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Tight Margins, Financing Challenge Antwerp Diamond Trade in 2015

Apr 26, 2016 3:40 AM   By Rapaport News
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RAPAPORT... The Antwerp World Diamond Centre (AWDC) said tighter profit margins and lower bank credit squeezed Belgium’s diamond trade in 2015, a difficult year amid an “unsettling global economy”.

“Softer prices for polished diamonds made it increasingly difficult for diamond traders to turn a profit,” according to AWDC’s 2015 annual report.

Average profit margin wholesalers reported in 2015 was in the 0.1 percent to 0.4 percent range, the same as previous year, the AWDC said. Those razor thin margins led the banking sector to cut its exposure to the industry, among other reasons.

The report acknowledged funding pressure on diamantaires in relation to rough diamond purchases, after the global banking and sovereign debt crisis dramatically altered lending practices. Making matters worse was the closure of industry pillar Antwerp Diamond Bank in 2015.

Industry financing was also impacted by the banking industry’s policy of “de-risking,” or removing access to funds for businesses with a perceived risk of money laundering or terror financing. The AWDC report said about 500 small-sized Antwerp diamond businesses were confronted with the closure of U.S. dollar payment bank accounts as lenders de-risked. “These companies have struggled to open new bank accounts,” the report stated.

The AWDC said its activities in 2015 were focused on financing within the diamond industry. It held seminars to help deal with challenges and set up a help desk to assist dealers in opening a dollar account, while continuing to lobby the banking industry for easing of lending restrictions.

AWDC successfully negotiated with the Belgium government to agree on an amendment in the way taxable-income is calculated in the industry, as that would help improve dealers’ “bankability.” While the Belgian authorities have accepted the change, the European Commission is currently assessing the proposal.

The value of all diamonds imported and exported through Antwerp fell 18 percent to $48.3 billion during 2015, after the local trade registered a record year in 2014.

“The global diamond industry took a beating [in 2015],” said AWDC chief executive officer Ari Epstein. He added Antwerp’s “strong foundations and ability to be agile and adopt new technologies has helped safeguarding its position as a leading rough and polished trading center. “

The full report can be downloaded here.

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Tags: Antwerp, AWDC, Belgium, diamonds, European Commission, Jewelry, Rapaport News
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