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“We believe in the superior craftsmanship of our Belgian Master Cutters”
jean_claude_muller_x.jpgS. Muller & Sons founded in 1955 is now a world-renowned diamond manufacturer managed by the third generation of diamantaires led by Jean Claude Muller, the company’s CEO. S. Muller & Sons has an in-house diamond factory, one of the few that still remain in Antwerp, which is producing the now famous Hearts & Arrows Diamonds. The company’s involvement in Hearts & Arrows initiated with its relationship with Mr. Takanori Tamura, the inventor of the Eight-Star Diamond. While attending the Antwerp Diamond Trade Fair last February, our correspondents – helped by the Antwerp World Diamond Centre and S. Muller & Sons - took an opportunity to visit the company’s diamond factory, which resulted in the interview with Jean Claude Muller below.

Namibia-De Beers talks scheduled to end in June
isak_katali_x.jpgDe Beers and the Namibian government have been negotiating over a new diamond-sales agreement for quite some time now. The envisaged new deal would replace a 2007 agreement that allowed De Beers to sell the stones through the Namibia Diamond Trading Company (NDTC), a joint venture between Windhoek and De Beers. Namibia’s mines and energy minister Isak Katali told Rough & Polished’s Mathew Nyaungwa on the sidelines of a mining conference in Cape Town recently that the negotiations are now envisaged to end in June this year, if not earlier.

The gemmological education is very important for the industry to build a sound and strong edifice
bakul_mehta_x.jpgThe Gemmological Institute of India (GII) plays an important role in the local diamond industry, offering a broad range of services, which include diamond grading and certification, detection of diamond treatments and identification of synthetic diamonds, as well as research and gemological education courses highly popular and widely recognized in the trade in India and abroad having trained more than 5,000 students. The GII runs the only gem and diamond-testing laboratory in Mumbai fully equipped with state-of-the-art instruments. Bakul Mehta, Chairman of the GII, answers the questions from Rough&Polished in the exclusive interview below.

Let us go back to the magic – Stéphane Fischler
stephane_fischler_x.jpgOn February 1 to 3, Antwerp hosted the sixth Antwerp Diamond Trade Fair (ADTF) welcoming hundreds of buyers not only from the world’s established jewelry markets, but this time also from the markets, which until recently remained largely unexplored. In his address during the opening ceremony, AWDC President Stéphane Fischler said the ADTF was an important link in Antwerp's annual promotional and marketing campaigns. On the 2 of February, having arrived to Moscow to bid last farewell to Fyodor Andreev, ex-President of ALROSA, Stéphane Fischler gave an interview to Rough & Polished, in which, speaking about the Antwerp Diamond Trade Fair, raised a number of other issues of current concern to the global diamond industry.


De Beers rakes in $550m from February sight, diamond prices drop
De Beers has raked in $550 million from its February sight with rough diamond prices said to have declined by between 2 percent and 3 percent, on average.

Pangolin recovers more diamonds from Botswana’s Malatswae project
Pangolin Diamonds said a further two diamonds were recovered from soil samples at its wholly owned Malatswae Project in Botswana.

Rio Tinto launches world-first Analytics Excellence Centre in India
Mining giant Rio Tinto will begin its world-first Analytics Excellence Centre in India, to improve equipment productivity across its global operations.

Major Trend on Diamond Market


The abrupt jump in prices for large-size and high-quality rough diamonds has triggered heated polemics in the professional medium. Key mining companies’ representatives point to the following unbiased reasons: the necessity to switch over to underground mining substantially contributing to cost increase and the shrinking share of high-quality rough in the current mining pattern due to depletion of major primary deposits. Both factors are essentially recognized by opponents from the cutting industry, but the price growth rate is causing bewilderment in this camp, to say the least – on the background of utterly weak current jewelry markets in the U.S.A., Japan and Europe, an adequate price rise for polished diamonds looks unlikely and expensive rough will make the industry work “for the inventory,” which may result in crucial losses.

Is the June price leap amplitude an artifact generated by short-run subjective or possibly speculative reasons or do we face a stable trend pointing to paramount changes on the diamond market? Does the new price reflect just the cost value of underground pit construction or is it an indicator of nearing structural transformations radically changing not only the position of players but also the game rules? If we analyze the developing situation within the frames of the commonly accepted paradigm, then indeed under the circumstances of evidently long-term stagnation of jewelry markets in the countries, which happen to be major consumers of diamond jewelry, the new prices look ultra mundane and their correction may be expected soon to balance demand and supply. However, if we stick to the assumption that the rough and polished diamond markets are in their essence the markets of information products, whose use value generally does not correlate with their physical properties and price, then the result of our analysis would be quite the opposite saying that the current price leap is appropriate, no price correction is expected and what is more – prices for large-size and high-quality rough diamonds in the nearest future will be growing at the same or even higher rates.

