Rapaport Group chairman Martin Rapaport recently released an editorial piece titled Rough Bubble Bust that detailed his views on how and why rough diamond prices had been manipulated to “artificially high, unsustainable levels”.
In the article, Rapaport explained that the high rough diamond prices had negatively affected the diamond industry, damaging its profitability, liquidity and viability.Rapaport was particularly critical of global diamond mining giant De Beers’ supposed role in the matter, blaming the company for the “collapse” of the rough diamond distribution system.
“[De Beers’] refusal to lower rough prices is destroying the diamond trade, creating severe financial losses, illiquidity, supply shortages, and the loss of tens of thousands of jobs,” Rapaport claimed in a statement.
“De Beers must immediately inject liquidity into the diamond trade by reducing rough diamond prices 30–50 per cent. There is no justification for rough prices higher than polished diamond prices. Without a viable, profitable and sustainable diamond trade distributing their diamonds, De Beers diamond mines are worthless.”
In addition to the sharp drop in rough diamond prices, the editorial piece called for the resignation of De Beers CEO Philippe Mellier.
Rapaport accused Mellier of “destroying long-term client trust relationships … while bankrupting the diamond trade for the sake of short-term balance sheet profits”. He recommended the appointment of “a leader who is a diamantaire, someone who is knowledgeable and passionate about the diamond business and the future of the diamond trade”.
Rapaport concluded the piece by calling on members of the diamond industry to directly email Mark Cutifani, CEO of Anglo American – De Beers’ majority shareholder – with their concerns.
In an email that was issued to the diamond industry as part of the article’s release, Rapaport indicated that he did not expect polished diamond prices to fall alongside rough diamond prices.
“Increased trade profits and liquidity will support polished diamond prices and expand demand as downstream distributors invest in marketing and sales,” he stated.Interestingly, Vinod Kuriyan, chief editor of gemstone and jewellery news publication GEMKonnect and former Indian editor of the Rapaport Diamond Report, disagreed.
Kuriyan suggested in his own editorial piece that such a drastic drop would “immediately result in huge losses for the diamond processing industry running into the billions of dollars”.
“Instead of seeking a drastic price reduction, the industry has to work collectively to first clear the production pipeline of this high-priced stock,” Kuriyan stated.
“The most practical way is to drastically reduce supply and in effect starve the pipeline until it clears. Combining this with a moderate price reduction will help the industry get its inventory moving by mixing higher priced goods with slightly cheaper ones and averaging out a cost that is acceptable to polished buyers.”
When Jeweller approached De Beers for comment on the matter, a company spokesperson said, “Suffice it to say we disagree with the view Martin sets out in his editorial. Alongside the price adjustments we’ve made through the year, we’ve taken a range of decisive actions to address the inventory indigestion issue in the midstream (which has been at the heart of the recent challenges) and to support demand pull-through, including a major additional Q4 marketing investment.”
Further to this, the De Beers spokesperson indicated that Cutifani had received “little response” after Rapaport’s call for the diamond industry to directly email the Anglo American CEO.
Click here to download Rapaport’s Rough Bubble Bust editorial.
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