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Trading In Antwerp
Editorial
Dec 13, 2013 2:55 AM
By Avi Krawitz
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RAPAPORT... At face value, the recent cooperation agreement between the Antwerp World Diamond Centre (AWDC) and ALROSA didn’t bring much that’s new to the table. While Antwerp has long been the Russian mining company’s strongest export destination, the deal did not ensure that more goods will be shipped there. Rather, the agreement should be viewed as a symbol of Antwerp’s still highly relevant position in the rough diamond market.
Skeptics have considered that the emergence of rough trading centers in Gaborone and Dubai would have a negative impact on Antwerp, particular since De Beers shifted its sights from London to Gaborone – a move that was completed only last month. Antwerp’s relatively close proximity to London made it a natural hub for goods en route to India for manufacturing. Some argue that it might make more sense to now ship the goods from Gaborone through Dubai to India, or to India directly.
So far there’s no evidence to suggest that is the case, but it may be too early to tell. Regardless, Stephane Fischler, president of the AWDC, noted that diamond dealers go to Antwerp not only to look for De Beers rough being traded on the secondary market, but for goods from multiple sources.
In fact, Antwerp’s reliance on De Beers goods has diminished in the last few years, notably since the mining company has reduced the number of sightholders that are based in Antwerp.
In contrast, ALROSA has increased its rough supply to Antwerp, with the company’s exports to Belgium up 31 percent year on year to $1.75 billion (RUB 57.23 billion) in the first nine months of 2013. Russia accounted for about 18 percent of Belgium’s rough imports during the same period, according to Rapaport estimates. The AWDC does not publish the list of Belgium’s rough trading partners as it does for its polished trade.
Therefore, the AWDC-ALROSA agreement served as a reminder of a strong partnership that already exists. The parties expressed their intention to contribute to the development of a competitive diamond market in Russia and the promotion of Russian diamonds in Antwerp, as well as to exchange market intelligence and to assist in the training of diamond grading and sorting skills among Russian students at the HRD Antwerp. Those goals fall in line with the AWDC’s 2012 strategic plan to grow Antwerp as a trading hub and diamond knowledge and education center.
Neither should the relationship be underestimated. After all, ALROSA is the largest diamond producer by volume supplying the market. The fact that Belgium represents its biggest client base is significant, especially as trading centers compete for goods.
Ultimately, diamond buyers will go where the diamonds are, which has been the marketing ploy enabling Botswana’s development as a trading hub. Dubai, meanwhile, has leveraged its position as a gateway to the east, along with its zero tax system and strong logistics capabilities, to grow its rough exports from just $600 million in 2003 to $6.9 billion worth in 2013. But while the Dubai Diamond Exchange (DDE) hosts rough tenders on an almost monthly basis, it still needs to sweet talk the mining companies into committing to sell their goods directly in Dubai on a long-term basis.
Antwerp has that added value. ALROSA has scheduled regular big stone auctions in Antwerp in 2014, to complement its auctions in Ramat Gan, Hong Kong, New York and Moscow. Rio Tinto Diamonds, Dominion Diamond Corporation, Petra Diamonds, Gem Diamonds, and Lucara Diamond Corporation all have sales offices in Antwerp. This week, Antwerp hosted its first tender of rough from Zimbabwe’s Marange mines, after the European Union controversially lifted its sanctions on the Zimbabwe Diamond Development Corporation (ZMDC) in September.
Fischler noted that Antwerp also has a strong financial base to maintain significant rough inventory in the city. While he acknowledged that large trading and manufacturing companies are opening offices in Dubai, they are also maintaining their Antwerp operations. Fischler added that the AWDC is working on a package to provide incentives to companies to anchor their capital in Antwerp in a transparent and efficient way. The AWDC is also hoping to provide more attractive banking facilities in the city – especially for the small and medium size companies that, Fischer claims, are not going to Dubai.
Of course, the growth of Gaborone and Dubai are not only a challenge for Antwerp as it affects all the established rough trading centers – including Ramat Gan, Mumbai, and Johannesburg. But as Fischler notes, “The industry is not a zero-sum game. The growth of one center does not mean less activity in the others.” True enough, there is room for everyone. In fact, the emergence of competing diamond hubs is an exciting and important development that will ultimately enhance the trade, as this column has expressed in the past (see editorial, “Competitive Diamond Hubs,” published on March 22, 2013).
But the older centers cannot afford to be complacent and given its historic leading position in the rough diamond trade, it appears that Antwerp has the most to lose. And the AWDC seems acutely aware of its vulnerability, intent not to reduce its market share. Such was the nature of its ALROSA deal. As long as Antwerp can maintain its relationship with the largest suppliers of rough diamonds, it ought to preserve its relevance in the market. After all, buyers tend to go where the diamonds are.
The writer can be contacted at avi@diamonds.net.
Follow Avi on Twitter: @AviKrawitz
This article is an excerpt from a market report that is sent to Rapaport members on a weekly basis. To subscribe, go to www.diamonds.net/weeklyreport/ or contact your local Rapaport office.
Copyright © 2013 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400.
Disclaimer: This Editorial is provided solely for your personal reading pleasure. Nothing published by The Rapaport Group of Companies and contained in this report should be deemed to be considered personalized industry or market advice. Any investment or purchase decisions should only be made after obtaining expert advice. All opinions and estimates contained in this report constitute Rapaport`s considered judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Thank you for respecting our intellectual property rights.
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Tags:
Alrosa, Antwerp, Avi Krawitz, AWDC, De Beers, diamonds, Rapaport
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