(Rapaport…June 29, 2006) The second day of the 32nd annual World Diamond Congress offered attendees a full schedule of events, tapping into major issues of concern in the diamond industry: synthetics, profitability and conflict diamonds.
First, the World Federation of Diamond Bourses (WFDB) ratified a resolution on the certification of synthetic diamonds.
While some members of the WFDB argued that synthetic diamond certification is an inevitable development of the diamond industry, others were concerned that consumers would not be able to differentiate between synthetic and natural diamonds. In a follow-up debate on the nomenclature of synthetic diamonds, Avi Paz, vice president of the WFDB, suggested a change in the categorization of synthetics in order to avoid confusion with diamond certificates. Delegates agreed to give a mandate to the International Diamond Council to determine the exact nomenclature of the certificate.
In a joint session of the congress which took place later in the day, Lev Leviev, the largest private diamond producer, addressed the lack of profitability in the industry and questioned why the middle sector is always hit hardest. “Why are diamond producing companies increasing the prices of rough diamonds and why does today’s diamantaire suddenly have to go market his diamonds? I don’t know a single manufacturer today who earns money,” said Leviev. “This is dereliction in the first degree.”
Leviev said, “Diamantaires barely manage to sell their goods when they have to go purchase more.” Manufactures face challenges on various fronts including the inability to sell goods, the lack of cash in the industry to float in rough times, and difficulty in obtaining credit. These challenges are compounded by the fact that diamantaires must still purchase additional rough at prices which have risen by 35 percent due to speculation of rough diamonds.
Leviev also noted the difficulties of diamond manufacturers. When selling goods to large chain retailers, they order on consignment and pay only once they are sold. The process can take as long as one year before manufacturers receive payment, if at all. The goods demanded by retailers are specific and when they are not sold, large retailers often return different goods to the manufacturer.
The diamond industry is not expanding and diamantaires are not making a profit, Leviev said. He recommended that manufacturers cut and polish their diamonds in a country where rough diamonds can be easily obtained. Additionally, Leviev urged producing companies to provide credit to manufacturers and categorize the goods for manufacturers so that buyers can build their own independent markets.
The impact of the upcoming Warner Bros’ film “The Blood Diamond” drew strong reaction from the audience. Eli Izhakoff, president of the World Diamond Council addressed the issue of conflict diamonds and the upcoming movie. Izhakoff reassured attendees that the WFDB performed ‘very well’ with regard to filtering out conflict diamonds in a three-year review rendered by the ad hoc committee of the government of Canada.
Izhakoff maintained that the industry should not direct its fight towards the film, but rather to ensure that the industry educates retailers, consumers, and the media about industry measures in place to keep diamonds conflict free.
“We lowered the percentages of conflict diamonds in the world trade to less than one percent,” he said. Izhakoff suggested an educational program geared to retailers so that when a consumer asks if they are buying a clean diamond, the retailer can provide a document that says the diamond is 100 percent conflict free. Izhakoff unveiled the council’s soon-to-be launched website at Diamondfacts.org. The website was set up for the purpose of answering consumer and retailer questions regarding conflict diamonds.
Jonathan Pudney, of the World Diamond Council, added that the success of the Kimberley Process and its system of warranties, “while not perfect, has helped stem trade in conflict diamonds.”
“Consumers want to know the industry cares about this issue. They want to know that when they are purchasing a diamond they are not buying a conflict diamond,” Pudney said.
Consumers should be taught about the Kimberley Process and the continuing efforts for the diamond industry towards fighting conflict diamonds, Pudney added. He named four actions the Council is willing to undertake on the topic:
1) Outreach to the film industry,
2) Outreach to media with core message,
3) Creation of fact based website,
4) Development of educational materials for trade concerning conflict diamonds.
The final speaker was De Beers managing director, Gareth Penny, who talked about the reputation of the diamond and the importance of heading off any impact from The Blood Diamond movie.
Penny spoke of the need to celebrate diamond industry success stories including the fact that diamonds employ approximately 10 million people worldwide, that Jewelers for Children recently raised $5 million to help the needy, and that diamonds generate more than $8 billion a year in revenue to Africa.
“The entire industry must be champions for the good that diamonds do and sell the diamond dream,” said Penny.
De Beers plans to spend $15 million during the upcoming six months in order to educate the public on diamonds, he added.