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10 posts from February 2006

Alrosa Auctions Large Diamonds

ALROSA, Russia's diamond monopoly, sold more than $25.5 million in special-sized rough diamonds at the 12th international diamond auction hosted by the Russian Diamond Chamber in Moscow.

The auction sold 120 of the offered 133 parcels containing 921 diamonds weighing a total of 15,000 carats.  Each parcel put up for auction contained nine diamonds weighing more than 50 carats each. The biggest diamond offered at the auction weighed 301.55 carats.  The auction was attended by 38 Russian and foreign companies including representatives from India, Israel, Belgium, Belarus, China and the United States.

ALROSA produces nearly 100% of the country's diamonds and more than 20% of the world's rough diamonds. The organization, which is jointly owned by the central government in Moscow and the Republic of Sakha, operates mines throughout Russia and also in Angola. About 50% of the company's rough diamonds are sold in foreign markets. ALROSA has a distribution agreement with The Diamond Trading Company (DTC), De Beers' marketing arm, but is reducing the amount of diamonds it supplies to De Beers and will cease selling to De Beers after 2008.  ALROSA also markets its own stones and supports a growing Russian diamond-cutting industry.


HRD Antwerp World Center in Turmoil

The Belgium diamond industry is in turmoil as its lead organization, the HRD Antwerp World Diamond Center, has seen resignations from government and De Beers sightholders.  This is a result of an internal power struggle shifting power away from the larger Diamond Trading Company (DTC) sightholders toward the smaller diamond companies in Antwerp.

Camille Paulus, governor of Antwerp; Patrick Janssens, city mayor; Leo Delwaide, deputy city mayor; and Luc Van den Branden, people's representative, all left the board.  These actions were preceded by the resignations of HRD managing director Peter Meeus and board representatives Chaim Pluczenik (Pluczenik Group) , Dilip Mehta (Rosy Blue) and Jacques Claes (IGC Group), all representing larger diamond companies.

One potential outcome of this power struggle is that De Beers sightholders and the Indian diamond representatives move their business away from Antwerp, leaving the diamond activity there a mere fraction of its former level.  While there are a greater number of smaller diamond companies in Antwerp, it is the larger sightholders that control the bulk of the business there.

Established in 1973 as the ‘Hoge Raad voor Diamant’ or the ‘Diamond High Council’, the organization has nowadays become the major employer of the Antwerp diamond sector. The HRD acts as spokesperson of the sector towards authorities and third parties, and offers a wide range of services to the sector such as diamond grading, training, research and trade & industry equipment. 

HRD Diamond Office is the customs office for diamonds. All diamonds moving in or out of Belgium pass through the Diamond Office. Operated by the HRD, and in collaboration with the financial and the economic services of the Federal Government, the HRD Diamond Office ensures the rapid handling and efficient government controls so necessary to the industry.

The diamond industry in Belgium was historically one of diamond cutting but today there are fewer than 1,000 polishers.  The direction of the HRD and the Belgium diamond industry is now in the hands of a board with new members and leadership.  Only time will tell what the new direction will be and what success it will produce.

Learn more about HRD at http://www.hrd.be/


Argyle to Continue Diamond Mining

The Argyle diamond mine in Australia, owned by Rio Tinto Diamonds, recently announced they will remain open.  For many years they have been surface mining diamonds but have exhausted surface opportunities and will now have to use underground mining processes.

Argyle will be spending some $900 million to move to the underground mining operations with production dropping to about 60% of the current 34 million carats per year production.  The Argyle mine provides about 17 percent of the world volume of diamonds but most of the diamonds are smaller, near gem quality and often brown in color.

The news to remain open is good news to the 250,000 workers in India whose jobs depend on the supply of these smaller, lower quality stones.

With the lower produce and higher costs of underground mining, the price of Argyle diamonds is expected to increase as much as 15% over the next several years.  However, the cost of rough diamonds is only a small part of the polished diamond price so the finished products are only expected to increase about 3% in price due to this change in mining operations.

