Rapaport

Preview: New York’s Fashion’s Night Out

Isaac Mostovicz writes that New York's Fashion's Night Out is more responsible this year...

Here’s a nice video from Rapaport previewing New York’s Fashion’s Night Out, an event occurring later tonight in New York that celebrates the work of a number of the city’s jewelers.

The video also covers a few corporate responsibility issues, including Ivanka Trump’s work with the United Nations Foundation’s Girl Up campaign and Donna Distefano’s fair trade initiative that ensures her jewelry is free from associations with environmental destruction or human rights violations.

Tina says of this article...

Just wanted to leave a quick ‘thanks’ for your blog and your posts. I just discovered it today, but I’m enjoying reading it, and I’ll be back again soon.

You say of this article...

Bookmark and Share

Can commoditisation be good for diamond prices? Part 1.

Isaac Mostovicz writes...

rough_diamonds_picture1

Two critical diamond industry events have thus far passed under the radar of mainstream media. They deserve an airing here as they signal a shift to open-access, transparent, and globalised diamond trading – a far cry from the industry’s heritage in tight handshake-based relationships.

First: The creation of a $400m Diamond Circle Capital Fund, an investment fund which will invest in $1m+ high end diamond. The fund is the brainchild of commodity asset management specialist Diapason.

Second: The development of a diamond futures market by industry ‘wild child’ Martin Rappaport, based on ‘bread and butter’ brilliant diamonds – high quality rounds between 1.01 and 1.19 carats. The classic engagement ring ingredient.

Both measures aim to address fundamental weaknesses in the existing diamond trade: while consumer demand is solid (if not exactly strong) and extraction capacity is solid (if not exactly strong), the centre of the diamond pipeline is in deep trouble. The distribution arteries of the industry are clogged. Rough dealers, manufacturers and polished wholesalers are finding it hard to breathe. Both stock and debt levels are at record highs.

It’s the first move – the investment fund – that I want to address first.
According to industry commentator Chaim Evan-Zohar, these measures should attract much-needed external capital into the industry, and will enable manufacturers to shift goods which would otherwise get stuck in the distribution, or shifted on at a bargain rate; they need deep pockets to hold onto.

There are dozens of good diamond manufacturers who will not even try to compete for the truly large rough stones, because they cannot be sure that they have the right connections. The Diamond Circle Capital fund significantly widens opportunities for the trade to sell large polished stones.

As De Beers’s historic monopoly passes into history, a period of uncertainty emerged in which the industry needs new pathways to get goods to consumers.

After a long period in the dodrums, Chinese and Indian demand is on the rise for smaller goods, and oligarchs increasingly need something shiny to please their soon-to-be-ex-wives. The is now some hope that the industry may finally be emerging from its doldrums. This hope, and desparation at the status quo is encouraging a new wave of innovation.

Both these new measures rely upon the fact that diamonds can be traded as commodities. By picking narrowly defined segments – one highly volatile and one highly stable, the measures will introduce powerful, albeit potentially conflicting price signals into an opaque marketplace.

But the question is, who will this benefit. Does it really help manufacturers? Does it really help consumers? Critically, will it help investors?

For manufacturers there may well be be a one-time injection of funds as they sell difficult to shift of stock to the Diamond Circle fund, but thereafter, it’s unlikely the fund will have the sales capability to shift much stock. If it does, the potential for misleading transactions is immense. On the one hand it promises to set a benchmark by disclosing genuine sales figures rather than tax-cogniscent guesstimates. On the other hand, the integrity of these transactions will be very difficult to assure. What liquidity is there really in a rolling stock of 100 or 200 diamonds?

The proposed participants are actually rich rough dealers with little sales experience.
As one of the world’s leading retailers of large stone said to me:

Selling large diamonds is an art form, making the buyer feel like a queen. Manufacturers should stay well away.

Building on his observation, it’s not the business of a fund, or even, really, of an auction house to sell these diamonds. It’s quite possible that the fund may actually act to suppress value rather than enhance it.

Secondly, the fund is likely to have a disproportionate number of difficult to sell or ugly diamonds – if a dealer has a really quality large diamond he is likely to be able to find a more value-adding route for it.

The third point is that not all diamonds have value. Period. Some are just not saleable, at any price. Although the aggregation created by the fund is likely to smoothe out the risks of holding these diamonds, on average it will probably overvalue the diamonds it contains.

To conclude, and to challenge Chaim’s view, the simple truth is diamonds are NOT commodities. Treating them as such will not inflate value, it will only erode it…

The sooner the industry finds a way to step back from this abyss, the sooner it may regain a luxury premium.

I will comment on Martin Rappaport’s futures market in due course…wait for part II…

Jeremy Sulzbacher says of this article...

Please view my editorial on these issues in the latest volume of Diamond Finance

You say of this article...

Bookmark and Share

Rapaport talks up fair trade diamonds

Isaac Mostovicz writes...

Martin Rapaport is urging industry professionals to join his new fair trade jewellery association.

We are also establishing a non-profit organization — The Fair Trade Diamond and Jewelry Association — that will work to ensure fair compensation and beneficiation to the poorest members of our industry.

The Rapaport Group is establishing a non-profit fund for the education of the children of artisanal diamond diggers in Sierra Leone.

Rapaport will be donating $100,000 to kick off this program. We have asked and hope that others will work with us so that we may do something powerfully good for the people of Sierra Leone.

This action is a proper response to the public perception.

You say of this article...

Bookmark and Share

Diamond stockpile grows…

Isaac Mostovicz writes...

According to Rapaport, the availability of rough diamonds will be less during the first half of 2007 due to several reasons.

Lynette (Hori) Gould of De Beers said:

There will be fewer Russian goods in the mix ($100 million less in 2007) as a result of formal commitments agreed with the European Commission.

Gould added that De Beers Canada production would not yet be available yet, and Botswana producer forecasts are slightly lower. He adds:

In addition, the DTC is committed to supporting the intentions of the southern African governments, with whom we work, to develop their diamond cutting industries, so we are selling a greater volume of rough (that is suitable for processing in local beneficiation enterprises) in southern Africa

Is this plausible?

The fact is that 98% of the world production are diamonds less than .7 CT. My feeling is that the Russian and the Canadian have relatively larger goods and to feed SA polishers you need larger goods as well…

There is a need to wash the excess supply of the tiny and cheap goods somehow and this, if you see this week’s comments on Rappaport, is not easy, the only way to sell these less desirable goods is to bundle them with more demanded goods that the DTC is increasingly being deprived of.

I suspect that we see here a growing stockpile in 2007.

Hiding the problem from the public is an acceptable tactic as long as the industry does not start to believe in that the stockpile does not exist…

You say of this article...

Bookmark and Share