Antwerp, Belgium — MININGREVIEW.COM — 02 June 2009 – Diamond prices and sales appear to be stabilising, as consumers realise that the sky has not fallen in and life continues. The industry is experienced and resilient, and will survive the current economic crisis, as it has done with earlier crises.
So says World Federation of Diamond Bourses (WFDB) president Avi Paz in a message on the federation’s website. He added that the industry had to focus on what it could do to ensure that it was less vulnerable to the occasional but inevitable downturns in the cyclical diamond jewellery market.
Paz emphasised that times of upheaval, while clearly complicated, also presented opportunities for positive change, and said the current crisis was no exception. “For the first time in many years, we have a golden chance of correcting two standard operating procedures in our industry which individually have placed a tremendous burden on our members and have had a devastating effect on profitability,” he said. “I am referring to memo sales and the practice of extending inordinately lengthy payment terms to our clients.”
Paz went on to say that today more than 50% of the polished diamonds imported into the United States were later returned unsold to the suppliers. “And while they sit in our clients’ safes, they are out of circulation and financed at no extra cost by us,” he pointed out
“Over a two decade period we effectively have been transformed into the jewellery sector’s primary financier. Now as the markets are in upheaval and as the banks reconsider their credit strategies, the time is right for us to demand change,” he proposed. “The burden of financing the diamond pipeline needs to be more evenly distributed, and both the rough producers and the jewellery trade must play a more active role.”
According to figures supplied by ABN Amro, after increases in the industry’s bank debt of 14% and 5% respectively in 2007 and 2008, its indebtedness had fallen between 8% and 18% during the first quarter of 2009.
“It is clear that we will emerge from the current crisis owing less money than we did going in, and that is a positive thing. What we must do now is discuss what needs to be done in order that it stays this way,” he insisted.