Let us allow a slight analogy with the market of the refined information product – operating systems (OS). As is known, up to 1980 operating systems had no market of their own and the buyer purchasing a certain model of electronic data processing machine was unfailingly given an OS specially designed for this computer. In summer 1981, computer giant IBM hit the market with the world’s first personal computer along with three optional OS: UCSD Pascal designed by IBM and worth $450; CP/M-86 designed by Digital Research and worth $175; and MS-DOS developed by a small company called Microsoft and modestly worth $60. Bill Gates’ brainchild was unrivalled in terms of its cost/efficiency ratio, but it was not this circumstance, which brought him his further fantastic success. Having won the first round with the help of elementary dumping, Gates managed to convince IBM to provide the computer with an open architecture, i.e. actually to permit copying to anyone and anywhere. IBM technical reference manuals appeared on free sale at $49 per one set. However, Gates’ own operating systems were made with a closed code – unsanctioned copying and distribution in civilized countries were criminally persecuted.
As a result of this ingenuous trick Microsoft earned tens of billions of dollars and turned into the worst enemy of IBM, which lost tens of billions of dollars respectively.

This was how a market for the new information product was brought into being, and almost immediately there emerged a monopolist. From the very start, the OS price was in no way tied to the use value or to any conceivable features of this commodity whatsoever. Why UCDS Pascal was 7.5 times more expensive than MS-DOS despite their equal performance capacities and consumed resources? Why does a box containing the latest Windows version now cost $450, and not $126 or $2090? (Much the same questions about the origin of price for various diamond grades may be put to the authors of price-lists of De Beers or ALROSA. With a similar success.) These questions cannot be answered by operating the concepts of “demand,” “supply,” “profitability,” “prime cost,” etc. This is not a commodity market, but an information market, where the price of a product is determined exclusively by the seller’s capabilities to make the image of the current price in the buyer’s mind look “fair.”

In the course of fifteen years, desperate attempts of rivals (for instance, by way of OS/2 on the part of the above mentioned IBM against Windows 3.1) failed to shake the monopolistic position of Microsoft controlling over 95% of the OS market. It is hard to tell if Microsoft programmers outmatched IBM programmers, but Bill Gates’ marketing experts were downright better. However, the patriarch of the IT industry finally figured it out that the information product market differed from the commodity market not only in pricing ways, but due to an opportunity of arbitrary managing the use value, which could be assigned a zero value (the market would be wound up in this case) or even a negative value (if a commodity was harmful to the consumer). This brought about Linux – an open-code operating system permitting free copying, distribution and follow-up development. From the point of view of open-code adepts, Microsoft products have at least three “consumer harmful” features: they violate the natural human right for free access to information; they contain errors and flaws, which are intentionally concealed from the buyer; and the product price is wholly unsubstantiated. Evidently, this kind of criticism is affecting the use value of Microsoft products, but in this particular case it is not just a marketing move of yet another competitor. A much bigger thing is at stake: if there is no way to score a victory in competition on the information product market or it takes too much – find some way to kill the market and then make it up again on your own conditions.

Initially, Linux proper and the concept of producing open-source software taken as a whole were played off to public as some breakthrough of high-minded and independent professionals concerned with human rights in the field of free circulation of information. However, it was impossible to hide the truth too long: the project was financed by IBM. The “blue giant” finally found a means to make Microsoft pay the old debts. In what way is Linux different from Windows? Economically, in one point only: Windows is a commodity, which the consumer buys for money, while Linux is free of charge. It is plain as daylight that the open-source concept kills the OS market itself; otherwise what’s the use of a market for a product without price? The next step was already evident – from day to day, consumers would be offered more and more computers (Dell and some other manufacturers already joined the ranks with IBM) furnished with a free OS for which there would be continuously developed new charge-free utility software accessible through the Internet. This process is currently turning very expensive to Microsoft losing tens of billions of dollars every year and stuck in a quagmire of endless court proceedings against open-code apologists. But the outlook is altogether clear – the powerful computer “hardware” manufacturers will seize a hefty slice of the OS market from Microsoft and recover the expenditures for Linux. How many percents of the cost of new computers will this compensation amount to? And why does Windows cost $450? These questions are of one and the same nature. As for the consumer, they are rhetorical.

Let us turn back to the diamond market and view it as an information product market through the prism of the above analogy.

