WDC President Fischler on The State of the Diamond Industry

Rough Market
09/10/2018 10:46

Stephane Fischler, President of the World Diamond Council, spoke with Mines to Market. Some key takeaways [for the complete interview, click 'Read the full article']:

MtM: What is your idea of the ideal environment for the diamond industry to evolve in today’s scenario?

Fischler: The ideal scenario for the diamond industry, as for any industry, is a combination of positive tension on the 'supply and demand' side and growing consumer desire for the product. That is the theory.

if I look the current state of the industry, there is a critical issue that needs to be looked at and fixed: healthy tension in terms of leverage. The midstream has completely lost it. The trade centers were more focused on internally competing (to the delight of miners) and have lost their reputation as 'experts' to grading labs and independent trade and pricing platforms. As a result, the current competition within the midstream is sadly towards the lowest and not the highest common denominator. It seems that only emotions and the short-term are driving the traders and manufacturers.

The major mining companies are since decades playing expertly on these weaknesses. And very successfully so. Just compare theirs, and the midstream margins. One major issue I must add, and sadly so, is fast diminishing ethics.

MtM: How far has consumer awareness for certification, transparency increased over the years? How can it be improved?

Fischler: If you speak about grading certification (one should rather use the term 'reporting' as it is only an opinion), I believe this has not beneficiated the industry at all. However, you do need to separate the scientific determination of the natural or synthetic nature of a diamond or the presence of treatments, where I believe the work of specialized laboratories and research centers is critical.

But I openly question if diamond grading by third parties has benefitted the consumers. It is a fact that it has removed part of the trust of the public in the expertise of the retailer and has enabled people, without expertise or history in the trade, to sell diamonds [while] passing themselves [off] as 'experts'. This has had a dramatic negative impact on the whole supply chain.

Consumers deserve correct product information. ... [But] In the end, we sell 'magic', a most amazing story, a rare and unique mineral.

MtM: What are your inputs about the Kimberley Process Certification Scheme?

Fischler:  The KP is another example of a situation where the industry can either choose to act preventively or will be impacted by regulation and more financial de-risking. We are at an important crossroad where the industry is taking a leading role at the KP, proposing new instruments to reduce risks. In parallel, it is proposing to strengthen its own processes through its new “System of Warranties”.

If the member governments that ultimately decide, fail to agree to provide the KP with a new set of rules and capacity to strengthen it, so as to prevent serious and systemic harm, it will be up to us through the “System of Warranties” to demonstrate to the legislators that our system is solid and can be trusted.

MtM: Artificial Intelligence and Blockchain: Are they a boon for the industry?

Fischler: Artificial intelligence or 'machine learning', is not new, but evolving fast. The impact on society and as an ethical challenge is potentially huge. The role of 'workers' will be redefined and a whole new set of skills required. As far as I am aware, there is some very powerful software being used currently by some diamond companies. I have yet to see, within the midstream, machine learning applications. I see it appearing in retail, driving sales and marketing processes.

About Blockchain: I am skeptical for its benefit to our industry. As with everything that depends on a connection to the world-wide-web, it is inherently risky. ... As a decentralized ledger for a whole industry involved for example in logistics like shipping, or for notaries, I guess it could be valuable. ... [But] For me, [it is] simply a new 'hype' to create an 'illusion' of confidence. My conclusion: nothing is stronger than an expert retailer putting his or her name and reputation on the table with every sale. No blockchain or technology will ever come close to that.