The trade of diamonds has always been a small and intimate market where most market actors know each other personally. Often trade relations have grown over decades in some cases even over generations. Trust is the hardest currency in the industry that has a volume of sales of about 18 billion dollars per year.
Diamond trade: An interesting example
When buying a care worth a few thousand dollars most people tend to issue a contract that lays out the details and is signed by both sides. For the purchase of a house worth a couple of hundreds of thousands of dollars usually a specialized lawyer writes the contract and the deal is signed officially with a notarial act. Yet, in the diamond industriy business worth above one million dollars can be done with a handshake. All you need is a piece of paper stating the amount and description of the diamonds. How is that even possible? Since the market itself is so small, trust means everything and the word of misbehavior in any way quickly spreads around. One time of trying to cheat or engaging in unfair business practices is enough to have a diamond dealer excluded from the trade alltogether. Nobody will do business with him or her again afterwards, and he could not buy from anybody in the industry.
A unique role in the world of diamonds plays the city of Antwerp in Belgium. With more than 500 years of being the center for diamonds and the diamond trade, Antwerp is up until today a major hub of the industry:
- 80% of all rough diamonds (per volume) are traded in Antwerp
- More than 50% of the trade in polished diamonds takes place in Antwerp
- And even about 40% of all industrial diamonds change hands in the traditional diamond center. Approximately 26.000 of Antwerp´s 500.000 inhabitants work directly or indirectly in the diamond industry
Until 1725 diamonds were found only in India only. Unsurprisingly, many of most famous and largest diamonds were discovered in Indian mines. Since the 1970s the country has become the cutting and polishing center of the world. Nowadays 90% of all diamonds (per volume) are cut in India. According to value this figure represents still 60% of global production. In the year 2011 India even imported more diamonds than were produced worldwide. More than 800.000 diamond cutters work in the Indian diamond industry.
For comparison: China and Thailand combined have about 40.000 diamond cutters. The reason for this development might have been India´s traditional connection to diamonds in history. But it is for certain the low labor costs that enabled the country´s rise in the diamond industry: The same work of diamond cuttin in the United States costs about ten times more. In the beginning of the 1970s only small and inexpensive diamonds were outsourced to be cut and polished in India. But over the decades a large industry has developed and accumulated an expertise in the field that also the finest diamonds are handled in India.
Trade at the diamond exchanges
There are more than 30 diamond exxchanges world wide where rough and polished diamonds are being traded every day. The six most imporant centers are: Antwerp, Dubai, New York, Hong Kong, Mumbai and Tel Aviv. Only in Antwerp there are four diamond exchanges which make the city the biggest trade hub of the precious stones. Next to the traditional centers the Dubai diamond exchange is interesting: Founded 2002 it is the fastest growing market place.
Forecast: Future developments in the diamond industries
The technological advancements don´t fail to affect the diamond trade. Digitalization and networking makes the traditionally intimate market become even closer to one another. The market displays and balances supply and demand through prices even more accurately and much faster. New business models exploiting the fast pace and benefits of the internet provide more transparency and make prices more comparable for customers. The standard procedure of having diamonds graded by independent gemological laboratories actually clears the way for diamonds to becoming a commodity.
But its much more than that: Automatic cutting machines cut reverse the trend of diamond manufacturing moving to India. Diamond cut grading and measuring is already today done by optical devices that detect the parameters much more precisely than man could. Planning and cutting a rough diamond required the expertise, skill and experience of a master cutter back in the days. Today computers generate a 3D model of the rough state and calculate the best exploit of the material. Considering that a polished diamond loses about 60% of its raw material one gets an idea how important these technological advances are. Many even see color and clarity to be graded by machines soon.