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Deliberations in the Reform of Diamond Industry

publish:2019-12-10

Introduction: When the biggest consuming market meets with the largest manufacturing country, coupled with the multi-dimension composition of population, technology, market, supply chain and economic cycle, what opportunities are in store for the diamond industry in the Greater Bay Area in the biggest diamond & jewellery cluster in the 2nd largest jewellery market of the world?
 
The sub-forum “Opportunities in a changing world” of the 4th Guangzhou International Jewelry & Diamond Conference 2019 hosted by Guangzhou Diamond Exchange was held in Guangzhou on the afternoon of November 21, 2019.  
 
At the forum, diamond industry authorities, leading enterprises, and well-known analysts shared thoughts on such topics as diamond supply and trade, testing and traceability, manufacturing and technology, and the changes of industry and market. Panel discussion was also held on “the supply and market development of rough diamonds”.
 
Exciting highlights of the forum
The forum was kicked off by Mr. Liang Weizhang, general manager of Guangzhou Diamond Exchange, and carried out discussion on the topic of “Deliberations in the reform of diamond industry”.
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Guangzhou Diamond Exchange analyzed the awkward situation of the weak market against the scarcity of the rough diamonds on the basis of the supply and trade data from 2012 to the present, while the trend of diamond unit-price was interestingly similar to that of the rough diamond sales revenue. With the technological advances in diamond exploration and mining, testing and grading, manufacturing, blockchain and 5G Internet, and lab-grown diamonds, as well as changes in the consumer market of Millennials and Gen X, the guests carried out discussion on the opportunities in a changing industry.
 
Topic 1: “Supply Chain Transparency”
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Paul Zimnisky, a famous global diamond analyst, who is also a regular contributor to leading industry trade journals and websites, shared his insights into the transparency of the diamond supply chain. Paul Zimnisky said that the transparency of the diamond supply chain could be the lowest hanging fruit for the natural industry from a marketing standpoint However, along with the technological development of blockchain, cloud computing, big data, and the research & development on chip / mapping / tracking-device technology, “execution still challenging, but new technology makes this more possible than ever.”
 
Paul holds that consumers have indicated interest in the origin of diamonds but most were unwilling to pay a significant premium for it in the past; however, current market dynamics now command transparency at no additional cost to the consumer. Paul enumerated De Beers via Tracr and “DTC provenance” initiative, Everledger Diamonds–a tech start-up, Sarine via “Diamond Journey”, Lucara Diamond via Clara, GRS / CGL–a Swiss / Canadian gem lab under the B2B mode; and Tiffany & Co. via “T&Co.” and Chow Tai Fook via “T-Mark” under the B2C model. This indicates that several companies and joint-effort groups have recently initiated supply-chain transparency programs and / or brands.
 
Topic 2: “Status and Challenge of Diamond Testing in China”
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Mr. Zhang Jian, deputy director of Beijing Laboratory of National Gemstone Testing Center (NGTC), talked about the relevant information of the industry from three perspectives: the Current Status of Gems & Jewelry Testing / Detection in China, the Current Status and Challenge of Diamond Testing / Detection, and the Mission and Mission of NGTC. Mr. Zhang Jian said that jewelry testing in China has the following characteristics: the most complex varieties, the largest number, and the most processing methods, but also a short development history, mostly medium- and low-end gems for testing and mostly inlaid jewelry. Diamond testing mainly faces problems such as genus identification, processing and identification, non-inlaid diamonds, synthetic diamonds, and similar products. Artificial diamonds have the characteristic absorption peak of natural diamonds, which cannot be effectively tested by traditional troubleshooting procedures, posing challenges to lab evaluation. In the future, NGTC will fulfill the mission and mission of certificate empowerment and service upgrade through technologies such as QR code, smart chip, fingerprint identification, database, automatic grading, and RFID.
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Topic 3: “DaVinci Diamond Factory – First Automated Laser Full-Faceting System for Round Brilliants”
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Dr. Bernold Richerzhagen, inventor of the patented technology Laser MicroJet and CEO and president of SYNOVA, delivered a wonderful speech on the innovation of diamond cutting technology. Focusing on the “Laser Microjet Technology” principle, Dr. Bernold Richerzhagen introduced DaVinci Diamond Factory that can automatically cut rough diamonds with flat facet from 0.25 to 10 carats to round brilliant cut diamonds with 57 facets. It can cut 1 carat rough diamond with regular shapes in 1.5 hours (calculated based on the 40% yield of round brilliant cut diamonds). The cutting accuracy is less than 5 microns, and the smoothness of facet can reach 400 nm to 3EX standards on average. This is a true disruptive technology for Diamond Manufacturing. Full-automatic laser surface processing can strongly reduce manufacturing time and cut the procedures, which reduces cost for inventory and interests, while obtaining higher and more predictable polishing yield.  
 
