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Challenging London's Diamond Industry
Q&A With Harry Levy - President of the London Diamond Bourse
Aug 3, 2014 5:18 AM
By Rapaport News
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RAPAPORT... Harry Levy is an industry veteran who has been president of the London Diamond Bourse since 2011. The bourse was opened in 1940 and today serves as the central meeting point for the U.K.’s rich diamond and jewelry trade. Levy also serves as president of the International Diamond Council (IDC) and president of the Gemmological Association of Great Britain (Gem-A). In an interview with Rapaport News, Levy gives an overview of the industry in London and outlines some of the biggest challenges facing the industry including HPHT diamonds, synthetics, and the lack of standardized rough pricing.
 Rapaport News: What is the general function of the London Diamond Bourse?
HL: It’s a typical bourse. Traders sit at given places and others come in on a needs basis. We have a proper trading floor and at any one time we have 50 to 70 members sitting there.
We have about 250 members, about 120 of which are based in the London vicinity. We have a few members who deal in colored gemstones and a few who deal in jewelry, but most are diamond dealers.
Rapaport News: What is the level of activity in London?
HL: Very little diamond manufacturing is done in London, so everything is imported and the majority is for local use. There is a certain amount of re-exporting done on a stone-by-stone basis, but people don’t come here to buy diamonds as they would go to Belgium, India or Israel.
On the retail jewelry side, London is quite active. A large number of stores form part of bigger groups like Signet, and there are independent jewelers as well as the prestigious Bond Street jewelers in the West End. Activity in that high-end segment is steady but has declined slightly since Arab buyers who would traditionally come to London are now going to Dubai.
However, the level of manufacturing has gone down substantially so the majority of jewelers now import jewelry ready-made, especially in the lower-to-medium range, which hurts the diamond dealers.
Rapaport News: What market trends have emerged in 2014?
HL: Overall, I would say that the market has been fairly neutral in 2014. People constantly complain about how weak the market is. There is the usual increase in activity before Christmas but I don’t expect it to pick up significantly, and I don’t see what would induce people to come to London to buy diamonds.
We’re trying to develop the market and are working with the mayor’s office to bring more people to the bourse. For example, many Chinese tourists come to London to shop at Harrods and we’re trying to make the bourse a stopping place for them too. There isn’t much added value that London currently offers international buyers, and the internationals that come to the bourse are generally trying to sell to us.
Rapaport News: What has been the effect of De Beers moving its rough sales out of London?
HL: None at all, because De Beers was very isolated and exported all its goods. Sightholders used to come into the bourse during the sight, which created a bit of business, but they stopped coming when the sights moved to Botswana in November 2013. Now, De Beers’ main presence is through the De Beers retail store, and its IT and research divisions are still here. The bourse maintains a good relationship with De Beers.
Rapaport News: You’ve been fairly vocal regarding the challenge that synthetic diamonds pose to the natural diamond industry. What are the central issues surrounding synthetics?
HL: I don’t see a big market for the larger synthetic stones from 0.50 carats upward. All those stones will be graded and sold as synthetics. The problem we see is in the small stones, 1-pointers to 6-pointers, coming in as jewelry, undetectable and probably undisclosed. They start off mixing synthetics with natural diamonds and then they end up just selling synthetics without the proper disclosure. That’s the main challenge.
I think the trade has been very negative toward synthetic diamonds out of concern that it could be a threat to natural diamonds, but I don’t think that is going to happen. I think people still want the real thing.
Rapaport News: Has the industry response to synthetics been misguided?
HL: People don’t want to talk about it, thinking that it will go away, but it won’t. I think we should start a positive campaign explaining why people should buy natural diamonds – selling the idea of romance and value in natural diamonds based on the rarity of our product.
I would like to see the synthetic producers organize themselves into an association and have a dialog with us in order to control the business more. At the moment we are legislating without consulting the synthetic diamond producers, and that doesn’t work.
We shouldn’t undermine or degrade synthetics. It’s a commodity that’s available as an alternative and we should work with the synthetics industry to make sure that they disclose properly and adhere to the rules. The majority of the producers are straightforward; it’s when we get to the dealers that we have issues of non-disclosure.
