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Positioning Antwerp for Growth

Q&A with Marcel Pruwer, President of the Antwerp Diamond Bourse

Nov 30, 2014 6:00 AM   By Avi Krawitz
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RAPAPORT... The Antwerp Diamond Bourse is one of four bourses which make up the Federation of Belgium Diamond Bourses. Challenged by competitive new trading centers and volatile market conditions, the bourse is at the heart of efforts to grow Antwerp’s position in the industry. Rapaport News spoke with Marcel Pruwer, president of the Antwerp Diamond Bourse, about those challenges and its strategy to spur growth:

Rapaport News: What is your background with regard to the diamond industry?

MP: I grew up in London where I worked in the textile and insurance industries, and in international trade. I entered the diamond trade when I moved to Belgium where I sorted and graded rough and polished. I then set out on my own and started a rough and polished brokerage, which is still active today.

IES, of which I am managing director, is a Belgium-based advisory group that initially focused on business development and strategy planning. After De Beers launched supplier of choice in 2000, and with the discovery of Canadian diamonds, there was a wave of interest for advisory work in the industry, and our involvement grew from there. We assess the ongoing changes in the market, work with companies to navigate this dynamic environment and help develop new business.

I have served as a director of the Antwerp Diamond Bourse since 2009 and as its president since 2013.

Rapaport News: What is the function of the different diamond bourses in Antwerp?

MP: The Antwerp Diamond Bourse, or Beurs Voor Diamanthandel, has 1,200 members and is essentially for polished trading, although we have many rough dealers as members. The Antwerpsche Diamantkring is for rough and the Antwerp Diamond Club is principally polished. The Vrije Diamanthande doesn’t have a trading floor but is located in the club and serves its members through the club’s facilities.

A few years ago we initiated the Fusion 4 program to facilitate more strategic cooperation between the Antwerp bourses, with the goal of dealing with the challenges facing the industry and ensuring long term growth for Antwerp’s diamond sector.

As the nature of business changed, trading shifted away from the bourse floors to offices. We’ve been reviving activity on the trading floors by developing new events – which is something that is now being done in other centers.

Gone are the days when the bourses could function as a Gentlemen’s Club for diamond dealers. We have to visibly add value for our members, protect and promote the market, and be prepared to take severe disciplinary measures in order to protect the business.

Rapaport News: What is the strategy to grow Antwerp’s diamond industry?

MP: Antwerp’s 600 year diamond heritage provides us with an added value that is very attractive to the business-to-business (B2B) community and consumers around the world. As a trading hub, we’re logistically and physically located in the heart of Europe, giving us immediate access to more than 500 million people. These factors are all important to our marketing story as it provides a legacy, authenticity and a branding opportunity which is good for Antwerp and the global trade.

Our key role and contributions include finance, active rough and polished markets, our deep diamond experience, accessibility and compliance. To reinforce this and expand our role in the global trade, we are strengthening our rough market and we continue to attract new rough producers to sell their goods here. We’re also expanding our polished trading through new initiatives and vigorously addressing our role in banking and finance.

However, this doesn’t guarantee continuity and growth. We need to understand the demographic and technology-driven changes that are affecting consumer behavior, and recognize how these trends will evolve in the coming years.

Growth in China and India, and new ways of doing business online, mean there is a broader consumer base that is very different in terms of who they are, what they’re buying and how they’re buying. Therefore, product lines need to change and the diamond industry needs to focus both on product development and on its supply chains to adapt.

The global diamond industry needs fresh stories to expand the aggregated potential pool of profit and we need to improve our margins to raise liquidity and be more bankable. In Antwerp, we’re asking how we can add value to our suppliers and customers and capture an appropriate portion of the profit pool, in a way that strengthens the global diamond pipeline.

We’re focusing on compliance and ethical issues as well as design and branding, efficiency, innovation and creativity. We have to create a strong but creative business model where people are happy to do business in Antwerp. In both rough and polished, we need the attractive environment to have suppliers selling through Antwerp and to have buyers coming here.

Rapaport News: Has it become more difficult to achieve that as other centers have grown?

MP: We’re well aware of the migratory patterns in the industry. However, we also have new major clients coming into Antwerp and affirmation by the major mining companies, manufacturers and dealers, that they are most comfortable doing business in Antwerp.

The Antwerp World Diamond Centre (AWDC), which represents the sector at a government level, is working hard to have the right fiscal and trading conditions in place to keep Antwerp competitive while adding credibility to the global pipeline.

Rapaport News: How do you assess the market in 2014?

MP: This year has been challenging. While people have been able to offload some goods, the movement of inventory and pricing of goods has made life difficult for businesses in the cutting centers. Margins and liquidity are down and the lack of clarity creates uncertainty.

