The Diamond Industry itself is to be Blamed for its Deterioration

The Russian government recently organized Eastern Economic Forum (EEF) in Vladivostok mainly to attract foreign investment to strengthen the country’s feeble economy. Alrosa grasped this opportunity to invite leaders of the global diamond industry including India to explore the business potentials of the Eastern Russian Region.

A special session was organized for the diamond leaders prior to the beginning of the EEF where they ‘said to have discussed’ various issues responsible for the present-day condition of the diamond industry. Mr. Ernest Blom, President of the World Federation of Diamond Bourses (WFDB) said, “We need to market diamonds more successfully and to create better profit margins for all players in the market. Therefore, we are looking forward to update our colleagues about the work that is done by the World Diamond Mark (WDM) in the area of generic promotion to the consumer and to impress the need for other stakeholders to join us in these efforts.”

Mr. Andrey Zharkov, President of Alrosa said, “It is necessary to sustain a responsible and balanced position aimed at stabilizing the market situation. Alrosa has lowered rough diamond prices by 6% since the beginning of the year and has cut supply volumes at the latest trading sessions in accordance with the market environment. We also need to bring back the campaigns focused on the promotion of polished diamonds as an emotional symbol to stimulate consumption”.

“Having given up generic diamond promotion some fifteen years ago, today our industry faces first negative signals. At this time we – practically all major diamond producers – have established a Diamond Producers Association (DPA). Its main line of activities will be development and implementation of marketing programmes, as the future of our industry directly depends on what new generations will see in the diamond,” Mr. Zharkov added.

Some leaders suggested the new rich and emerging market economies (India, China) etc. as possible ways of moving forward. All these suggestions may produce result as far as the traders’ sustainability, re-generating demand for diamonds and re-establishing consumer confidence are concerned. But the global diamond industry today faces issues which are not limited to marketing or re-establishing consumer confidence. There is a gamut of issues (already discussed in my earlier blog) which has ‘rotten’ the entire supply chain of the global diamond industry.

Many leaders and analysts think that the problem really started when De Beers ceased its marketing campaign but I disagree with it. In the era of internet and information today, maybe it is Sierra Leone or Hollywood movies like Blood Diamonds, maybe exposure of market manipulation and price control, maybe frequent cases of undisclosed mixing of lab grown diamonds with the natural ones have played a major role in erosion of the consumer confidence and the reduced diamond demand ultimately leading the industry to the present day shabby condition.

The doyen of Indian diamond industry Mr. Sanjay Kothari had recently said, “The industry has seen these (bad) days thanks to some unscrupulous players in the industry who have diverted much of their time and money to other enterprises and have adopted in all sorts of unethical practices. This is evident with many cases of bankruptcies among diamond companies including many large ones with valuations in hundreds of millions of dollars.”

So let us start afresh. Along with application of some short and long term ‘clinical’ measures as suggested by our veteran leaders, the industry people need to do a self-assessment of themselves. The industry henceforth should be for consumers only and not for the benefit of a few governments, Companies or individuals.

Posted by Suresh Chotai