Diamdel, a diamond trading arm of De Beers operating worldwide, has made a breakthrough in rough diamond sales introducing online auctions which attract bidders from across the world. Embracing cutting-edge technologies, the company took a path leading to a new kind of trade in rough diamonds virtually open to businesses of any size. Rough&Polished caught up with Neil Ventura, CEO of Diamdel, to find out how his business is performing having embarked on this way.
Could you share some information about how successful your company was in the current year?
Yes, we experienced an exceptional H1 2011, delivering a record performance for our shareholders.
This performance built on a strong year for us in 2010 and has paved the way for us to make a number of investments in the business. Alongside refinements to our premises in Antwerp, we have relocated to larger offices in Tel Aviv, launched a new business in Dubai and recently announced our expansion plans in Hong Kong.
We have also welcomed new members to our global team. These investments have been made with our customers in mind as we continue to try and provide as many opportunities for our registered customers to purchase the rough they require for their businesses at market determined prices.
We also launched what we call Multi Unit Auctions in June. These new format auctions provide our customers improved opportunities to manage the volumes they seek to purchase of a given product.
We were also honored to be selected amongst 110 companies in Europe to receive a Ruban d’Honneur from the prestigious European Business Awards, representing Belgium for the 2nd year running.
So 2011 has been a busy and eventful year for us so far. Although demand for spot purchases has fallen substantially since September, we remain on track to deliver an exceptional year in Diamdel’s history.
What will mean a second wave of expected global crisis for the diamond community?
I think the implications of any change in business environment will be company specific, as we all have a different set of business circumstances at any given point in time. Financial and inventory positions for example will differ widely from company to company and so changes in the business environment will impact each company differently. That said, I also believe that we have become much more adept at managing unprecedented levels of uncertainty – a key and growing feature of the business environment that seems set to stay with us.
Don't you think the number of participants in the diamond trade is excessive?
I don’t see that there is a right or wrong number – industry structure and competitive forces will determine who participates, how they participate and over what time period.
What caused the expansion of your company's presence in Asia?
We have had a long standing presence in the region through our Hong Kong office since 1989. Unfortunately we had to reduce the scale of our presence during Q3 2007 as part of a global turnaround strategy for the Diamdel business. However, since pioneering online negotiations for the sales of rough diamonds in January 2008, we have witnessed strong growth in demand from Asia Pacific buyers. This demand growth has been for both long standing traditional product categories and, increasingly, for new product categories as regional demand from our customers, especially in China, evolves to meet changing consumer demand patterns. We therefore see a compelling rationale to create the necessary capacity in Diamdel to cater to the demonstrated demand growth being expressed in the Asia Pacific region.
Similarly, our investment in a new business in Dubai we anticipate will offer improved access to the buying opportunities that Diamdel provides, especially to businesses based in India, Dubai and the surrounding markets.
What is your evaluation of the current sales level compared to the summer of 2011?
Assuming this question is referring to Diamdel sales, current sales are down from the end of Q2 2011, in accordance with a fall in demand for spot purchases from our customers. However, we also typically sell less during Q3 and Q4 but have continued to sell products across all rough diamond product categories during the last two series of auction events.
We have witnessed a rapid shift in short term supply and demand dynamics though, over a very short period of time. A market characterized by a prolonged period of scarcity of product availability rapidly gave way to a situation of significant availability that we see today. This has resulted in a wide range of products being made available at discounted prices (as quoted prices clearly show) and customers are understandably comparing these trading prices against spot prices at auctions and allocating funds to those opportunities that offer the best value.
Do you think the demand is recovering?
From where we sit short term demand appears to be stabilising but it’s too early to point to a clear recovery trend in spot prices. I think it’s important to see the difference though between short term price movements that result from single purchase propositions, and long term price movements that reflect long term supply propositions. Trading quotes and spot prices at auctions reflect short term supply and demand fluctuations and single purchase transactions. The short term issues currently combining to suppress short term demand will no doubt give way to more buoyant demand conditions at some point.
However, the medium and long term supply and demand fundamentals remain very favourable, driven by consumption growth in key markets, and I think these growth trends are rightly being reflected in stable prices for long term supply propositions.
Short term prices and long term prices have never in my experience been equal (unless by chance) and I don’t see this changing in the foreseeable future.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