Colored diamond lovers worldwide are glad to hear the Argyle is continuing operations because the Argyle mine is the leading producer of colored diamonds, especially the celebrated pink colors.

Learn more about Argyle diamonds at http://www.argylediamonds.com.au/


Tiffany’s to open in Vancouver

Many jewelry stores in Vancouver sell Canadian branded diamonds but they are soon to face increased competition from one of the best known brands in the jewelry industry, Tiffany and Co.  The New York based Tiffany’s will open a 5,000 square foot store this November in Vancouver.

Tiffany’s has a direct relationship with some of the diamond mines in the Canadian North but will only be branding its products as “Tiffany diamonds.”  Tiffany’s has world wide brand recognition as the result of decades of marketing.

In 1837, Charles Lewis Tiffany and John B. Young established Tiffany & Young, a stationary and fancy goods emporium at 259 Broadway in New York City.  The Tiffany’s brand started that same year with the introduction of the distinctive shade of blue chosen for the boxes, shopping bags, brochures and catalogues.  Over time, the color became universally recognized as the trademark Tiffany Blue.


De Beers to stop buying diamonds from Alrosa

De Beers, the world's biggest diamond company, will have to stop buying rough diamonds from Alrosa, the firm that controls Russia’s diamond production.  This is a result of failing to follow European Commission rules.

The commission said De Beers' promise to stop buying gems from Alrosa, its nearest rival, by 2009 would bring genuine competition to diamond supply of rough diamonds which was about a $12 billion market in 2004.

The EU said the settlement was approved under a process which allows firms to make binding commitments to avoid abusive practices, but without admitting wrongdoing. De Beers faces fines up to 10% of its global turnover if it breaks the deal.

As part of the agreement, De Beers' purchase of Alrosa rough diamonds will reduce from $600 million in 2006 to $500 million in 2007 and $400 million in 2008 followed by total refrain from all purchases of rough diamonds from Alrosa.

De Beers, which is 45% owned by mining conglomerate Anglo-American, accounted for about half the world market in 2005 while Alrosa, mines nearly a quarter of the world's diamonds.


India and Canada to work together mining diamonds

India and Canada have agreed to explore the possibility of cooperation in diamond mining on a mutually beneficial basis, Indian Ministry of Commerce and Industry.

This was discussed at a February 21 meeting between Indian Minister of Commerce and Industry Kamal Nath and Canada's Ontario Province Minister of Economic Development and Trade Joseph Cordiano.

Kamal Nath discussed the idea of investing in diamond mines in Canada for sourcing of rough diamonds which could be then cut and polished in India for exports. He explained how India had emerged as the top exporter of cut and polished diamonds in the world, while there was good scope for Canadian mines being tapped for rough diamonds.

Both the Ministers underlined the potential for expanding trade and investment ties between India and Canada. India is the 37th largest source of direct investment in Canada, with more than half of the Indian investment there being in pulp and paper. There has also been a steady increase in Indian investment in Canada in the last decade.

Cordiano said that Ontario would welcome increased Indian investment in different sectors.  He stressed the need to diversify trade in terms of products and markets as well as the need to enhance competitiveness in an era of globalization.


Diamond Jewelry Sales Slowed in 2005

While sales of diamond jewelry rose 2.8 percent in 2005 over 2004, this was the lowest percentage increase since 2001.

The growth in diamond jewelry sales was launched by De Beers in 1947 when they introduced the “A Diamond is Forever” slogan which changed the way the consumers world wide thought of engagement rings.  For years the consumer was told they simply had to go to their local jewelry store and buy one of the diamonds in the display case in order to secure the love of the women they wanted to marry.

What has changed is the shift in how diamonds are now being bought.  Every year more and more diamond shoppers find that there are many different sources including warehouse clubs and online retailers. 

When the local jewelry store was the only game in town, the prices were all about the same and the only differences tended to be the selection that each store carried.  Today, the online retailers have lower overhead than the jewelry stores and are able to provide consumers lower prices and often do not have to charge sales tax if selling out of state.

