Unlike exploration, this value chain segment usually does not happen in one location. Instead, the sorted diamonds are sent to other countries for cutting and polishing. The diamonds are again classified according to the four categories (4Cs). Global production at this part of the value chain is valued at $19.3 billion. Cutting and polishing is said to be the most crucial part of the value chain.
There are many different programs, developed to make a student’s writing process easier and to save some time as well. If you wish to find out the best APA formatting software, you are welcome to read our wonderful blog.
This is where the hefty mark up on the diamonds occur. This also goes beyond the geographic borders of diamond mining because at this stage, the diamonds are transported to different countries for cutting and polishing. Hence, this segment makes the diamond industry's value chain "global."
National governments and private diamond companies always source the best and the most cost-effective places where they can safely and excellently have their priced diamonds cut and polished. Diamond cutting is also delicate as it calls for highly specialized craftsmen, tools, equipment, and methods. Diamonds should be perfectly cut since its value is dependent on its enhanced appearance. This sophisticated stage in the supply chain constitutes the final part in the processing of the rough diamonds. After this, the diamonds are distributed to wholesalers and then to the retailers.
The very few places in the world which specialize in this aspect are the diamond cutting centers in Antwerp, Belgium, Amsterdam, New York, the United States, The Netherlands, Tel Aviv, Israel, and Johannesburg, South Africa. (Kogel, 2006) Bigger diamonds in smaller volume are often sent to Europe and North America for cutting and polishing.
Antwerp, Belgium is still regarded as the diamond trading and cutting capital for big stones. It accounts for about 40 percent of the global diamond cutting and polishing trading and about 60 percent of the overall trading of large diamonds. (Hays, 2011) This is also the world's largest diamond exchange center for uncut stones. It is also known as the center of the diamond black market. Diamond cutters or lapidarists in Antwerp specialize in cutting odd shaped diamonds. These Belgian craftsman are popular for their high skills. They use diamond dust and olive oil on their saws. Most of the diamonds here come from Southern Africa. About one third of De Beers buyers sources for diamonds in Antwerp. They account for 60 percent of all diamond transactions in the industry. Belgium's diamond trade is worth $4 billion annually. It consists of 6 percent of Belgium's total exports.
Aside from Europe and North American cutting and polishing centers, most diamonds are also cut in India, China, and Thailand. This is because of their most competitive labor prices. India's diamond industry employs about 800,000 craftsmen in its cutting, polishing and exporting activities. While India specializes in low grade diamonds, Israel traditionally processes high quality diamonds. India accounts for about 59 percent of all polished diamonds exported to the U.S. while Israel accounts for about 20 percent of the whole U.S. diamond imports. India's polished diamond exports were estimated to be $1.922 billion in value. They are 4.925 million carats in terms of volume. The average price of polished diamonds was $390.16 per carat. (" India's Diamond Traders Ready Themselves for the Festive Season," 2011).
After the diamonds have been properly cut and polished, they are sold on diamond exchanges or what they call as bourses. There are 29 registered bourses in the world at present. (World Federation of Diamond Bourses, 2012) Diamonds are sold as loose diamonds or as diamond jewelry. Diamonds are made into fine pieces of jewelries before or after they are sold to the bourses. Wholesalers or manufacturers purchase relatively small amounts of polished and unset diamonds. They sell these to jewelry designers, jewelry manufacturers or retailers. (World Diamond Council, 2007)
Wholesale of diamonds is comparatively lower in value. Some factors which diminish a polished diamond's value include the following cases:
Other factors which diminish the wholesale value of the polished diamonds include the presence of negative fluorescence when the diamond is brought to UV light, when the table size is more than 57.5 percent on a round diamond, and when it is more than 65 percent on squares and rectangular shapes.
Cut and polished diamonds are also sold directly to manufacturers. Manufacturers of diamonds transform the polished diamonds jewelry with the use of designs from jewelry designers, retailers, or their own in-house jewelry designers. At this point, there is a great deal of enhancing the value of the diamonds as the diamonds are finally turning into precious pieces of beautiful jewelry. This phase is one of the higher process of diamond production. Many diamond producing countries aim to become manufacturers. This is because the diamond manufacturing centers have a strong hold on the final destination of the diamonds. They can also realize the highest returns for their investments.
Jewelry design and manufacturing is a very specialized function that demands exquisite craftsmanship, good equipment and tools. Designs are made before the pieces of jewelry are created. There are artists/designers or craftsmen who render the designs on paper. After the nitty-gritty details have been worked out and all the measurements have been set, the manufacturers create a wax mold. This is used to produce the jewelry piece, which is again polished after being made. The jewelry manufacturers add some other diamond designs and enhancements to the metal pieces. (Hershey, 1940) Jewelry that is distinct and well-designed gives a manufacturer a good competitive edge. (World Diamond Council, 2007) Already cut and polished diamonds are subjected to enhancements in order to enhance the gemological properties of the diamond stones in several ways. These consist of laser drilling (to erase inclusions), application of sealants (to fill up the cracks), treatments to upgrade a white diamond's color grade, and treatments to render fancy colored to a white colored diamond.
