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Antwerp
By Marc Goldstein
Waking up in twenty-first-century Europe and witnessing five big army trucks entering the Hoveniersstraat, the main street of the Diamond Square Mile, is something nobody would have believed, had you suggested it even a year ago. But that was before May 24, 2014, when the first major terrorist attack in Brussels killed four people in the Jewish Museum, and before the raids that thwarted other Belgian terrorist attacks following the January 7 massacre in Paris. At least two soldiers are now guarding the synagogue located at the heart of the Mile – less than 17 yards from the Antwerp Diamond Bourse. More police have been deployed and more security measures have been taken on site. The diamantaires seem to be going back and forth as usual, except for the street whispers and gossip.
Jacky Roth of Antwerp Star Diamonds explained that “We can, today, more than ever, rely on the support of our mayor, Bart De Wever, who does his best to protect our business area.” As is the case in most other cities across Belgium, the army is assuming certain duties normally handled by the local police, so that the police are in a better position to handle security. “We’re not a city under siege,” De Wever told Flemish radio and TV. “We’re a city where we like to take all possible precautions to protect our citizens and give a sense of security.” The troops are currently deployed around the major institutional buildings, the police quarters, in the Jewish neighborhoods around the synagogues and in the Diamond Square Mile. “In Antwerp lives a major Jewish community, which represents a very visible target for Islamic terrorism,” De Wever said.
As for diamond business, the middle part of the pipeline appears to be more and more squeezed by the producers and the retailers. The industry is characterized by not enough profit, too much risk and not enough interest in financing. “The producers must reduce prices and quantities offered to the sightholders, or at least one of those two,” said Roth. Wherever you go, you hear people complain about being tired of losing money. The sight in Botswana in December is a very good example of what is happening. Whereas the percentage of goods refused at a sight is usually around 10 percent, this time it was 40 percent. If the current situation endures, more and more people are going to have to give up goods where they know they’re going to take a loss. Jean-Jacques Taché of Taché Diamonds explained, “We manufacturers can’t be taken hostages any longer. With the recent and sudden drops in polished prices, the producers were inclined to believe that sales would increase tremendously, which is not the case at all. Consequently, they appear to be totally disconnected from the market. The deals that were signed just three years ago do not match the reality of today. We have no choice but to share with the producers the cost of holding inventory.” “We’ve come to the edge,” said Kaushik Mehta of Eurostar Diamonds. “The producers must indeed do something. Reducing quantities forced onto their clients would only be a temporary solution. In the long run, the only logical and sustainable solution would be to reduce prices. So far, the Diamond Trading Company (DTC) has made a gesture, reducing its prices by an average of 3 percent to 4 percent. However, it’s not enough. Another 7 percent is absolutely necessary for profitability to return and for the system to function again.”
Erik Jens, head of the diamond and jewelry business for ABN AMRO Bank, said, “We are indeed seeing volatility and also price drops in polished and in rough trading. Inventory is probably hurting throughout the pipeline in combination with still flat or tight margins. That is worrisome indeed. I think the whole industry from producers to retailers is in favor of a stable and predictable market. However, each participant carries his own responsibility for being profitable and bankable and sustainable in the future. “Of course,” Jens concluded, “from an economic textbook perspective, in view of the inventory overhang, a policy of lower quantities in the market seems more effective. We must also realize that diamonds are not the only sector where we are seeing volatility and price swings — we are seeing that in all commodities. Look at oil, that sector is also readjusting itself to stay profitable under current circumstances. The diamond sector is no different.”Article from the Rapaport Magazine - February 2015. To subscribe click here.
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