Last year was an exceptionally difficult one for the diamond and jewelry business for many reasons, writes CIBJO (World Jewellery Confederation) President Gaetano Cavalieri in GemKonnnect. But it might come to be seen as a pivotal one where the industry took control of its destiny and realized that past practises were no longer acceptable. This is particularly the case regarding the distribution of profit in the midstream of the pipeline.
"For despite bold statements about our industry being transformed from a supply-driven to a demand-driven business, the mining companies never relinquished their ability to demand and receive price changes, almost at will. With their margins in the healthy double digits, they considered it perfectly acceptable, when opportunity arose, to squeeze their clients’ margins, which were in the low single digits at best. And why should they have not? For despite sometimes grumbling, their clients in the midstream generally accepted their lot. The fear of being cut off from supply outweighed concerns about profitability. Only when diamond manufacturers saw they was no profitability did they start rejecting rough goods.
Cavalieri writes in the GemKonnect article: "The logjam in the pipeline eventually will be released, and the slowdown in the markets will ease, for the long-term prospects for the industry remain exceedingly positive. When that happens, the industry needs to remain united it its determination not to return to industry dynamic that existed prior to 2015. If it is able to speak with a single voice and act accordingly, that need not happen. But this should not be a war of wills. Producers are reliant on their customers, just as the midstream is reliant on its suppliers. There is a middle ground and it should be reached through dialogue. But whatever that middle ground is, it will have to include a more equitable distribution of profit," adding that the midstream’s relationship with its own clients and the generous terms of payment they receive also needs to be changed.