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Sunday 7 September 2008

London’s diamond trade may not be forever

Richard Orange says London’s traditional dominance of global dealing in uncut stones is under threat from new players based in India, China and Dubai

So far London has been insulated from these trends by the DTC’s presence, but its fortress is now looking a little less secure. Indeed, some industry insiders expect that by the end of the decade, no sales of rough diamonds will take place in London at all. Unlike the threat facing Antwerp’s cutters, this has nothing to do with competition from abroad. Under pressure from diamondproducing countries to direct more of the industry employment towards local workers, De Beers itself is diverting sorting work away from London, and sales may follow. DTC Botwana will begin taking over most of DTC London’s sorting work in 2008. At the same time, Namibia and South Africa are demanding that more of the diamonds they produce are sold locally so they can develop their own cutting industries.

Over the past 20 years, DTC’s share of global diamond sales has slumped from 80 per cent to less than 45 per cent, and it has further to fall. Last year, after an inquiry by the European Commission, DTC agreed to stop selling diamonds produced by Alrosa, the Russian state diamond company, by 2009. Mark Boston is one expert who opposes so much change: ‘The sight system allows people to meet ten times a year. If you mix it up, have several different sights and systems, then everything gets confused and everybody will have different agendas.’

Some of the Indian cutters are also worried by the concessions De Beers is making. Lalit Adani, chief executive of M Suresh & Co, becomes quite agitated when asked about plans to move the cutting industry to producer countries. Obtaining sufficient stones for his legion of skilled craftsmen is already proving a headache, he complains. As well as the London sight week, he is being forced to buy from De Beers’ South African sights (held the same day), and from mining companies such as Rio Tinto. He is still short, and De Beers’ plans will further restrict supplies.

But diamond traders are both adaptable and resolutely global. Antwerp’s diamond bourses have long featured as many Indian faces as local ones; the same goes for Hong Kong. M Suresh & Co has already set up shop in South Africa to salvage what business it can from the new order, sending over Indian master craftsmen to train African cutters. And you can be sure every self-respecting diamond company, whatever its nation-ality, has a Botswanan subsidiary in the pipeline, while several Israeli diamond companies have registered as participants in Dubai’s new diamond trading centre.

In summary, this is just one more industry in which surprising new patterns are emerging as the old world loses its grip and new superpowers flex their muscles. The only attraction of the ‘London Mix’ is those diamonds in my hand: where the trading takes place is immaterial, so long as there’s trading to be done.

More articles from: Richard Orange | this section

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