Today, the major mining companies are expressing concern about liquidity in the market. The banks cannot lend in the same way that they used to as some clients no longer qualify. Suddenly the mining companies are faced with a much less predictable sales strategy going ahead.

Liquidity and the perception of the trade’s bankability is a big concern for every diamond center. We have to recognize that the liquidity and banking challenge is directly linked to the reality of profitability in the midstream sector, as well as to the trade’s governance and reputation, and global leadership and representation of the sector.

Rapaport News: How has the closure of Antwerp Diamond Bank (ADB) affected the market?

MP: Firstly, it is important to note that we’re talking about a structured wind-down of ADB’s activities with agreed upon re-payment schedules.

ADB is not only active in Antwerp so it’s affected everyone. If a bank signals that it’s reducing credit lines, or closing, it affects the climate of the diamond banking fraternity and impacts the perspective of the broader capital market. All this is being carefully looked at in Antwerp, because banking and finance is such an important part of the city’s role in the industry.

ADB currently lends approximately $1.6 billion (EUR 1.3 billion) to the market. We plan to ensure continuity by expanding finance facilities available to the diamond pipeline through both conventional and alternative financing.

Bank credit to the Antwerp industry is currently around $4.97 billion (EUR 4 billion), including approximately $1.2 billion (EUR 1 billion) of non-straight loan, alternative financing. The current banking challenge has triggered a major rethink of our financing options. Bank lending to small and medium sized companies in all sectors is not working well. So the diamond midstream has to demonstrate that it is innovative, dynamic and profitable.

Rapaport News: What are your biggest concerns for the industry?

MP: I feel there is a lack of strategic vision. There’s a failure to reimagine the diamond industry’s future, and translate good strategy into effective execution. The industry is fragmented as there are many legitimate stakeholders with different priorities and often different interests. We need to develop and execute a vision that will benefit and protect everyone.

That might be achieved through strong global representation together with the adoption of a generic diamond promotion strategy. The World Diamond Mark, which was developed under the umbrella of the World Federation of Diamond Bourses (WFDB), could be implemented immediately. If the mark can pull together stakeholders it has an excellent chance of providing sustainable promotional support that will generate sales growth at the consumer level and improve industry profits.

Rapaport News: What do you view as the biggest challenges facing the industry?

MP: We need strong leadership to ensure the fast and deliberate edging out of stakeholders whose behavior brings disrepute or danger to the industry. I believe the WFDB has an important role to play as it represents 95 percent of the global trade.

We also have the fundamental challenge of finally realizing our potential for profit. The past 10 years has seen explosive growth in the luxury market, but the diamond manufacturing sector has not shared in these returns. The trade should have earned returns that strengthened its capital base allowing it to reinvest in the future, but this has not happened.

To improve profits, we need supply chains that add economic value, implement creative merchandising, tell a far more seductive sales story, and elevate our ethical standards and balance sheet integrity to align with modern management and business philosophy.

The consumer world is changing whereby seasons and individual markets play a much less important role. Travel-related luxury spending is huge, while online sales are increasingly critical as digital marketing has created a new relationship between the brand and the consumer. We need to assess and adapt what our industry is doing in this space.

Rapaport News: How do you envision the Antwerp industry developing over the five to 10 years?

MP: Our business will be unrecognizable in five years. We will be a software, creative, innovation-driven industry, in which the diamonds and jewelry are an indispensable part of the design and product story, and of a much richer consumer proposition.

We’re operating in a growing trillion dollar luxury space. Looking at our key industry value-add and transformation points, price elasticity and the innovation and entrepreneurship gap, IES conservatively estimates a potential additional profit pool of $1 billion to $3 billion that could accrue to the cutting and trading segment through implementing supply chain science, better design, marketing and promotion. To achieve this, the industry must step up to the entrepreneurial, merchandising and reputation-management mark.

Antwerp will seize the advantage in those areas where it can add value, and that will include a number of new business lines. Our physical and fiscal structures will be upgraded dramatically in order to be attractive for the 21st century. Very soon, , Antwerp will be a very different, more fit for purpose, agile, strong market place, with strong business lines, and a vibrant, clear and compelling role in the global diamond industry.   
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Tags: Antwerp, Antwerp Diamond Bourse, Avi Krawitz, AWDC, diamonds, Jewelry, Rapaport
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Dec 1, 2014 8:33AM    By Maurice Rosenfeld
Words, words, words by a President totally ignorant of the reality of the diamond market and of polished in general. As irrelevant as the so-called Master Plan 2020 elaborated by him and presented in February 2012 and of which not a single item was implemented or yielded any results. Empty locutions, use of so-called sophisticated definitions that may impress halfwits . That is his trademark.
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