Topic 4: “New Opportunity in Matured Diamond Industry -
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Grading of Fancy Cut Diamond”
 
Bie Zhitao, director of China Laboratory of International Gemological Institute (IGI), and Stephen Andaraki, director of IGI Hong Kong Laboratory, talked about the status of fancy cuts in the market and how to identify fancy cuts. IGI data shows that in Hong Kong, the testing rate of fancy cut diamonds is merely 4.8%; in Mumbai, round brilliant cut diamonds still account for a large proportion, but the proportion of fancy cut diamonds rises slightly in 2019 than previous two years. Mr. Bie believes that fancy cut may lead the future market. 
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Stephen Andarakis gave a detailed explanation of “grading on cutting”. He mentioned that grading on fancy cut is affected by factors such as ratio of the crown to pavilion, the girdle thickness, the shape outline, the length / width ratio, and overall brilliance. IGI can provide customized fancy cut certifications such as light return effect, heart and arrow effect, and patented cut diamond.
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Topic 5: “The GIA Diamond Origin Report:  Diamond Traceability Based on Science”
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Seung Hac Moon, managing director of the Asia-Pacific region of the Gemological Institute of America, introduced the GIA certificate and related services. Ms. Moon said that the importance of origin of diamonds lies in responding to evolve consumer expectations and ensuring industry direction. The report of origin can differentiate natural diamonds and lab-grown diamonds, and has the value of background description. For finished diamonds (color D and colored diamonds) of 0.15ct and above analyzed and certificated at the rough diamond stage, the GIA Diamond Origin Certificate services will add the confirmation of diamond geographic location and formation, inscription of report number, in addition to the full 4Cs grading assessment with plotted diagram. The entire project will also come with promotional materials such as origin book and retailer brochure to enhance sales team’s training skills and sales skills.
 
Topic 6: “Insights on Diamond Industry 2019”
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Data is the highlight of the speech by Andrew Wang,  Senior Business Excellence Manager of De Beers Group. A snapshot of key data captured the attention of the audience. Through the data, Mr. Wang shared the highlights of De Beers 2019 Diamond Insight Report.
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According to the report data, the global demand for polished diamonds and diamond jewelry increased in 2018. The three countries that witnessed the highest growth were China with 4.7%, the United States with 4.5%, and Japan with 2.1%. Natural diamonds are still an enduring symbol of love continued, and romantic love continues to be the main reason for diamond gifting. In major markets such as the United States, China, and Japan, love-related gifting of diamonds represents about half or more of the total value of diamond jewellery bought. In the US, just over 70 per cent of brides acquire a diamond engagement ring, while in Japan the proportion is about 60 per cent. In China, which is still a new market for diamonds, the proportion has increased rapidly to 47 per cent and continues on an upward course. Chinese and Japanese prefer rounds and hearts, platinum is the metal of choice for brides; while US brides are more open to different shapes of diamonds with white gold is preferred. The nature of romantic relationships and the way they are experienced is evolving, and consumers, including Millennials, are confirming their belief that diamonds are a unique and precious symbol central to the various expressions of modern-day love.
 
