Rapaport Magazine

Antwerp Market Report

Antwerp and ALROSA Tighten Links

By Marc Goldstein
RAPAPORT... ALROSA reportedly has decided to set up a sightholder system that is expected to be similar to De Beers. None of the sightholders approached would comment openly, as they were still awaiting their written agreements.

Nevertheless, here are the basics. A group of some 19 companies has been appointed as ALROSA sightholders: two for Armenia, one each for Israel and Russia, four for Indian companies — two of which are India-based and two Antwerp-based — and the remaining 11 are Antwerp-based companies. As to why so many of the new sightholders are Antwerp-based companies, one of them explained: “Those sights will be by nature trading sights. Antwerp is the major trading center. In addition, ALROSA favors those who have had a historic relationship with Russian diamonds.” Philip Claes, spokesman for the Antwerp World Diamond Centre (AWDC), said the abundance of Antwerp companies on the sightholders list was “proof of the strength of the Antwerp diamond center and of the trust ALROSA places in our companies.”

The yearly value of the sights is expected to flirt with $750 million total for 10 to 12 sights a year. It’s been reported that there would be a minimum obligation to purchase. Nothing is known regarding the goods themselves, but it’s been reported that they probably would be a mix of ALROSA’s current production. Furthermore, the boxes are destined for trading, allowing sightholders to spread the goods among their clients.

As far as prices are concerned, it’s been rumored that the margins won’t be that big, probably inferior to that of the Diamond Trading Company (DTC). Even so, the reaction to the new system was positive, especially when one considers that, in the current environment, securing a source is more important than immediate profit. Shashin Choksi, secretary general to the Belgian Polished Diamond Dealers Association (BVGD), is less enthusiastic. “If such a system is an advantage for the new sightholders, it’s once again a sign that the business is concentrating further in the hands of fewer individuals. Hence, that is less goods reaching the open market at a fair price.”

Sky-High Prices for Colored
A straightforward summary of the natural color diamond market is given by Eddy Elzas of Rainbow Gems. “It’s as if people wanted to get rid of their money as fast as possible. Money is subject to such inflationary pressure that the wealthiest look for ways of investing carefully in assets that aren’t expected to drop [in value]. My most striking example is that about one year ago I sold an 82-carat intense yellow fancy for about $2.4 million. Recently, Graff sold a similar 70-carat stone for some $11 million. There’s nothing more to add to that.”

Arthur Langerman of Langerman Diamonds agreed, noting that “Since last year, prices have increased at an unprecedented pace.” Among the reasons suggested by the leading firms is that hyperluxury goods are not likely to suffer the consequences of such events as the subprime crisis, given that many of their clients derive their wealth from petrol, be they Arabs or Russians.

Blue diamonds have totally disappeared from the market. They are priceless and move for at least $1.3 million per carat compared to $1 million per carat in 2007. Red diamonds have become the fairy tale of diamonds and their prices have evolved similarly to those of blue diamonds. Green diamonds can easily reach $1 million per carat. Large, 3- to 5-carat yellows have risen by more than 50 percent, with some vivids reaching $60,000 per carat and intense, $25,000 per carat. Dark browns increased by 50 percent across the board during the past six months. And nice pink diamonds, given that Argyle’s production has diminished, are increasingly difficult to find.

Langerman complained about the “slowness” of the services supplied by the major diamond labs, which are not in tune with the high value of many colored diamonds. “Taking three to four months to get a lab result is some kind of administrative harassment that makes business very complicated. Moreover, it requires that huge amounts of money be immobilized. I remember a stone of about 3 carats and a 1.5 carat that I sent to GIA [Gemological Institute of America]. The former came back five years later with ‘Undetermined, No Report,’ whereas the latter arrived four years later with the same labeling. At least they didn’t charge me any fee, contrary to the HRD [Diamond High Council], which returned a stone to me after two months with a useless ‘Fancy Pink, Undetermined Color Origin,’ together with an invoice for 88 euros [$140].”

The Marketplace
• Demand is good across the board for cleanish goods in VVS-VS, D-I. 
  Polished prices increased by 10 percent in one recent week, which is 
  considered justified in the current market.
• SI, P are increasingly difficult to move because of weakened U.S. market.
  Diamonds are no longer a priority for middle-income consumers. 

Fancy shapes
• 3 carat+ in nice makes in marquises and pears are moving well across the 

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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