Supplier of Choice’ Dominates Meeting

The question of whether De Beers’ new policy will hurt the diamond secondary market dominated the recent diamond association meeting in Sun City, South Africa.

In an effort to assuage the often-angry gathering, DTC sales and marketing director Gareth Penny said that $500 million in stones would be sold this year through Diamdel, the De Beers subsidiary that typically caters to smaller, up-and-coming dealers and manufacturers. DTC spokeswoman Lynette Hori stressed that the $500 million “is not an annual figure,” but was “a response to the depth of feeling at the [meeting.]”

Many didn’t know how to interpret the number, especially since there was nothing to compare it to. Hori said, “If we accept the $500 million as a ballpark figure, supply to the Diamdel will be more or less the same as last year.” She added, “We want a vibrant secondary market to challenge our sightholders. After all, this is the pool from which future sightholders will emerge.”

The two associations rendered a mixed verdict on De Beers’ new Supplier of Choice strategy. A World Federation of Diamond Bourses (WFDB) statement said the program could concentrate the rough market “in fewer hands, seriously threatening the business structure of the established wholesale diamond sector” and could “have a major adverse effect on the future of the entire wholesale diamond trade and industry.”

The International Diamond Manufacturers group was more upbeat, saying merely that it “acknowledges the benefits” of Supplier of Choice, although behind the scenes officials shared many of the concerns of the WFDB.

The gathering took place in the aftermath of De Beers’ pruning of its sightholder list, and many delegates were itching for a fight. “I’ve never seen a meeting where people were so passionate,” said Derek Parsons, president of the Diamond Dealers Club of Florida. “We see a real threat to our distribution channel, and we will protect our interests any way we can.” Some talked of dramatic options, including taking their concerns to the European Commission, which currently is ruling on De Beers’ new contract with Russia.

In the end, the associations decided to take the less confrontational route. “This is not a time to declare war,” said WFDB president Shmuel Schnitzer. “There are a lot of good points to Supplier of Choice, but we want them to adjust it a bit.”

But not all were pacified. The Los Angeles-based Diamond Club West Coast (DCWC) at press time talked of approaching the EU board. “We’ll talk to De Beers before we do it, but we think this is the only way we can guarantee a level playing field,” said DCWC president David Marcus.

Both associations plan to meet with the new diamond producers to discuss these issues.

The issue of high-pressure, high-temperature (HPHT) treatment of diamonds also was raised at the meeting. Many delegates are worried about the presence of undisclosed stones on the market and the failure of major gem labs to detect them. De Beers announced it had developed a machine to detect HPHT-treated diamonds, which it will send to gem labs this month.

The associations extended the mandate of the World Diamond Council for another year. The WDC, headed by chairman Eli Izhakoff, is the industry body handling the conflict diamond issue.