonds mislabeled as natural:

We have seen this practice already in the smaller sizes, where the relative cost of detection and policing is high—an example, perhaps, of the vise of economic pressure not leading necessarily to survival of the economically fittest but instead to an overall lowering of the ethical common denominator. In a similar vein, the potential for synthetics to bypass the various industry and regulatory mechanisms now in place to establish verifiable chains of custody for natural diamonds imperils the integrity and utility of those mechanisms as a whole. To take just one example, synthetics remain at this moment exempt from the stringent regulatory requirements imposed by the U.S. Patriot Act on dealings in natural diamonds—so not only do we who deal in the natural product carry the greater legal burden, we are exposed to greater reputational risk from the actions or inactions of those who are relieved of that same burden.

He called for greater law enforcement involvement in instances of mislabeled synthetics and closed by suggesting that the industry needed an overarching body to carry out an “expanded conversation with governments.” His full talk can be seen here.

There was also a worthy speech from Fred Waelter, global business lead, responsible sourcing for UL consumer and retail services. Waelter talked about other industries that have coped with issues with the supply chain for their products, including blueberries, tomatoes, and shrimp. (The stories he told about shrimp were pretty bad.)

He posited that the diamond industry was roughly analogous to the coffee industry, which also has a multistep supply chain where different productions are often blended together. After so many years of hearing that the diamond industry’s structure was unique and therefore diamonds were impossible to track, it was enlightening to hear that other industries have faced similar challenges—and have overcome them.  

Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine

JCK News Director

Log Out

Are you sure you want to log out?

CancelLog out