De Beers is cautiously optimistic about finished products market: Bruce Cleaver

Interview with Group CEO, De Beers

India’s diamond sector has been passing through a bad phase for the past two years. However, De Beers Group CEO Bruce  Cleaver tells Rajesh Bhayani that the prospects of finished diamonds in the country look better in the second half of 2016. Excerpts:

When do you expect India’s diamond sector to revive?

I agree that year 2015 was not so good for the sector. But, things have started improving. Globally, the US market has shown signs of improvement, while China’s experience has been mixed. I’m cautiously optimistic about the finished products market. Its prospects would improve by the second half of 2016.

Rough prices have now stabilised and for finished products, things are looking better. Polished prices are also more or less stable. The just-concluded sightholder sale (sightholder is a company on the De Beers Global Sightholder Sales’ list of authorised bulk purchasers of rough diamonds) was a good one and we sold $520 million worth of diamonds.

At De Beers, 90 per cent of sale is through this route. To balance the market, we cut production of rough in 2015 to 28.5 million carats from 32.5 million carats in 2014. For 2016, our guidance is to produce 26-28 million carats to achieve a proper balance.

India is opening up diamond mining. Will you be participating in it whenever it comes up for auction?

In principle, yes.

Will you be participating in the facility now opened at Bharat diamond bourse, where miners can sell rough directly to buyers?

As I said, 90 per cent sale of rough is through contractual arrangement only 10 per cent is through auction. We are open to other options.

In India, many diamond players are going through financial difficulties. Even globally, some banks have withdrawn finance given to diamond companies...

We have come across many such reports and our advice to our clients is to keep better debt-to-equity ratio and try to improve accounting standards in line with international norms. Banks tell us that such advisory to clients is helping them to serve clients better . The Standard Chartered Bank issue you mentioned was not really a diamond industry issue. It was about that bank's portfolio and now we hear that some banks in Dubai have come up to finance diamond business.

Synthetic or lab-grown diamonds have emerged a big challenge to the traditional diamond industry. How do you, as a market leader, look at it? De Beers also manufactures such diamonds...

Let me clarify that De Beers manufactures diamonds only for industrial use - for robotic tools, dentists’ tools, mining tools, etc. We are basically into natural diamond and we promote the use of natural diamonds. Several surveys have shown that consumers also prefer natural (mined) diamonds. We spent huge money in making machines to detect synthetic diamonds. To promote natural diamond jewellery, our marketing budget for 2016 is $100 million. This includes promoting our own brand Forevermark. Diamond mining companies recently formed Diamond Producers Association. Almost 90 per cent of producers are part of it, which promotes the use of natural diamond and has a budget to spend $12 million this year.