David Block is CEO of Israel’s Sarine Technologies and has served in the position since 2012, rising from his previous position as deputy CEO and chief operating officer. Before that, he was also Sarine’s vice president of sales, CEO of Sarin India, and product manager.
Sarine is among the world’s best-known suppliers of manufacturing and other equipment to the global diamond industry. Its global management and operations team, as well as much of its research and development (R&D), are based in Israel north of the Israel Diamond Exchange (IDE) in Ramat Gan where the company also has a service center.
In this exclusive interview for Rough and Polished, Block gives his opinion on the leading issues affecting today’s diamond trade.
What is the state of the diamond market globally from Sarine's point of view?
There are several main issues that have actually been present for a while and are continuing to shape where the industry is currently and where it will go in the future. Firstly, China was expected to rebound in much the same way as the US market did after COVID. Unfortunately, that didn’t happen. China accounted for 15% or more of global consumption of diamonds before COVID.
Until China comes back then we will stay in the current state. And it's important to understand that this has an effect all the way through the diamond supply chain - from the demand for rough and the price it sells for all the way through to the level of polished stones and diamond jewelry sales.
Secondly, there is the issue of lab grown diamonds (LGDs) vs natural diamonds in the US market over the last two years. At the beginning the market tended to downplay the impact of LGDs, but during COVID the demand for them grew. When the demand for natural diamonds declined following the COVID rebound then sales of LGDs increased.
Thirdly, there is the issue of the G7 sanctions on Russian goods. The G7 countries, such as the United States, Europe and Japan, account for about 70% of polished stone consumption, so this is obviously a major factor affecting the global diamond market.
How do you see the state of the LGD market? Do you see it continuing to grow?
Regarding LGDs, we are starting to see a change in the balance between these stones and natural diamonds. Lots of retailers are now thinking about how to move forward.
Up to now there was a big incentive to sell LGDs because of the high margins, but retailers are now seeing how LGDs are not sustainable because prices are going down.
The business model for LGDs is not sustainable and many retailers are now looking to change strategy. LGDs are not going away, but it is more about how they are sold and price points. Jewelry retailers are fine tuning their sales strategies.
Could you give some details about how Sarine is helping the industry adhere to the G7 protocols?
At Sarine, we believe the industry clearly needs a solution that enables the achievement of the goals of limiting the influx of Russian goods to G7 countries. So, if you have a system that is full of holes then that’s no good. In other words, we must have a robust solution that is able to track goods efficiently.
Sarine gives a solution to enable to achieve the tracking of diamonds from where they were sourced all the way through the pipeline to their polished state. Simply tracking rough is not a full solution.
Secondly, we believe a solution is needed that doesn’t create huge overheads for the industry. In this respect, we are able to help because we base our solutions on our existing systems since we process so many larger diamonds.
A robust traceablity system is needed. Where are all the 1ct and larger Russian diamonds going if not to G7 states? It is clear that they are still being sold. Where are they going if not to G7 states which account for 70% of global consumption? We are working with partners, such as TRACR, to ensure such a system is available for the industry.
Could you talk about how Sarine products are using AI, and particularly in traceability, and the advantages that it provides to diamond manufacturers?
Because we have such a large amount of data on diamonds that we have collected over the years, this gives us the ability to think how we can use it to benefit clients throughout the pipeline and provide different types of services to clients.
For example: in grading stones, we are able to teach the system how to recognize color for grading. Machine grading has many advantages: it is very consistent and accurate and not influenced by, for example, cultural or geographical differences, or staff who may be in a bad mood. In other words, we are able to remove the possibility of human mistakes.
And if we look at diamond planning solutions, we can take the vast amount of data that we have collected and teach the system how to recognize a particular type of diamond and plan the cut based on previous experience. We are always looking at how technology can do things better than humans to help make the industry more efficient.
And in the area of traceability, AI allows us to create a connection between a polished state and where it was originally sourced as rough.
There was some concern and skepticism in the industry several years ago when Sarine launched automated diamond grading. Can you speak about the advantages this provides and how your customers relate to it in terms of its reliability.
I believe that automated grading, for example, is superior to the traditional methods of grading, but the industry needs time to adapt to these solutions and believe in them.
In terms of efficiency, you just need to think about the time and costs involved in shipping a diamond to a lab which might be on the other side of the world, such as insurance and other costs. And during all of this process you cannot sell the diamond, of course. That is very inefficient.
I believe that our solutions provide many advantages for clients. However there is still a great deal of skepticism in the market so time is needed for these solutions to be adopted.
Please explain the reason for Sarine's partnership with GCAL and the solutions and advantages it provides.
Although Sarine is well known across the diamond industry globally for our technological solutions, we knew that we were not well known at the retail level in the United States despite our efforts to create awareness about our company and our products.
GCAL is a well-known and respected brand in the United States, so the acquisition of GCAL enabled us to approach the US market due to its high level of brand recognition and combine GCAL’s many advantages together with our solutions.
We also brought advantages for GCAL because they only had one lab which is situated in New York so that meant they could not provide a worldwide service and that's what we were able to give.
What were the standouts for you from the JCK Show?
I believe the major factor is the rethinking of strategy related to LGDs by retailers and how they sell these stones alongside natural diamonds.
It was also the first time that I had seen GCAL in action at the show and I was extremely encouraged by seeing how they engaged with clients and how respected and trusted they are by American customers.
There are reports that consumers may be disillusioned with having bought LGD-set jewelry where the diamonds are now close to worthless and with little or no upgrade value/possibilities. What are your views on this?
It really depends on how retailers engage with clients. Many retailers don’t emphasize the likely future value of LGDs. Some consumers are aware that the value of the stones will fall, and some are not.
Retailers need to be transparent and to set realistic expectations. This is important because otherwise it will cause damage to the diamond trade overall.
Abraham Dayan for Rough&Polished from Tel Aviv
