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Competitive Diamond Hubs

Editorial
Mar 22, 2013 6:00 AM   By Avi Krawitz
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RAPAPORT... In many respects, the contrast could not have been starker. Two vastly different diamond ‎industry events took place this week, one in Dubai and the other in Ramat Gan, ‎seemingly with different agendas and each reflecting different aspects of the trade. The ‎similarities were equally enticing; both drawing strong crowds and signaling a more ‎upbeat industry than a year ago. ‎

In Ramat Gan, dealers, fresh off the Hong Kong show, bartered their goods at the ‎U.S./International Diamond Week while the local leadership reveled in their re-found ‎relevance in the diamond trade. Like similar events in New York and Antwerp earlier this ‎year, Israel’s “festival of diamonds” revealed a need for the traditional diamond trading ‎centers to innovate and aggressively market themselves to maintain market share.‎

By all accounts, the Israel Diamond Exchange (IDE) achieved its goal for the week ‎attracting around 200 buyers from 15 countries to the event, despite mixed reviews about ‎actual trading that took place. With a reported excess of $1 billion worth of polished ‎diamonds on offer, the event also gave Israeli buyers located in the bourse an opportunity ‎to look for goods that would otherwise not be in the country before next week’s Passover ‎break. It also hosted rough and polished tenders during the week. ‎

IDE president Yair Sahar was surely thinking of Israel’s long-term strategy when he said ‎he expects to host such events every year in Israel and New York, and possibly in other ‎countries as well. Israel has been successful in penetrating the Far East market but ‎strategically recognizes the need to diversify further, or at least strengthen its existing ‎partnerships. Having lost its manufacturing mojo to India, Israel is operating in a changing ‎and extremely competitive global trading environment.‎

The Dubai Diamond Conference this week illustrated that change. In short, with more ‎rough being distributed from southern Africa, mainly from Botswana and Zimbabwe, ‎Dubai is positioning itself as the “new silk route” for diamonds on their way to India and ‎China. ‎

‎2013 may prove to be a landmark year in that development. De Beers is on track to ‎relocate its London sights to Gaborone by the fourth quarter and Onkokame Kitso ‎Mokaila, Botswana’s minister of minerals, energy and water resources, reported that the ‎state-owned Okavango Diamond Company is expecting to launch its independent rough ‎sales by the end of June. He added that the value of goods polished in Botswana has ‎grown from $28 million in 2005 to more than $600 million in 2011. The volume of goods ‎traded, manufactured, and exported from Gaborone is set to grow further.‎

Dubai’s growth has been equally impressive. Rough imports doubled from 2009 to $3.75 ‎billion in 2011, according to the most recent available data, while rough exports grew 179 ‎percent through the same period to $5.91 billion. It boasted $14.9 billion in polished ‎imports and $14.7 billion in polished exports during the same year. Peter Meeus, ‎chairman of the Dubai Diamond Exchange (DDE), emphasized Dubai’s growth in doing ‎business with Africa. Among these, he disclosed that imports from Zimbabwe grew from ‎‎$1.7 million in 2008 to $408 million in 2011. ‎

Dubai has emerged as the natural destination for Zimbabwe goods that remain ‎sanctioned in the U.S. and the European Union. It can be argued that Zimbabwe was a ‎catalyst for Dubai’s growth in the past few years as Indian cutters sought to procure ‎rough from the new, albeit controversial, Marange mines.‎

Either way, the result is that almost 600 diamond and jewelry companies and 400 ‎additional gold-related firms are located in Almas Tower, home of the DDE and the Dubai ‎Multi Commodities Centre (DMCC), according to Meeus. He added that DMCC has on ‎average five to six new companies licensed every day. Dubai has also raised its profile ‎on the international stage by hosting the World Federation of Diamond Bourses (WFDB) ‎meeting in 2011, this week’s conference, and recently too by nominating Meeus to be ‎president of the World Diamond Council (WDC), which represents industry at the ‎Kimberley Process, when the job becomes vacant in June.‎

Dubai markets itself with a solid infrastructure, zero taxes, minimal bureaucracy and ‎strong regulation that few of the established diamond centers can match. Its location as a ‎gateway between west and east, or rather between south and north, is a marketable ‎advantage, not to mention its own emerging consumer economy. ‎

The rough trading centers of Antwerp, and to a lesser extent Israel, should take note. ‎While they are correct in being proactive to raise the level of activity with their trading ‎partners, they need to work to become more investor – or diamond trader – friendly. By ‎making it easier to do business in Antwerp and Israel through simplified bureaucracy and ‎more liberal tax codes, they will come a long way to compete, prevent local companies ‎from leaving, and maintain their respective shares of the market.‎

Then again, Antwerp and Israel have aspects working to their advantage too. Certainly as ‎polished suppliers, they have historic access and relationships with the consumer ‎markets of the U.S., as this week’s Ramat Gan event illustrated, as well as in Hong Kong ‎and the Far East. And more importantly, their respective dealers have an unparalleled ‎knowledge about diamonds that keep them highly relevant.‎

But the landscape is changing. The various trading centers find themselves jostling for ‎position as the global trade diversifies between geographies. If anything, this week’s two ‎diamond industry events showed two vastly different centers united by a common ‎ambition: to be a leading diamond trading hub. With others in the game too, it will take ‎some aggressive marketing and strategic thinking to ensure their growth in a relatively ‎small market. Hopefully, there’s space for everyone. ‎

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.rapnet.com 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: Avi Krawitz, De Beers, diamonds, DMCC, Dubai Diamond Exchange, Okavango, Rapaport
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