Rapaport Magazine

Encounters in the Emirates

After two years with almost no large industry gatherings, the Dubai Diamond Conference took place in February, attracting professionals from across the world. Here are some of the big topics that came up.

By Joshua Freedman

Image: Stargems

1. Dubai rivaling Antwerp and Hong Kong

“The new capital of the diamond trade” was how Ahmed Bin Sulayem, executive chairman and CEO of the Dubai Multi Commodities Centre (DMCC), described the Emirati city in his introductory remarks.

Whether or not Dubai has replaced Antwerp as the world’s most important trading center is a matter of debate. While rough exports out of the United Arab Emirates (UAE) jumped 98% year on year to $12.96 billion in 2021 — leapfrogging Belgium, which shipped out $11.12 billion — Belgium is still the clear leader for polished.

In terms of trade events, however, Dubai has taken a big step toward becoming a major hub, especially with Hong Kong still unable to host international gatherings. Unlike Hong Kong, which requires long quarantine periods for visitors, Dubai has a relatively relaxed policy that has given it an advantage. Some 550 delegates attended the conference, including CEOs of the largest miners, manufacturers and retailers.

The same week, Dubai hosted the inaugural Jewellery, Gem & Technology (JGT) Dubai show, a joint venture between Informa Markets and Italian Exhibition Group (IEG). Informa had been looking to diversify after suffering a series of disruptions to its flagship Hong Kong show, including the pandemic, the 2019 protests, and multiple typhoons.

2. Why sales and rough prices have soared

After speeches by Bin Sulayem and Diamantino Pedro Azevedo — Angola’s minister of mineral resources, petroleum and gas — the conference began with De Beers CEO Bruce Cleaver, who discussed why the jewelry industry had recovered so well from the Covid-19 downturn.

Cleaver listed six reasons for the rebound. Four of them were at the consumer level: government stimulus packages; higher savings among affluent people following lockdowns and travel bans; a shift to online spending; and shoppers’ desire to buy something meaningful during a crisis. Diamond jewelry outperformed all other luxury products in 2021 as compared to 2019, the executive said.

“Fundamentally, what we should be celebrating is that there was really strong consumer demand, and it goes to show the point we’ve always believed: People really love the category, and they love the product,” Cleaver said in conversation with Anish Aggarwal, cofounder and partner at diamond consultancy Gemdax. “So I think the industry has got a positive future ahead of us if we can just build on that.”

On the trade side, the midstream’s financing situation improved, and supply returned to a better balance with demand, Cleaver added.

The latest challenge, however, is rising rough prices and their threat to manufacturers’ profit margins. De Beers sets its prices based on the consumer demand that it expects to exist when the rough reemerges on the market as polished, the executive explained. He attributed the sharp price rises on the auction market in part to “a bit of exuberance,” short-term speculation, and fears of supply shortages. Addressing those fears, he asserted that “supply is perfectly stable but isn’t going to be as high as it might have been in the past.”

Notably, the sector cooled in the weeks following the conference, with prices falling by double-digit percentages on the open market.

3. ‘Sustainability is not a motivator’

Responsible sourcing is not necessarily consumers’ top priority, but it’s still something they want to see. That was the takeaway from a panel discussion with Beryl Raff, CEO of Helzberg Diamonds; Stephen Lussier, De Beers’ executive vice president for brands and consumer markets; and Shamlal Ahamed, managing director for international operations at India-based retailer Malabar Gold & Diamonds.

The industry needs to focus on the core elements of marketing, an approach that has been lacking since De Beers stopped carrying out category advertising many years ago, Raff argued. “If we lose what little bit [of generic marketing] we still have, and we focus too much on making sustainability the first message, I think we jeopardize ourselves.” She stressed, however, that “in no way am I saying sustainability is not important, and in no way am I saying that all of us…should not pay attention to it and do the right thing.”

Lussier distinguished between factors that give consumers the initial impetus to buy an item, and those that merely create “cultural permission” to do so.

“Sustainability isn’t a motivator to buy a diamond — that’s not why I’m going to go buy one,” the De Beers executive explained. “What motivates me to buy a diamond is what I want it to say to the person I give it to, or what I want it to say about me. [A] diamond is a complex product that targets people on many different levels.”

4. Can lab-grown maintain value?

In one of the most noteworthy moments of the conference, Raff revealed that Helzberg customers had been keenly buying lab-grown diamonds and that this was lifting overall transaction values. The company stocks both bridal and fashion jewelry containing man-made stones.

“In 2021, we sold, in units, 50 times more 2-carat labs than we sold 2-carat mineds,” Raff reported. “That customer took the average ticket up with it: Where they would have been a $4,000 to $6,000 customer, they became a $7,000 to $9,000 customer, because the difference [in price relative to the size] is enormous.”

Yet the US has just seen the strongest period of natural-diamond sales in history, retorted Lussier, whose company’s own lab-grown brand, Lightbox, focuses on the fashion-jewelry market. In addition, he argued, the ever-decreasing cost of producing synthetics will make it hard for companies to keep selling at such high prices, as these will be difficult to justify to consumers.

“I’m seeing an increasing divergence [between natural and lab-grown stones], and to me, part of the natural-diamond promise is based on an inherent rarity,” Lussier said. “There is only what the world made a billion years ago. It’s [been good,] over the last 15 months, to see diamond prices rising again, because I think that they need to be permanently [increasing]…. That’s the challenge [of] lab-grown: It does not have a natural rarity.”

Article from the Rapaport Magazine - April 2022. To subscribe click here.

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