Diamond miners are dealing with falling prices and demand for their rough product, but dealers are searching for a way to support the value of cut and polished diamonds. Rapaport Group, and its chair Martin Rapaport, specialists in the polished diamond sector, plan to set up a trading platform for diamonds to underpin their value as the Covid-19 virus wreaks havoc on global markets, economies and individuals caught up in unprecedented worldwide response to curtail its spread.
Manufacturers and dealers are facing a severe liquidity crunch as sales to China and Hong Kong have stopped because of the coronavirus. Rapaport repeatedly stressed on Thursday that diamonds are more than just a luxury item, as they are a store of value that could be unlocked during difficult times like the current ones.
To do this, Rapaport Group will set up a trading platform for polished diamonds, which, unlike gold, platinum and other commodities, come in an abundant array of shapes, colours, sizes and values, making it difficult to homogenise price points. The plan is to as quickly as possible set up the platform for dealers to sell and buy polished diamonds.
It is not an arena for the sale of rough diamonds nor is it a marketing venture, Rapaport said. “We want to create a transparent bid process. That’s what we are working on and what we want to introduce,” he said. “Giving a [price] floor to the market is a very powerful thing.”
“Our ability to provide liquidity to customers is the key to survival of the diamond industry,” he said.
While the technology to make the platform a reality is available in the group and in the process of being developed, the scheme hinges on people, he said. “It’s not just technology. It’s a lot more. It’s human interactions that will ensure this thing succeeds.
“The real thing is the connections, getting buyers to bid. It’s bids that I want. If a seller sees there’s a place to go to sell, and that there are bids, then he can decide to sell or not ... but other people around the world will say, ah, these diamonds are at least this much,” he said.
At the heart of the trading will be natural diamonds that have been certified by the Gemological Institute of America, which will “trade like hotcakes,” he said.
Unlike the money poured into marketing and advertising by the Diamond Producers Association, this is purely an exercise to create transparent, credible diamond pricing to create confidence in the underlying value of diamonds. “The idea that with advertising we can cure markets, no, I don’t believe that at all,” Rapaport said.
“The only reason someone will participate in the bid market is if they’ll make money. There are no favours here. This isn’t a charity. A viable bid market should be structured so anyone who bids can make money, they’re setting the price,” he said.
Diamond miners have their own problems, with Botswana halting the flow of foreigners into the country that is the site of De Beers’ 10 annual sales events called Sights, where it aggregates and sorts diamonds from its mines in that country, SA, Namibia and Canada.
“International travel restrictions are inevitably affecting plans for the Sight so we have been working on developing innovative approaches to meeting customer needs,” De Beers CEO Bruce Cleaver said.
London-listed Gem Diamonds said on Thursday its tender of small diamonds realised $7.8bn, an 18% fall since a similar sale in November before the viral outbreak.
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