Harry Levy FGA, previously wrote a regular column for Gems&Jewellery titled 'Around the Trade'. Featured on the Gem-A News&Blogs section for the first time, here is his update on the diamond trade for 2017.
DPA, IGDA and IIDGR
To most readers these three sets of initials will mean nothing. They do not even form an acronym. To be an acronym a set of initials must be pronounceable and read as a word. These initials are all relatively new and all related to the diamond industry.
DPA - Diamond Producers Association
IGDA - International Grown Diamond Association
IIDGR - The International Institute of Diamond Grading & Research
DPA – Diamond Producers Association
This was set up in May 2015 by seven of the world’s leading diamond producers. There was no need for such an association for over a century as the main distributors of rough diamonds were De Beers, through their Consolidated Mines association. At their height they distributed about 95% of the world rough diamond sales (leaving the other 5% for other producers to sell for themselves to insure De Beers pay the right market price). This was because companies such as Alrosa (Russia) and Rio Tinto (Australia) sold their entire production to De Beers. De Beers also traded as the Diamond Trading Company. From about 2000 the production of rough diamonds began to exceed what De Beers could absorb and the cartel began to disintegrate. De Beers always claimed they did not run a monopoly, remember the 5%, but they fell foul of the US government.
De Beers had become the guardians of the trade, they were foremost in advertising generic diamonds, they were at the forefront in negotiations over conflict diamonds - the Kimberley Process (KP). Their method of distribution through sight-holders, ensured that supply never exceeded demand. So they could steadily increase the price of diamonds, thus ensuring that diamonds were a good investment over time. I recall many of my colleagues in the Bourses would curse De Beers - "They always put the prices up", never realising what it would mean should they decrease prices. They were the benevolent dictators of our trade.
Once De Beers lost control of the market, the other mining companies soon realised that they were on their own. They had to sell their products in the open market, many formed a tender method of distribution thus having fluctuating pricing, and no real funds for advertising.
They eventually formed their association, much to the delight of traders in polished goods, and set aside money for running the organisation and advertising – much too little. They very recently upped this sum ten-fold realising that they had to counter the assault from synthetic diamonds.
Their slogan has become: REAL IS RARE
IGDA – International Grown Diamond Association
The only welcome to synthetic diamonds from the trade was one of pure hostility and hate. Whereas in most trades a technical achievement such as synthesising the hardest substance known to man would have been greeted with praise and accolades and probably a Noble Prize or two, our trade took a luddite approach, seeing synthetic diamonds as a product that would kill off the natural diamond trade.
The initial approaches were to try to ban the substance from being produced, ban people from trading in it, Bourses united in banning the product from being traded by its members and banning the product from being brought onto the bourse trading floors. All these approaches were against laws of restricted trade practice in most countries, and finally they realised the real problem was that of trying to sell synthetic diamonds as if they were natural, that is without proper disclosure.
These fears were soon realised, as parcels of natural stones began to appear containing synthetic diamonds and some stones were sold without the disclosure that they were synthetic. Jewellery containing diamonds had some or all of the stones being synthetic. This is deception, fraud and illegal in most countries. We are now in this phase with these stones.
My own approach has been to accept synthetic diamonds as a legitimate part of the trade and try to bring in the producers of these stones as part of the industry. It is not the producers who are cheating, this comes from some cutters and some dealers and some jewellery manufacturers. And the simplest way was for these manufacturers to form an Association. They have done this now and I have got the heads of CIBJO and the WFDB to agree to talk and possibly bring this Association into their folds.
I know this could take time, as they need to persuade their members, many of whom regard synthetic diamonds as a bad dream from which we will all wake up. Unfortunately waking up with your head buried deep in the sand will not help.
If the Association is brought into the trade, they could then control the spread of their product, be in a stronger position to sanction those who do not disclose, prevent fraud and have the technical ability to find reliable ways to differentiate between their stones and natural ones. After all they are the ones with the technology regarding synthetic diamonds.
IIDGR - The International Institute of Diamond Grading & Research
This is the De Beers arm for research and their laboratories. The question is why not use the name De Beers Laboratories, after all De Beers is one of the best brands known. Since they lost their place as the number one distributers of rough diamonds, they began to look for other sources of income. The retail trade is one of the most profitable parts of the distribution chain.
They started selling jewellery in shops, under the name of De Beers, but decided to join the LVMH (Louis Vuitton Moet Henessy) Group, probably the most prestigious sellers of luxury goods, to enhance their trade. But they had to sell the name De Beers to the Group. Thus when it came to it they could not use the name to brand their own laboratories.
The research has been part of De Beers for many years. They worked under the name of Element 6, and were in the forefront of developing synthetic diamonds, but mostly for industrial use. Today most of the industrial diamonds used are synthetic in origin.
Another profitable part of the trade is that of grading diamonds. They started with one laboratory in Antwerp, where they graded most of the stones they use in their own jewellery, and are now expanding internationally with laboratories in many diamond centres. Their grading system was not a revolutionary new system, but they decided to fit in with the accepted standards, methodology and terminology used by the GIA.
In order to know the trading market they asked the London Diamond Bourse to set up a panel, with whom they could interact. Luckily I was part of this panel and we had several meetings with De Beers setting out their system. The last such meeting was held at their headquarters in Maidenhead. There we were given an excellent talk and shown the instruments they have developed for grading colour and detecting synthetic stones. They are continuing with their research into new instrumentation and improving their grading system. ■
Interested in finding out more about gemmology? Sign-up to one of Gem-A's courses or workshops.
If you would like to subscribe to Gems&Jewellery and The Journal of Gemmology please visit Membership.
Cover image synthetic diamond crystal. Image by Pat Daly.