Speakers at the third annual Rapaport Diamond Conference, September 19, 2005, grappled with many of the issues confronting the diamond industry today. Emerging as the overriding theme is the interconnectedness of these issues. When an action is taken in one part of the world, or one part of the industry, it has an impact on the rest of the industry, often in ways that could not have been anticipated.
ROUGH VERSUS POLISHED
Saul Singer, Director of Rapaport Research, kicked off the day with a rundown of the rough versus polished diamond picture. Singer considered whether there will be sufficient production in existing diamond mines to begin to meet the increasing demand for diamonds. While he expects that both the underperforming Argyle and Ekati mines will return to better levels of production, that will not be enough to offset the higher worldwide demand for diamonds. His conclusion: "Demand is outstripping supply for larger, better quality diamonds."
The price of rough remains very high while polished prices are weak. The production of rough is controlled by five companies with De Beers still leading the way. It now controls just 50.8 percent of market share, by value, followed by Alrosa with 11.3 percent; Lev Leviev with 8.9 percent, Rio Tinto at 5.7 percent and BHP Billiton at 4.4 percent. The remaining market share is scattered among other producers, mainly alluvial miners in West Africa.
This production, however, is now being outstripped by global demand. According to Singer, there are two distinct markets competing for diamond jewelry. First are the developed markets such as the United States, Europe and Japan. These are mature markets that are now beginning to see competition for jewelry from the emerging markets, notably China, the Gulf states, India and Turkey. Over time, the mature markets will see moderate growth while the emerging markets will see tremendous increases in demand.
Already, the emerging markets have grown from less than 10 percent of retail diamond jewelry sales in 2000 to around 20 percent in 2005. This demand is driven by marketing efforts that are reaching newly affluent customers. As Martin Rapaport says, "After a woman has a washing machine, she wants diamond jewelry." That is, the consumerism that is most familiar to us in the West will play a similar role in the emerging markets. Once basic …