Topic 7: “Changes in the Diamond Markets-The Rapaport Perspective”
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Rapaport, founded in 1978, chiefly provides information services, online trading network, diamond grading and certification, Rapaport auction and trading services. Saville Stern, Chief Operating Officer of RapNet Group, analyzed the changes in the diamond market from the perspectives of global mining, manufacturing, retailing, and dealing.
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Changes in the global diamond market environment 
 
The industry is also responding to these changes through source-certification, commodity innovation (origin, light performance, etc.), blockchain initiatives, and innovative funding experiments. Mr. Saville Stern analyzed the diamond market in China. He said that the jewelry consumption in China is growing. Due to diamond dealers market in Hong Kong, India and Israel, there is opportunity to attract new diamond dealers in China, but there are risks. At the same time, internet also provides new sales channels. In addition, the inventory held in China, dependency on Indian, Hong Kong and Israeli dealers, chain stores and brands on the rise, uncertainty in trade negotiations, the rise of lab grown diamond production in China, and the no distinction between B2B and B2C platforms presented, chiefly account for the changes in the Chinese diamond market.
 
Topic8: Panel: Supply and Market Development of Rough Diamond
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The forum culminated in panel discussion on rough diamond supply and market development. At the panel forum supported by Rita Maltez, founder of Bravva Consulting, it invited Mr. Hao Lifeng, secretaire general adjoint of SACIM; Mr. Igor Bokov, managing director of Russian diamond manufacturer Grib Diamonds; Mr. Eddie Tsang, chairman of rough and polished diamond trader Cordmax Trading Ltd; Mr. Paul Wong Huang Chengwei, chairman of EVERGREEN Diamond Processing Factory, to conduct discussions on the supply of rough diamonds and the development of the Chinese market. It aimed to provide Chinese jewelry and diamond enterprises with information on rough diamond supply, the relationship between rough and polished diamond, and financing available to the rough diamond business development, and to support Chinese jewelry and diamond enterprises in further development of rough diamond business.
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On the issue of international rough diamond supply, Mr. Hao Lifeng said that Democratic Republic of Congo is the world’s fourth largest rough diamond producer, with an annual output of 15-16 million carats. It is characterized by high output and low value, mainly industrial-grade rough diamonds. Yield of gemstone-grade rough diamonds accounts for less than 10% of the total. SACIM has a capacity of some 3 million carats this year (increased to 5-6 million carats next year); Mr. Igor Bokov introduced that Grib Diamond, which is located in Antwerp, Belgium, sells rough diamonds through online auctions/tenders every month. The annual sales of rough diamonds reach some 4-5 million carats. Its shareholder Russian AGD DIAMONDS is Russia’s principal rough diamond miner. It holds Grib mine in Arkhangelsk, Russia, and is responsible for leading the diamond mining and exploration. Grib Diamonds is highly interested in cooperating with Guangzhou Diamond Exchange in selling rough diamonds in the Chinese market, and now is a good time. Mr. Paul Wong Huang Chengwei considers that there is still much room for improvement in the current rough diamond trade in China. He said that the diamond industry in the Greater Bay Area can achieve more efficient development in customs clearance and logistics; he also pointed out that today’s market demand and consumption patterns are changing, and processing plants of rough diamonds shall keep pace with the market. Mr. Eddie Tsang introduced the process from the rise of China’s diamond polishing market to the current slow development. He hoped to support the development of China’s rough diamond trade and processing market through convenient trade in diamonds.
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On the vision and recommendations for the industry, Mr. Hao Lifeng said that as production capacity grows, his company is organizing rough diamond auctions in Dubai, Guangzhou, Antwerp and other places, and invites colleagues in the diamond sector to conduct field inspections in Congo, so as to hold auctions as far as possible and achieve win-win development. Mr. Igor Bokov hopes to foster cooperation with Guangzhou Diamond Exchange to provide the industry with more rough diamond supplies and processing and manufacturing resources. Mr. Paul Wong Huang Chengwei said that in the face of the current grim market situation, perseverance and resolution are required for our survival. Mr. Eddie Tsang hoped that Guangzhou Diamond Exchange could serve as a bridge with financial institutions and solve the problem of financing difficulties faced by SMEs.
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