Rapaport News: What is the International Diamond Council (IDC)?
HL: The IDC was set up about 40 to 50 years ago at the time when diamond grading came into being and the GIA was developing its diamond grading system. Many laboratories were misgrading stones and so the bourses got together to form what became a technical arm of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA). The IDC set up its own rules and regulations for grading, which are very similar to the World Jewellery Confederation’s (CIBJO) rules, to create a system for disclosure, grading standards and control over the laboratories.
Rapaport News: How functional is the IDC?
HL: It’s not the most active organization. We have periodic activity when something comes up, but the number of laboratories grading according to IDC rules has diminished. There are a few in the council that want to bring more laboratories under our wing so that we can exert more control.
Rapaport News: Is there concern that a report from one lab for the same diamond may be very different from another lab?
HL: Some laboratories have made a virtue of giving a better grade than the stone deserves. They all use the GIA terminology, but in order to grade color you need master stones to compare to, and not all of the labs have accurate master stones. To get a set of master stones is very difficult because the set has to be on the borderline of each color and it’s difficult to find that. So, many laboratories grade according to a master set that is not identical to the GIA’s, yet they use the same GIA terminology. Many laboratories are honest but some are prepared to give a diamond a better grade than it deserves in order to attract business.
Rapaport News: Does the IDC have a master set of diamonds?
HL: Yes, it’s with HRD Antwerp, which formed the IDC rules, but HRD’s position is falling away as it becomes more commercial. Some of our council members are a bit concerned about HRD moving away from the IDC.
Rapaport News: What other challenges are you concerned about for the industry?
HL: I think we have a challenge regarding treated diamonds, especially HPHT stones. These are treatments that cannot be identified by individuals and you need highly sophisticated laboratories to identify them. Many stones are not disclosed as HPHT.
I have spoken to several large laboratories and they say that detecting HPHT is much more difficult than detecting synthetics. HPHT is used as a synthetic and also as a means of changing the color of a diamond.
Rapaport News: What are the biggest changes shaping the market that you’ve seen over the course of your career?
HL: The biggest change has been that we no longer have a De Beers central selling organization through which rough was controlled. They would put the price up each year so all the stock you bought would rise in value because of the built-in price structure. Now, we’re moving more toward a tender system and I don’t know how we’re going to ensure stability in the rough prices.
If you end up with wildly different prices between companies for the same diamonds, it puts the polished market into jeopardy. There’s less standardization of rough pricing and I’m not sure how to overcome that. At the moment nobody wants to talk about it. It also lends itself to speculation.
Rapaport News: But doesn’t it also lend itself to the possibility that the market determines prices?
HL: I suppose it does but it’s difficult to commoditize diamonds because each one is an individual. So you can’t have a price fixed as you have for gold. With De Beers slowly reducing its influence on the market, there’s no central way of really knowing what the correct price of a diamond is, at least for a rough diamond.
Rapaport News: What advice do you have for someone starting out in the diamond industry?
HL: It’s a question we need to consider because children today are not following their parents into the industry as often as before. The industry is also moving away from being a one-man industry, and I only foresee more large groups coming in. It’s going to be more difficult for the one-man business to survive. A person starting out has to bring in skills and knowledge about diamonds and grading, and they need experience.
Rapaport News: Are we not seeing a greater interest from the younger generation in gaining industry knowledge through Gem-A?
HL: There is an upward trend of people who want to gain knowledge about gemology, but I think they have difficulty finding jobs. They come out as qualified and expect the salary of a qualified person, but the industry doesn’t require that expertise to sell stones.
I think these problems have arisen because of the improvement in our gemological knowledge and technology. Whereas a few years ago, no one would have questioned whether a diamond was synthetic, natural or treated, but today we know better. Knowledge is becoming much more important and while larger dealer companies may require someone with gemological qualifications, their opportunities are limited. The individual entrepreneur, who is typically the middleman dealer, doesn’t have enough business to employ people.
The trade is now using the internet more, sending goods out with courier, and manufacturers are now going directly to jewelry manufacturers and stores. So the middlemen, such as our bourse members, are being squeezed. It’s the way the market is evolving.
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