Industry News by Nemesis

IDMA President Maxim Shkadov Issued a Warning to De Beers and ALROSA about Increased Supplies of Rough to the Market

February 8, 2016

The processing sector of the diamond industry is still weak, and the attempt to collect all the money from the market after the Christmas sales can trigger a steeper downturn in this sector, as the next step - after the encouraging reports about growing sales - will be to hike rough prices. As a result, the little hope for recovery in the industry will collapse. I would like to draw particular attention to the margins existing in our sector, because it is the main indicator of the market’s health. Prices for polished diamonds need to move up, and only this can be a basis for increasing rough prices. Polished prices will be able to advance only after the restoration of balance between supply and demand, as well as after an intensive campaign to promote polished diamonds run by the Diamond Producers Association.

 

A large amount of supplied rough will undoubtedly put the situation out of balance resulting in another falling wave of polished prices. It should not be forgotten that operation at feeble margins or even at a loss in our sector for a long time is conducive to amassing holes in the companies’ budgets, and no one can say how long they will be able to patch them. I urge all diamond manufacturers to be guided by value-adding indicators and not by reasoning based on the “just to be in the game” approach while buying rough.

 

Rough diamond producers are no longer a guarantor of profit for diamond manufacturers. Lately, they have shown that their own interests are above the interests of their customers, and this should give everyone an understanding that a new era has come - the era of real market relations, the era of the buyer. We all need to understand that the rules have changed, and the first to declare it was Mr. Mellier. “If you do not see a profit - do not buy” - this slogan replaced “A diamond is forever”. And we must reply to this: “Work with clients and do not impose loss-making terms”.

 

We have long been hesitant to speak about our margin, but life has put everything in its place. IDMA has prepared a study which was sent to all its members, and I hope the results of this study will make many heads sober. At least, we shall have a different look at the numbers that we see in the diamond pipeline we present, especially in its part reflecting the difference between rough and polished diamonds. We would otherwise have viewed this difference as numbers just reflecting the turnover, but the statement that our sector generates billions of dollars of added value while showing continuous losses, prompted us to bring evidence on the basis of an independent survey.

 

Dear colleagues, let us move our business forward developing and strengthening faith in the eternal value of diamonds!

 

Kind regards,

Maxim Shkadov, President of IDMA

 

Source: Rough&Polished

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