With the cost of wholesale diamonds going up due to world wide demand outpacing production capacities, the downward pressure on retail prices by online retailers has produced an intense competition for the traditional jewelry store.  Gross margins for jewelry stores have continued to shrink over the past ten years and there is no relief in sight for jewelry stores as the market share continues to grow for the online retailers.

The bottom line for the consumer is that they are getting better diamonds today at closer to the wholesale price than ever before.  Yes the price of diamonds continues to increase, but more of their dollars goes for the diamond and less into the pockets of the jewelry store owners.  There will always be customers who feel more comfortable purchasing from a jewelry store even though they know they are paying a price premium.  However more and more diamond shoppers are finding that purchasing from an online retailer can usually result in a bigger and better diamond for their hard earned money.


Canadian Diamonds: Where are they cut?

When Canadian diamonds were first marketed, the diamonds were not only mined in Canada, they were also cut in Canada.  This was significant to the Canadian economy because the cutting process is where much of the value is added to the diamonds that are ultimately sold in jewelry stores.

As is so often the case, the companies who own the mines focus on finding the lowest priced processes, which means many of the Canadian diamonds are now moved offshore to be cut where the labor is less expensive and the cost to cut a diamond is reduced.

Canadian diamonds have been marketed heavily as the “non-conflict” diamonds but the outsourcing of the cutting creates an additional challenge.  When diamonds are moved to other countries to be cut, the opportunity is greatly increased to mix “conflict” diamonds with the diamonds mined in Canada.

Some of the Canadian diamond companies are now marketing the fact that they mine and cut the diamonds in Canada to ensure their “purity” as a Canadian diamond.  Only time will tell where cutting will occur for diamonds mined in Canada but the stakes are high for Canadians and the international mining companies who are focused on maximizing profits.


Prices for Rough Diamonds Increase

The Diamond Trading Company (DTC) announced that the prices for rough diamonds at the February sight will increase less than 2 percent.  The increase in prices reflects the DTC estimate of 6 to 7 percent growth in polished diamond demand for 2005.  The DTC forecasts 2006 growth at 7 percent even though the demand for diamonds at the start of the year was softer than anticipated.

For the consumer, larger carat weights can be expected to increase at a rate higher than the average and smaller diamonds at a lower rate.  The cutters, wholesalers and retailers take the rough price increase and relatively quickly spread it to all diamonds currently in the distribution channels.

The speed that rough diamond prices increase throughout the distribution channels is similar to what is seen in the oil industry.  If a storm damages refinery capacity, the prices of gas at the pump in your neighborhood increase in days if not hours.  Similarly, diamond prices on the wholesale and retail prices quickly increase because the industry knows that the diamond they purchase tomorrow will be more expensive than the diamond they bought last week or last year.


India Increases Export of Diamonds

The Indian Gem and Jewellery Export Promotion Council (GJEPC) reported that the Indian gem and jewelry sector grew 14.81 percent from $14.8 billion (670.99 billion rupees) in 2004 to exports totaling $17 billion (744.07 billion rupees) for 2005.

The growth was primarily driven by the cut and polished diamond segment, which registered growth of 19.29 percent in value terms and 9.74 percent in volume terms.  The export sales of cut and polished diamonds grew to $12.3 billion during 2005 from $10.3 billion in 2004, while total volume of cut and polished diamond grew to 48.7 million carats during 2005 from 44.3 million carats (44,300,000) in 2004.

Among other segments, exports of colored gemstones grew by 15.03 percent to $222 million, while gold jewelry exports remained flat at $3,765 million.

The United States, Hong Kong, the UAE, Singapore and Belgium accounted for nearly 80 percent of total exports. 

Commenting on the industry's performance, Bakul Mehta, Chairman, GJEPC, said, “The industry has shown tremendous resilience to surpass its export targets under extremely competitive environment. [The] coming years are going to be an acid test for the industry and we expect the government to continue its support to enable us to compete with China and other global market on equal grounds.”