Ali Pastorini, Director of Marketing of the World Jewelry Hub (WJH), in an interview to Rough & Polished talked about the goals set before the WJH, described the main trends and challenges currently facing the world jewelry and diamond markets and delineated the role of China and India.
When was the World Jewelry Hub founded and what are the main goals it pursues?
The project itself has been in the planning stages for several years, and included the creation of the Panama Diamond Exchange (PDE), as Latin America’s first and only diamond bourse. This was taken as first step in order to establish Panama’s status as the primary trading center for the gemstone and jewelry business in the region.
Construction of the first stage building of the World Jewelry Hub began early in 2014, and it was completed on schedule at the end of the year, with companies starting to move in the beginning of 2015. It will serve as the headquarters of PDE and provide leased offices for about 60 companies, until the second phase building is completed at the end of 2017. The latter is a luxury office tower, the likes of which our industry has never seen before.
Offices in the tower block will be available for purchase, with the pre-sale campaign already underway and the official sales campaign about to start shortly. Construction of the second phase building stage will commence during the third quarter of this year.
The World Jewelry Hub is specifically designed to serve as the access point to Latin America, opening up a market that historically has not performed to its full potential, largely because it lacks the proper infrastructure.
But, as you may guess by its name, we are not regarding the World Jewelry Hub as only a regional market center. The size, quality of the design and structure, the range of services, and the fact that is located in a Free Zone, provide companies the opportunity to use the World Jewelry Hub has their business headquarters. This is complemented by the Panama’s geographical location, at the very center of the Americas.
How much successful was the JCK Show in Las Vegas?
From our perspective, the show was excellent. We met with a great many people and were able to report first hand one what is developing in Panama. The feedback and interest we received was most encouraging.
As far as the show itself was concerned, I believe the results were mixed. The U.S. market is solid, as is the economy. But there are issues that need to be addressed in the industry, such as financing, which is causing a degree of nervousness in the pipeline. Overall, though, because the fundamentals are sound, I found the industry pretty confident.
What are the main trends in the world jewelry trade?
Like I said, there are what I believe are short term issues, including the shortage of bank credit, and a relative cooling of growth in the Chinese market, partly because it is maturing, but also because of the anti-corruption drive of the country’s government.
But at the same time, we are seeing a strengthening of the established markets, including the United States, of course, but Japan as well.
What also is interesting is the effect that the Chinese are having outside of China. Chinese tourists are responsible for a significant proportion of jewelry sales, particularly at the high end. This is especially important in Europe, where the local market is weaker.
What is your forecast for the world jewelry market in 2015-2016?
From what we have heard, there should be modest but steady growth over the coming years, and I would expect the rate to pick up moving into 2016. I believe that most of the short-term issues that are holding the market back at present will be resolved, and the rate of growth will pick up both in China and India.
And let us not forget Latin America. I believe our project has focused a tremendous amount of attention on the opportunities that exist in our region, and as a Brazilian, I would point out that 2016 is the year of the Olympic Games in Rio de Janeiro. I fully expect them to act an economic catalyst, as did the Olympics when they were held in Tokyo, Seoul and Beijing.
Are you satisfied with the level of diamond supply? Do you see an increase in demand for diamonds from jewelry retailers?
The fact that prices have held steady over the past year, and indeed have dipped somewhat, are a clear indication that, right now, the level of supply is not a problem.
But this may change. The basic forecast that demand in the market will increase at a rate that is several percentage points higher than the growth in rough supply has not changed, meaning that, over the long term, we can expect to see a supply shortfall and rising prices.
Again, taking a Latin American perspective, we expect to see a strong rise in demand for diamonds, to a large degree because of the growing role of the World Jewelry Hub, which will provide a consistent and steady supply of merchandise for jewelers in the region. This has not been the case in the past, which meant that the general inclusion of diamonds in jewelry produced in the region has been lower than it is other parts of the world.
Can the larger market share enjoyed by synthetic diamonds lead to lower prices for diamond jewelry?
Synthetics may provide jewelry buyers with a wider range of alternatives, but in principle, it is a mistake to see them as a substitute for natural diamonds.
Synthetic diamonds are legitimate, but they should be marketed as a separate product. In other words, they should influence diamond prices no differently than colored gemstones, pearls or pure gold or platinum jewelry are able to affect prices.
What is the impact of China and India produced on the market? How does this affect the prices?
China and India clearly had a major influence on the market, particularly during the most critical years of the global financial crisis, when they almost entirely were responsible for the fast recovery of the diamond industry.
The two countries together also play a critical role in what over the coming few years will be an inability of the mining companies feeding rough goods into the pipeline to match the growth in demand for polished. That, inevitably, will push prices higher. Right, now, however, this is not a significant factor.
What do you think about the practice of over-grading?
Deliberately over-grading is a deceptive practice that should be rejected. It undermines the reputation of the gemstone and the industry, and threatens one of our most valuable assets, which is consumer confidence.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
