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Trade Relations
Editorial
Apr 10, 2014 8:00 PM
By Avi Krawitz
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RAPAPORT... If the golden rule for real estate is location, then for the diamond industry it is all about relationships. Not only on a personal level between dealers, buyers and suppliers, but also diamond bourses are increasingly forging relationships with each other in an effort to facilitate trade.
Already in 2014, the Israel Diamond Exchange hosted the Diamond Dealers Club of New York (DDC), India’s Gem and Jewellery Export Promotion Council (GJEPC) co-hosted a gem and jewelry fair in Dubai, and the invitation-only Antwerp Diamond Trade Fair was held for the fifth consecutive year. While each of these events follows a different model, they demonstrate greater cooperation within the global polished diamond trade.
It’s important to understand the objectives of these budding bourse relationships.
The role of the bourse trading floor has been challenged in recent times. With the advent of the internet and the ever increasing need to certify diamonds, goods are now easily viewed online and deals are generally sealed in offices, on the phone or behind closed doors. As a result, the trading floor has lost much of its vibrancy and relevance.
Efforts, primarily by the bourses in Antwerp, Israel and New York, to restore some of that vibrancy have been admirable. This week’s (somewhat tediously named) U.S. and International Diamond Week in Israel saw approximately 400 companies operating booths, reportedly 350 registered buyers from 20 countries attending and $1 billion worth of goods available for trade.
Similar events took place in New York when the DDC hosted the second annual Israel Diamond Week in November, and the DDC is planning an Antwerp Diamond Week in New York with Beurs voor Diamanthandel from May 5 to 8. The DDC is also in talks to partner with the Bharat Diamond Bourse to create the India Diamond Week in New York – although nothing concrete has been planned yet.
It’s important to differentiate between these events – which are about dealer networking – and the diamond and jewelry trade shows, whose successes are largely measured by the retail buyers that attend.
For one week at least during at the various “Diamond Weeks,” dealers are reminded of the hustle of yesteryear’s trading floor. Suppliers this week in Israel noted that trading was almost exclusively inter-dealer, and predominantly conducted between Israelis already in the bourse.
While some said they expected to see foreign retail buyers, they missed the point as these are aimed to be dealer events. Dealing with dealers brings back a sense of authenticity to what the diamond business is about: people, and the spectacular, tradable product they represent.
However, an event’s success is not measured by its mere existence. Organizers need to be sure that the event will take the business conducted in the centers to another sustainable level. To do so, these “Diamond Weeks” need to be focused on enhancing specific relationships between specific centers. For that reason, the “U.S. and International Diamond Week in Israel” branding is unfortunate. Stressing Israel’s unique relationship with the U.S. – its largest market – as originally planned would have been sufficient and more effective in the long run. Israel should be pursuing partnerships with the bourses in Belgium, India, Shanghai and other “internationals” separately to enhance its relationships with those centers for the long term.
So too should India. As the world’s dominant diamond manufacturing center, India has different needs than the trading centers. Due to the sheer volume of goods being manufactured there, the country expects buyers will automatically come to Mumbai and Surat. As a result, India tends to adopt a relatively insular approach, which has been detrimental to its trading fraternity. Furthermore, the GJEPC’s trade shows have become largely domestic events.
The Dubai Global Gem & Jewellery Fair that took place in March jointly hosted by the GJEPC and the Dubai Multi-Commodities Centre (DMCC) represented a step in the right direction – even if this was not an exclusive diamond event. The Bharat Diamond Bourse would be doing a great service to its members by participating in a proposed India Diamond Week in New York – or elsewhere for that matter.
It’s a fairly simple formula. As David Lasher, DDC’s director of marketing and development, said, “When you put diamond traders in a room together, things happen.” The bourses are aware that they need to facilitate that interaction. They’ve also recognized that each center has its own needs, personality, buyers and availability of goods that others can draw upon.
In contrast, intense competition remains in the rough market between the trading centers. There, relationships are forged between the rough trading centers and producer countries or companies, as the likes of Antwerp, Israel and Dubai compete to lure in rough supply for their buyers and consequently maintain their positions in the market.
In its pursuit of becoming a leading rough trading center, the Dubai Diamond Exchange (DDE) has coopted officials from South Africa, Zimbabwe and Namibia to its board in 2014, and this week signed a cooperation agreement with ALROSA, the Russian mining company.
The globalization of the rough market is distinctly different to the polished market, as it tends to focus on where the rough exists. Conversely, the revival of the bourse trading floor demonstrates the truly global nature of the polished market.
It was inevitable that the business model of the bourses had to change, and there is some irony in the fact that the bourses have gone back to their roots in order to stay relevant. They need to find creative ways to bring traders back to the trading floor. After all, polished trading is as much about the people as their diamonds. To facilitate growth, the polished trading centers are accordingly shifting from competing with each other to cooperating with one another.
The writer can be contacted at avi@diamonds.net.
Follow Avi on Twitter: @AviKrawitz and on LinkedIn.
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 © 2014 by Martin Rapaport. All rights reserved. Rapaport USA Inc., Suite 100 133 E. Warm Springs Rd., Las Vegas, Nevada, USA. +1.702.893.9400.
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Avi Krawitz
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