Before the discovery of primary diamond fields in South Africa, gem-quality diamond was an extremely rare stone, which determined its high price. After the discovery of Kimberlite pipes, it became evident that diamond is not a rarity that much and if the diamond market will operate like a regular commodity market, being geared to the balance of demand and supply, the prices will crumble and any further pricing will be of a chaotic and unruly nature. The discovery of South African diamond fields and beginning of their intensive operation was simultaneous with the crises and actual termination of the European market of noble opals – the most receptive gemstones market in that period. Whether this coincidence was incidental or not is a subject for a dedicated investigation, but the fact, that the opal market was collapsed entirely due to the spread rumors about bad luck brought by the stone to its owner and its ability to facilitate cholera infection, was unlikely to miss the attention of those who handled the diamond market structure. The opal story was a dramatic instance of how the use value of a gem may be reversed – but if this was true, it meant it was inherently wieldy. Then, if the use value may be controlled, it means we are not dealing with a commodity as such, but with its information skin, with a sui generis matrix, whose content is actually what makes the end consumer pay for it with relish (or flee from it like a lamplighter in the case of “ill-fated” opal).

The entire history of the modern diamond market may be described as a process of managing the use value. Such an approach allows explaining, for instance, the paradoxical “stretchability” of the market, when discovery and wonton development of new large diamond fields in Yakutia, Angola or Canada was not followed even by short-term price sags. Here an easy explanation may be found to the relative market “harmlessness” of any synthetics, treated stones and such marvels as “black diamonds.” That sort of effects is possible because the information skin happens to be the genuine commodity; it has not only a great number of dimensions, but also tuning bands facilitating its quick adaptation to new market realities. Thus, when in the mid-1960s the market was hit by an avalanche of small-size rough from the U.S.S.R., there appeared the “eternity ring” with 25 small diamonds for American matrons celebrating their silver weddings. The development of this vector allowed “utilization” of an enormous portion of rough without any harm to other market segments, excluding price games and, naturally, monopolistic control of Yakutia’s diamond output – just at the expense of elaborating the information model. The efficiency of adjusting the matrix to suit some situation is increasing with the lapse of time due to the development of mass communication means and perfection attained in manipulating the consumer’s awareness. Up to now, this skin was expanding and trapping more and more consumers. This sweet process has been going on for so long and managed so efficiently that all went a bit oblivious it was man-made and reversible.

The long-term expansive development of this matrix has brought the notional framework laying in its basis near to its logical abnegation. The “eternal value” has become too easily obtainable and too cheap. In what particular way a 0.3 carat “gift of love” is different from that of 3.0 carats? Of course, the latter’s price and size are greater, but what about eternity and love? Does a $50 luxury piece on the finger of a happy Chinese girl student make you gently smile? But this is a diamond, the same kind of crystalline carbon as in the necklace of a Hollywood star, only a bit smaller… Any further devaluation of the notional framework of the matrix will lead to losing control over the use value and turn the diamond market into chaos with unpredictable price formation. However, the use value reversibility is expected this time to play the role of a safeguarding device.

The tack of market re-formatting is already being clearly delineated. The familiar information skin should be related only to large-size and high-quality rough and polished diamonds. Exactly to those, which are now so rapidly gaining in price. Consequently, they are turning more expensive not only because mining companies have to recover their expenses for underground works. They are growing dearer because genuine diamonds may only go up the price ladder and “the more they are genuine, the pricier they are” – this is the beep sound of the matrix. Everything else, all those “Indian goods” are just trash, bort, pseudo diamonds, parody to diamonds fit only to make bijouterie. Do you see how genuine diamonds take on their value? Do you remember that genuine diamonds are always rising in price? While trash isn’t getting more expensive, it is even getting cheaper; these are no diamonds, no one needs them; there is an enormous speculative bubble inflated in this segment soon going busted and then such rough will be dirt-cheap; that’s it, this market will be no more!

What will happen if the use value of small rough and polished diamonds will be brought to naught? Orderly arrays of numerous petty speculators ever ready to sell the “eternal value” with a good discount will sink into non-existence. Mining companies will optimize and make cheaper beneficiation techniques dumping “Indian goods” into waste piles. There will be completed the process of establishing vertically integrated transnational holdings consolidating all the stages of diamond processing under one roof – from mining rough to retail sales of jewelry under world brands. Contradictions between mining companies, diamond cutters and speculators will be drastically removed: those diamond cutters and siteholders, which by some reason will not enter the vertically integrated holdings will soon follow the “Indian goods,” since virtually there will be no high-quality rough left on the free market. The latter will negotiate a new spiral turn, where the notional framework of the information skin will be cleared of peelings stuck in recent decades and diamond will again become an “eternal value” – a rare and fabulously pricy dream of many, but owned by the few.

Well, of course, lucky owners of genuine diamonds will have to pay through their noses. Much more than they pay today – the current price hike is only the beginning of the process. And they will do pay – since diamonds are given back their exclusivity so much valued by consumers, whose annual income exceeds a certain level. And of course, such a consumer will refrain from asking, “Why does this diamond cost just that much?”

That would be a rhetorical question.


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