The World Diamond Council (WDC) was established in 2002 to pool the efforts of the two pace-setting players in the global diamond market, the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) for their team work within the Kimberley Process. Eli Izhakoff, President of the World Diamond Council, has kindly agreed to answer questions from Rough & Polished.
How do you assess the current balance between supply and demand in the world diamond market?
After what clearly has been a tough year, it does appear that the market is stabilizing. Bank of America/Merrill Lynch recently forecast a 2.1 percent increase in diamond prices this year, compared to a 14 percent fall in 2012. This would indicate an improvement in the supply-demand equation. However, the long terms trend is clear. Demand for polished diamonds will rise, driven largely by the larger developing markets – most notably China and India, but also Russia, Turkey, Brazil and others. Over the same period rough supply will lag. Inevitably this should lead to a steady increase in diamond prices.
Do you think the last year’s stalemate in diamond manufacturing will be overcome this year?
It ultimately depends on the market. If there is a recovery, and the indications are generally positive at present, then manufacturers will have incentive to meet the demand.
How do you evaluate the sales policies of Alrosa, De Beers and Rio Tinto?
I prefer not to refer to the companies individually, but I can make some general observations. The mining companies’ policies have been conservative and cautious, although the industry would clearly prefer to see a widening of the rough and polished diamond price gap. Mining companies saw lower sales in 2012, largely as a result of reduced demand. This clearly put pressure on their bottom line, and there may be an incentive to improve matters by edging prices upward. But such a strategy could be counterproductive, for it would shift the burden onto the manufacturers, who already are under pressure. In general this does not seem to be happening. The mining companies are responsible, and understand that their long-term position depends on stability in the diamond centers.
Do you think in case synthetic gem-quality diamonds will attract greater consumer interest this may affect the market of natural stones?
In principal I do not see synthetic diamonds as threatening the market for natural stones, as long as the industry is consistent about marketing them as different products. Each has its place in the mix, and each is legitimate. But the consumer must understand that a natural diamonds is not a synthetic diamond and vice versa. Let us remember, products like cubic zirconia and moissanite were developed as diamond alternatives. Neither has disappeared, but they also have not threatened the natural diamond market. Synthetic diamonds, if handled correctly, should behave in the same way.
The WDC offered to help organize the work of the KP secretariat if it is to be established. Could you explain in more detail what will be the role of the WDC in this context?
The World Diamond Council will take responsibility for the management of what has been called the Administrative Support Mechanism. It role is to provide logistic, organizational and communications support to the KP on an ongoing basis, becoming in effect a permanent civil service. One of the reforms that has been discussed for a long time in the KP was creating a mechanism that would operate continuously and efficiently over the long term. Previously, a new KP bureaucracy was created each time the chair of the of the organization moved to another country, at the start of a new year. WDC will manage the Administrative Support Mechanism through the collaboration of four of our members, which include the Gem and Jewelry Export Promotion Council of India, the Israel Diamond Institute, the Antwerp World Diamond Center and the Diamond House of the Government of Ghana. This makes it an international cooperative effort, joining with a strong African component.
The World Diamond Council sometimes comes under attacks for failing to address the problem of Kimberley Process certificates issued for illegitimate diamonds. Can you comment on this?
The World Diamond Council expects the Kimberley Process Certification Scheme to be implemented and enforced strictly, and this a position from which we have not wavered. We have never condoned nor ignored the issuing of KP certificates for conflict diamonds. There has been disagreement as to what should constitute a conflict diamonds, and as an organization we agree in principle that it should refer to diamonds that have actively been involved in acts of armed conflict or other situations of violence. We also believe that the definition of what is a conflict diamond needs to be decided by the KP Plenary.
Lately, Zimbabwe’s diamonds appear to be the bone of contention between the Kimberley Process and those who are in favor of expanding the definition of ‘conflict diamonds.’ What is your view of this situation?
The situation in Zimbabwe clarified that the geopolitical situation has changed since 2000, and that we need to review whether the terms and definitions that were applicable then are still relevant today. The KP is not in conflict with those who want to expand the definition of conflict diamonds, because many of those who do so are members of the KP. But is clearly is not a simple process, and will require understanding and empathy from all sides. As I said, we supported the suggestion of the previous Kimberley Process Chair, Ambassador Gillian Milovanovic, that we explore the possibility of conflict diamonds including diamonds related to instances of armed conflict or other acts of violence. I am confident that we will find common ground, but we must be patient.
Do you think the Kimberley Process is efficient enough to cope with this challenge?
The KP is not perfect, and the reform process that is being discussed, including the Administrative Support Mechanism, will have it more efficient and effective. But let us not forget that the KP has been effective in reducing the incidence of conflict diamonds in the marketplace to a mere trickle. It can always be improved, but it remains the best thing we have.
