By Bernardette Sto. Domingo
Antwerp, the world’s leading hub for rough diamond trade, anticipates a stronger 2017 on the back of a more stabilised market and fresh initiatives to stimulate global demand.
Total diamond trade in Antwerp, the world’s largest diamond trading hub, reached $48 billion in 2016, representing a 5 percent year-on-year increase due to a significant recovery in the rough diamond business, data from the Antwerp World Diamond Centre (AWDC) revealed.
The figure translated to a total of 202 million carats of rough and polished diamonds traded in Antwerp last year, according to the centre. It also cited a stronger rough sector as a positive sign, adding that this is the “foundation and lifeblood” of the diamond trade.
AWDC attributed improvements in this particular product segment to efforts to bring more rough diamonds to the Antwerp market.
The centre also cited a more upbeat mood in the market as opposed to 2015. Despite an overall declining trend in the polished diamond market, Antwerp retained its lead in the rough diamond trade.
“In 2016, Antwerp reinforced its position as a global leader in the rough diamond trade and the model of fiscal transparency and innovation. There is always more work to be done, but the pessimism with which some began the year has yielded to determination and guarded optimism. Following a forgettable year in 2015, the Antwerp diamond trade can now breathe a little easier as a result of stabilisation in 2016,” noted Ari Epstein, CEO of AWDC.
Optimism pervades the global diamond sector, thanks to more favourable market conditions and business provided by both traditional and non-traditional segments, revealed Epstein.
Despite a slowdown in diamond jewellery consumption from 2012 to 2014, demand started to regain traction in 2016, added the AWDC official. This trend is expected to continue moving forward in 2017.
US demand continues to be the main growth driver, disclosed Epstein, adding that China and India have likewise maintained their positive momentum.
“We expect demand for rough diamonds to recover from the recent downturn and return to a long-term growth trajectory of about 2 percent to 5 percent per year on average, relying on strong fundamentals in the US and the continued growth of the middle class in China as well as in India,” he commented.
Chinese demand is particularly fuelled by second- and third-tier cities where the huge population is becoming increasingly affluent thereby presenting tremendous growth opportunities, remarked Epstein.
Citing industry reports, he stressed that demand from China and India could equal that of the US by 2020.
The AWDC chief likewise cited the rise of millennials as a potential source of growth in the diamond sector.
According to Epstein, this new generation of consumers represents a “compelling opportunity” for the diamond industry despite claims that younger buyers are no longer interested in diamonds.
“This is more of a generational bias than reality. It makes for a good story to tell. But the fact of the matter is, millennials are not only very interested in diamonds but are already the largest consumers of diamond jewellery, and their purchasing power has not even matured yet,” he noted.
This, however, calls for more creative ways on the part of industry players to adapt to millennials’ new patterns of consumption, and their desire for personalisation and experiences. “If we do this, we should prosper. In short, there will be volatility, but there will also be demand,” Epstein disclosed.
Challenges and opportunities
Notwithstanding volatility and challenges in the medium-term, the AWDC CEO said a positive macroeconomic outlook is expected to bode well for the industry in the long run. Success, however, is hinged upon diamond producers behaving responsibly and industry players sustaining marketing efforts to support diamond jewellery demand, especially among millennials.
“Antwerp’s diamond trade has strengthened its position in the rough diamond market, and AWDC’s proactive approach in this context should not be underestimated. AWDC rigorously sought out new and promising markets and organised several missions to diamond-producing countries, so we are creating new opportunities,” he added.
The year 2017 is an exciting one for AWDC, according to the diamond expert. In celebration of the 570th anniversary of diamond trade in Antwerp, the centre is kicking off the Antwerp Diamond Year, in collaboration with the City of Antwerp, from October to February 2018.
It is also organising educational projects as well as various cultural and artistic events aimed at fostering awareness of the diamond trade among students and the general public. Also in the works is an African Diamond Dialogue, which will delve on recent developments and pressing issues in the African diamond industry.
Epstein said the centre is focusing its efforts on reinforcing its leading position as a rough diamond trading hub by facilitating the presence of tender houses and the influx of rough diamonds from smaller producers and junior miners. Antwerp also maintains its existing relationships with leading producers such as Russia’s Alrosa.
“The increasing number of rough diamond tenders in Antwerp is a clear result of these efforts, which provide an additional impetus to Antwerp’s rough diamond trade,” he remarked. On the finance front, AWDC recently adopted a new fiscal system called the “Diamond Regime,” or “Carat Tax.”
Under the Diamond Regime, corporate taxes are no longer based on profit but on a lump sum amount defined as a percentage of diamond traders’ turnover. This increases predictability and stability, as diamond trading companies will be able to forecast their total corporate tax due based on diamond sales. This initiative is expected to strengthen the capital base of companies and improve their bankability, noted Epstein.
Major industry players, meanwhile, underscored the enduring appeal of diamonds, which continues to fuel worldwide demand.
According to Ketan Shah, CEO of Kediam Bvba, the market has seen a considerable increase in demand at the start of 2017, compared to a more challenging 2016.
Among Kediam’s most sought-after products are diamonds of D to M colours with clarity grades of VS to I1. Buyers are partial to stones of 30 points to 3 carats, he noted.
The company specialises in white diamonds in round and fancy shapes, from 30 pointers to 5-carat stones in D to M colours, across all clarity grades.
It also has an extensive and exceptional range of fancy colour diamonds in all shapes, sizes and clarity grades. The company started offering high-end finished jewellery about four years ago to further widen its client base.
“As manufacturers of natural diamonds, we buy from the source, from all major producers. We manufacture in Russia, South Africa, Antwerp and India, and we pride ourselves on our high-quality production process, which we continually strive to improve,” noted Shah.
Kediam’s major sources of business are Hong Kong, mainland China, Europe and India. Among these markets, China presents an immense opportunity for growth.
“China has a large consumer market with an ever-increasing middle and upper-class consumer sector. These people have money to spend. For us, there is a vast potential for growth in China,” the company official commented.
For the rest of the year, the company will focus on expanding its customer base, improving the quality of its production process and developing new initiatives to strengthen its business with increased stability.
A shortage in banks and financial assistance is however making a dent in diamond traders’ business in Antwerp, Shah remarked.
Raj Mehta, director of Rosy Blue NV, echoed this sentiment, adding that financing issues are the biggest stumbling block in the industry at the moment.
The company official also cited the diamond industry’s seemingly unconventional behaviour in relation to developments in the global equities market.
“The environment is very strange. For instance, stock markets are booming across the globe, which should directly and indirectly influence our industry, but somehow this is not the case,” revealed Mehta.
Polished prices haven’t increased in the last 12 months while prices of rough have gone up by about 6 percent, he noted. “This is not normal because business needs to be ‘pull-driven’ instead of ‘push-driven’,” he added.
Business, however, thrives for some sectors. For instance, buyers are generally on the lookout for pointers.
“We deal with buyers in major markets across the globe and sell different goods in specific areas. Each market has strong and weak points,” added Mehta. “Our focus has always been to understand our clients well and manufacture goods according to their diverse preferences.”