This city's diamond district is recovering some of the shine it lost during the financial crisis by cashing in on a hungry new customer: China.
Exports of polished diamonds from Europe's diamond capital to China, including Hong Kong, increased 55% to $737 million in the first three months of 2010, the Antwerp World Diamond Centre said, according to John W. Miller of the Wall Street Journal.
That makes China, for the first time, the biggest buyer of diamonds from Antwerp, knocking the U.S., traditionally its largest customer, into second place.
The booming Chinese market, fueled by the world's fastest-growing middle class, is proving a strong antidote to slipping sales in more established markets like the U.S. and Europe. A recent report by consultants KPMG forecasts China will become the world's largest diamond market next year.
In the latest quarter, the U.S. purchased $694.7 million of polished diamonds from Antwerp sellers in the first quarter of 2010, and Israel, in third place, bought $273.9 million. Other former top destinations, such as Japan, Switzerland and Dubai, have dropped in the standings.
For 2010, the AWDC predicted total sales to China of $3 billion, far above last year's $2.3 billion.
Antwerp's diamond polishers, sellers and traders have been suffering narrowing margins as mining companies have cut back production at a time when retail prices have been falling. They have also seen a lot of cutting and polishing work being outsourced to India, which then sells the stones more cheaply.
The Antwerp diamond industry is fragmented among 1,800 companies with combined sales of $45 billion a year. As the labor-intensive business of cutting the stones has shifted to developing countries, Belgian diamond firms have increasingly focused on the trading, marketing and final polishing of diamonds. They typically buy stones from mining firms such as De Beers and BHP Billiton. "Antwerp is reasonably well situated to compete in China because it has the infrastructure already set up as a trading hub," says Des Kilelea, a London-based diamond analyst for RBC Capital Markets.
But the Belgian city, the traditional center of the world's market for polished diamonds, faces tough competition from other diamond powerhouses. India sold $6.6 billion worth and Israel $2.2 billion worth of diamonds to China last year.
The AWDC, the Antwerp industry's organizing body, Tuesday unveiled a full-scale effort to expand in China. Banks, cutters, traders and polishers who work here say they are courting Chinese diplomats, giving prizes to Chinese jewelry designers and spending millions on trade fairs in China.
"We have a lot of competition, so we must position ourselves to attack in China and win in China," said Mickey Weinstock, an Antwerp diamond seller who says his company's $50 million of annual sales are now almost only to retailers in China.
In June, the AWDC will finalize a joint venture with the Shanghai Diamond Exchange. The Belgians will provide advice and consulting on the business in exchange for more access to the Chinese market, said Freddy Hanard, CEO of the AWDC.
Last year, the Antwerp High Diamond Council gave 12 of the 30 finalist places in its jewelry-design competition to Chinese designers.
The Antwerp-based International Gemological Institute, which trains gemologists—the experts who analyze, grade and price diamonds—is expanding its staff in China to 200 in the next few years from five, says Chief Operating Officer Deborah Pienica. "We're seeing that the new generations in China are less conservative and ready to spend money on diamonds," she says.
Belgian diamond dealers say they are attending as many trade fairs as possible. The AWDC 18 months ago tapped Mr. Weinstock to set up a wing of the Belgian pavilion at the World Expo in Shanghai, which runs from May to October and is expecting 70 million visitors.
A stand staffed by 45 traders, cutters and salesmen will show off several million dollars worth of the flashiest stones cut in Antwerp, including a 28-carat rough in the shape of the continent of Africa, a black diamond cut in the form of a mosque, a yellow diamond and a pink diamond whose 8.8 carats will appeal to the Chinese love of the number 8, which is considered lucky, Mr. Weinstock said.
These efforts are meant to help jewelers like Jean-Claude Muller, CEO of S.Muller & Sons. He already sells $25 million worth of diamonds, half his annual take, in China but would like to sell even more.
Diamond dealers like selling in China, Mr. Muller says, because customers there pay cash, unlike in the U.S., where they ask for credit. They are also very consistent buyers, he added. By contrast, he said, buyers in the Middle East will purchase a few big stones, then stop calling.
