RAPAPORT… So this is it, the long-awaited moment: The Antwerp Diamond Conference (ADC) is back on the map, and Antwerp as well. The 2011 conference, held May 23 and 24 in Antwerp, attracted approximately 1,000 attendees in returning to the two-day-long format it had in the first years after it was inaugurated in 2002. The conference was shortened to one day in length and retitled “symposium” during the crisis years of 2008 and 2009. This year’s conference theme was “Diamonds 2020: A Window to the Future.” The speakers represented a cross-section of diamond producers, industry bankers, government officials, economic analysts, consultants, nongovernmental organizations (NGOs) and players at all levels of the diamond industry. The agenda was divided into four sessions, covering financing, the rough diamond sector, the polished sector and technology and marketing.
Ari Epstein, the new chief executive officer of the Antwerp World Diamond Centre (AWDC), which sponsored the conference, explained the conference theme. “I’m pleased because we have at last a conference dedicated to the long-term future of the diamond business, and we’re attempting to help everyone in our industry look beyond the point in time everyone has looked so far. The idea is to try to take some distance from our day-to-day business in order to assess how things might be in 2020, which is nine years from now and which also happens to be the duration of a mining cycle. In order to decide whether to mine or not, and how much, for example, producers need to be one decade ahead of demand. How will production and mining be influenced by the demand in 2020 and how will technology affect manufacturing, sales models and marketing? Will our business be more capital intensive or not? At what speed are we going to have to adapt ourselves? And what information and resources are out there that could help us answer those questions?”
“This conference was different because of its emphasis on dialogue,” said Anish Aggarwal of Gemdax, a consultant to the diamond industry, who moderated conference discussions. “This type of conference is an industry first — and it happened here in Antwerp, under the auspices of AWDC. It’s the first time producing countries have come out to the industry so clearly talking about their mines, their investment — this is a major step forward.”
Financing
Presentations on financing were entitled “Basel III and the changing face of bank regulation: how might it impact upon the diamond industry over the coming decade?” which was given by Pierre De Bosscher, CEO of Antwerp Diamond Bank, and “The management of bank debt in the wake of the global financial crisis. Were the proper consequences drawn?” by Victor van der Kwast, CEO of the International Diamond & Jewelry Group (ID&JG) of ABN AMRO. Among the major points they stressed was the need to begin a new era of governance based on full transparency.
The first afternoon of the conference was devoted to the diamond producers, who explained how they see the next decade and how they are attempting to cope with the uncertainty in the world since 2008. Jean-Marc Lieberherr, general manager of Rio Tinto Diamonds, explained “We make decisions now that will impact our business ten years from now, so we have to anticipate. After a two-year recovery period and the restoration of our balance sheets, it’s probably time to try to assess what demand for diamonds will be in ten years and to see what we can do to help it happen.
“If you want to know how we decide to invest, there’s basically one major variable: How intense is the consumer demand going to be a decade from today. That’s it,” said Lieberherr. “As a matter of fact, we’re pretty confident that there will be intense demand for diamonds. ‘Intense’ is a very important word here. It means that we think consumers will ‘strongly’ want diamonds in the future. However, there are other issues to address. If it’s true that diamond supply peaked in 2005 and will most likely stagnate until 2020, and, at the same time, diamond jewelry demand is expected to grow everywhere until that time, the matter isn’t resolved. It’s important for everyone to understand that demand growth isn’t synonymous with market growth. The consumers who want diamonds may indeed want them badly, but there will also be a substitution movement in favor of competing luxury goods over diamonds. That ultimately makes it difficult to predict whether the diamond market will grow or not. Furthermore, the expected consumption changes vary — they could be positive or negative, based on the maturity of the individual markets” in which diamonds are sold.
Rough Diamond Sector
During the discussion on rough business models and sales mechanisms, it was clear that tenders are here to stay. BHP Billiton is a strong advocate for totally transparent auction mechanisms. In addition, Diamond Trading Company (DTC) and Rio Tinto confirmed their attachment to mixed models — sales through a combination of sights, contracts and tenders — and noted the role tenders play as price discovery mechanisms.
The state of beneficiation efforts in producing countries was also covered during the producers’ panel. Dr. P.H.K. Kedikilwe, Botswana’s minister of minerals, energy and water resources, confirmed that the producing countries want to bring more operations onto their own soil. “We should maximize the value chain by having all steps in Botswana, including diamond center activities, and we’re gearing ourselves toward that with our infrastructure, financial and educational development.”
During an open discussion with moderator Aggarwal, Varda Shine, managing director of the DTC, said “We can’t continue doing what we’ve been doing over the past 50 years and hope that things will improve. We have to reinvent ourselves. Consumers are indeed moving from mindless to mindful consumption and while they don’t mind paying more for a brand or a design, they will want to see the higher price justified by ensuring the product fits with their values. Transparency in our industry will therefore become increasingly important.”
Other speakers addressed the changed consumer market and how more knowledgeable, more demanding consumers will require more attention, more information, more outreach and more product innovation from the industry.
Colin Powell, former U.S. Secretary of State, was the keynote speaker at a gala dinner on the first evening of the conference, which also included entertainment and a runway fashion show.
Antwerp diamantaires were obviously pleased to have the conference back, especially on its two-day schedule, and they were obviously impressed that Epstein and Nishit Parikh, AWDC president, pulled off the conference in just three months of planning. Previous conferences sometimes took 15 months to plan. In doing so, Epstein and Parikh proved that whatever challenges arise for the center, the diamond industry and the city, they will be there to meet them.
