Mr Stephane Fischler, President of WORLD DIAMOND COUNCIL : “At the end, we sell “magic”, a most amazing story, a rare and unique mineral.”

Mr. Stephane Fischler, President of WORLD DIAMOND COUNCILMr. Stephane Fischler, President of WORLD DIAMOND COUNCIL

Mr Stephane Fischler, President of WORLD DIAMOND COUNCIL: “At the end, we sell “magic”, a most amazing story, a rare and unique mineral.”

Q. What is your idea of the ideal environment for the diamond industry to evolve in today’s scenario?
A. 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.
Now if I look at the reality of the current state of the industry, there is a critical issue that needs to be looked at and fixed. The 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.

Q. How far has consumer awareness for certification, transparency increased over the years? How can it be improved?
A. 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 centres 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 let people, without expertise nor history in the trade being able to sell diamonds passing themselves as “experts”. This has had a dramatic negative impact down the whole supply chain. So again, to reply to your question about consumer awareness for certification a positive evolution? No, it is not. I believe the relation of trust between the retailers and his or her midstream supplier must be again the norm. A transaction between two experts. Consumers deserve correct product information. But I do not believe a third party is better qualified “with an opinion” coupled to a disclaimer, then an expert retailer putting at stake his reputation. In the end, we sell “magic”, a most amazing story, a rare and unique mineral.

Q. Do you think Lightbox could shift demand of the lower priced natural diamond jewellery segment?
A. Diamonds, natural diamonds will remain most prized and desired, no doubt.
As far as a shift in demand, in the medium to long-term (5-10 years), it potentially could. Anyway, too early to tell. I am for one, very sceptical of the expressed strategy behind “Lightbox”.
But I do not want to say too much as this stage. Too late anyway. The genie is out of the box. Let us look first at the Lightbox roll-out, the demand for it and its impact on both categories in the next 24 months. I wish I will be proven dead-wrong for being so sceptical.

Q. With De Beers allowing its clients to reject cheap goods, how will it impact the industry?
A. This is nothing new. Not the first time, nor the last a leading producer is holding specific supply due to challenging market conditions. Simply said, demand finally realizing they have been overpaying and subsidizing manufacturing. Not a great nor a sustainable business model, if you ask me.

Q. What is your opinion on the price meter of diamonds for the next six months?
A. On the one end, we have seen some good retail sales in the first half of 2018, on the other hand there so much uncertainty in the world today with some major leaders deflecting internal challenges with short-term conflictual approaches abroad including new trade tariffs. We have a stock market in the US that is long overdue for a correction while other markets in Asia have come down. Of a more current and serious and immediate negative impact, currencies in important consumer markets like China and India have seriously depreciated against the US dollar.
On prices: some qualities in low demand have become relative bargains in relation to their rough to polish cost and compare to lower qualities. Others (very limited sizes and qualities) have risen substantially. I believe a new equilibrium will be set. With no overall change in prices.
By the end of the year I will be very happy with a slight rise in prices for the overall price “index”. But all of this depends not only on consumer demand and a stable geopolitical and trade landscape, but is also linked the attitude of the industry’s finance providers,and the size of “blind” manufacturing. Resulting in bloated Inventories of goods with no demand, which then result in severely strained cash-flows inducing forced sales and ultimately bankruptcies.

Q. For an industry operating on human relations, is regulation the answer for a more transparent business process?
A. Governments have always “regulated” human interactions by law. It has set limits to freedom to ensure, in theory, that the freedom of one does not become a harm to another. As such regulation, is all over. Our industry is sometimes selectively blind to regulations is does not “like”. Every country has enacted laws including a criminal code. When respected, in a “rule of law” setting, no regulator will want to interfere. But when people’s money starts being pilfered, when state banks in particular, but this is valid for all banks, are taken for a ride to the tunes of billions of dollars, we all seem scandalized regulators want to regulate.
This size of harm to society is either fought from inside the industry or someone outside will fix it. The choice is first and foremost ours. Either we recognize that the harm done by a minority operating within our industry is causing serious distress to many, or, if we fail to fight back and throw them out, governments and financial institutions will leave us no choice but to act.

Q. What are your Inputs about the Kimberley Process Certification Scheme?
A. 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 who 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 then up to us through the “System of Warranties”, to demonstrate to the legislators that our system is solid and can be trusted.

Q. Artificial Intelligence and Blockchain: Are they a boon for the industry?
A. 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 sceptical for its benefit to our industry. As with everything that is depending on a connection to the world-wide-web, it is inherently risky.
Setting aside the above, as a decentralized ledger for a whole industry involved for example in logistics like shipping, or for notaries, I guess it could be valuable. Again, I must stress this, it depends on stable and secure connections.
But beware if used for commercial purposes, for the (hidden or not) profit of a few.
There, I am much more inclined to see the issue of privacy of data, hidden backdoors and certainly a serious risk of (pardon the expression) “ bullshit in, bullshit out” being very real.
For me, 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.

Mines to Market
the authorMines to Market
Prashant Rathod

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