Jewelry manufacturing can be described as a highly fragmented sector of the value chain. There are more than 10,000 jewelry manufacturers worldwide and about 80 percent are based in India and China due to the comparative labor costs in these countries. (The Global Diamond Industry Report, 2011) For ten years (from 2000 to 2010), these countries' share in jewelry manufacturing increased from 27 to 55 percent.
Generally, Asian diamond manufacturers do not brand their jewelry businesses and their works are relegated to the low end of the diamond jewelry market. Chow Tai Fook and Rosy Blue are significant players in the regional jewelry manufacturing markets. At the high end segment of the jewelry manufacturing market, Tiffany& Co. leads the players while other luxury brands such as Bulgari and Richemont maintain sizeable shares.
As with the total jewelry manufacturing market, diamond jewelry is under two major categories: branded (or luxury) and unbranded. Strong and highly visible global brands operate in the branded luxury segment since they can command higher prices for their diamonds. For instance, a branded diamond engagement ring of Cartier may rake up to a maximum 40 percent margins more than an unbranded ring with a diamond stone of the same size and quality.
The United States maintains its lead position as the largest market for diamond jewelry. However, significant global market growths are seen from China, India and the Persian Gulf countries. (World Diamond Council, 2007) Industry experts perceive positive prospects from the emerging middle classes in these countries. Some diamond experts also expect major growth in the diamond jewelry manufacturing operations from the Asian markets. (Ibid)
The final stage of the global diamond value chain is when diamond jewelry is sold by retailers to the end users or the ultimate consumer. Retailers may buy loose diamonds straight from the diamond exchange centers or purchase them as jewelry. The diamond jewelry end product is valued at $31 billion for diamonds and $62.5 billion, including the non-diamond jewelry components. (Rudnicka, 2010)
According to independent research, diamond jewelry is the highest, highly sought category of the luxury goods market. It transcends the male and female categories, including the men's gifts category. The total value of diamond jewelry retailed annually is more than US$60 billion. (CR Jewelers, 2012) This includes the diamond costs, precious metals and other gems. The largest retail market is the United States with a 55 percent market share, followed by Japan with 15 percent market share, Europe with 10 percent market share, Asia Pacific with 5 percent, Asia Arabic with 5 percent, and other countries with 10 percent share of the total market.
According to Rudnicka (2010), jewelry has become a leading retail industry. The industry is divided into five main categories:
Global jewelry stores make up about $27 billion sales annually. The U.S. market takes up about 15 percent of these annual sales. Jewelry sales directly correspond to economic wellness. If economic times are good, consumers are most likely to have greater propensities to buy jewelry. Sales of jewelry are also influenced by the season. Hence, the sales reach its peak during the Fourth Quarter of the year. Tiffany & Co. reported an impressive holiday sales, which increased by 11 percent to $889 million. Other jewelry retailers also increase in sales like Signet Jewelers (6%) and Zale Corporation (8%).
To enhance further sales, jewelry retailers now also sell through online channels. Jewelry consumers now buy set or customized jewelry via the Internet. In general, the global jewelry retail market has seen its recovery in 2010. It was heightened by the improvements in the U.S. economy and the generally strong recovery in the high-end luxury sector. (CR Jewelers, 2012) Chang, et. al. (2002) summarizes the global diamond value chain through the figure from the Chazen Web Journal of International Business.
You have no idea how to write world literature papers it in the most effective way or do not even know which topic to choose among a vast number of them? To avoid these needless difficulties, order your paper at Pro-Papers.
The countries signified by red constitute diamond operations as owned by De Beers. Generally, as the diamonds go further down the pipeline, they increase in value. The incremental mark up, as mentioned earlier, happens during retailing. As such, the highest prospects for profits are in retail. (The Diamond Industry Backgrounder, 2007)
It is interesting to note that the diamond production is concentrated in African countries such as Botswana, Namibia, South Africa as well as in Canada and Russia. It is important to emphasize that the actual value of the diamonds from the mines to the consumer has no definite patterns. These precious stones can change hands several times before they reach the end users. Also, the mark-up value of diamonds exponentially goes up as it passes through the process of the global value chain. Industry players usually operate on the basis of trust, with small documentation. According to Yager (2002), all of these practices diminish the real information about diamond trading.
Leave a Reply
Your email address will not be published / Required fields are marked *
Calculate your price