In the end of the 1970th Martin Rapaport made a small revolution in diamond trade, having organized regular publication of reports on retail diamond prices in the market of New York. Since then the “Rapaport Price List” has been a necessary tool in the arsenal of diamond dealers, cutters, retailers, analysts, experts in marketing, and financiers – everyone who is connected with the diamond market. In later years the idea has been amplified and developed by a number of independent agencies and today well structured, authentic and promptly updated information about polished prices provided by Polished Prices, Idex Online, and ADL can serve as a reliable reference point in this complex business. Creation of such tools has played a significant role in increasing transparency of the polished market, made it more dynamic and formed a basis for innovative projects aimed at transformation of polished diamonds into exchange-traded commodities.
Unlike the market of polished diamonds, the market of rough diamonds cannot boast of having a similar toolkit. There are analogues similar for example to the price index issued by Almazyuvelirexport based on the prices of transactions in rough diamonds on the world market inclusive of the wide product range offered by global diamond miners, but they are not public and are intended for use in the interests of the company generating such data. The principal cause of such a situation has historical roots: unlike the polished market always operating in the environment of free competition, the rough market has long been monopolized, which automatically made the system of pricing closed. To a wide extent it remains closed until now – the leading diamond-mining companies do not publish their price-lists and are extremely skimpy and reluctant in sharing such information as far as the scale, structure and prices of transactions made by their sightholders are concerned.
But times have changed, and today the rough diamond market is compelled to work in a competitive environment, and what is more - under the conditions of prolonged crisis which is sure to aggravate any competition. Major diamond miners are on the verge of technical default, and this circumstance cannot facilitate higher confidence to their systems of pricing. The prices for rough diamonds today are subject to influence of many factors which are difficult and often impossible to consider, being guided only by market realities. Thus, the protectionism shown by the authorities of India in relation to the national lapidary industry has caused a summer wave of speculation which pushed rough prices upwards – a very dangerous thing on the background of stagnating demand for diamond jewelry in the key diamonds consuming countries. This example, and also the events in the diamond dependent countries of Africa and in Russia show that the influence of political and social factors on rough prices volatility during the current crisis can be considerable. And it is extremely difficult to predict the effect of such influences, including because of absence of proper tools allowing to observe the movement of market prices for rough diamonds and correlate it to the movement of prices for polished diamonds in real time.
Technically, drawing up and issuing promptly updated price lists for major categories of rough diamonds (and indices based on this information) can hardly be considered an unsolvable problem. The main point here is the access to the sources permitting to obtain representative sampling. Certainly, heavyweight dealers working both with key producers of rough and on the secondary market possess the data necessary for solving this problem. But the traditional reserve of this market may well become a barrier. It is worth reminding that in its time the pioneer offer of Martin Rapaport ran into a rather strong negative reaction of those in support of closed dealings based on the “traditional handshake.”
But in the long run creation of such a tool will be favorable to everyone since it will objectively work to stabilize the diamond market. The higher will be the transparency of the rough market, the lower will be the risk of inflating speculative bubbles, especially dangerous today, when world consumption of diamond jewelry dropped to critical levels and when a sharp disparity between prices for rough diamonds and prices for polished diamonds can lead to unpredictable consequences. If the raw market will generate tools similar to price-lists for polished diamonds and their derivatives, it would be a real movement to such transparency. It would be a step permitting to improve the quality of decisions taken by both immediate participants of the market and by authorities which are trying today to regulate it.
