Feature Articles

Chaim Pluczenik, chairman and CEO of Pluczenik Diamond Company, started in the business, founded by his father Isaac, in 1967. The company was established in 1948, and has been a DTC sightholder for 60 years.

 
Chaim Pluczenik worked in cutting and polishing rough diamonds, before moving through all divisions of the group, becoming head of the company in 1997. Continuing his father’s work, he strengthened and grew the business still further in North America, Hong Kong and Japan, and oversaw its expansion in South East Asia and China, Russia and the Gulf, as well as the establishment of the firm's manufacturing plant in Botswana.    
 
He has held many key positions on industry trade bodies, including vice president of the Antwerp World Diamond Centre. In doing so, he says, he hopes to ensure that Belgium maintains its position as a leading diamond centre, and that natural diamonds retain their unique appeal and value both to the trade and to consumers.     
 
ANTWERP FACETS: What is your assessment of the condition of the diamond markets, and what are your expectations for the rest of this year?
CHAIM PLUCZENIK: We are coming out of a bad recession, and there is still a long way to go. Demand is still not strong. The market in the United States, which remains the most important market in the world, is still weak. This year will be difficult and we must all act in a responsible manner.
 
ANTWERP FACETS: The speed with which the diamond industry has largely turned around in the past year or so following the onset of the financial crisis in September 2008 has surprised many. Do you see the market as recovering, or is it too early to say?
CHAIM PLUCZENIK: Although the industry is clearly over the worst stage, I cannot say that we are fully on the road to recovery yet. We are seeing improvements, but there is still a way to go. There should not be a sense of euphoria.
 
ANTWERP FACETS: The diamond producers have received a great deal of praise for acting quickly to cut back output following the onset of the global financial crisis in late 2008 and through to the middle of last year. Their actions are widely believed to have kept the diamond industry going by inundating the market with goods. What is your opinion, and do you believe that the time is now right to increase production or is the present supply sufficient?
CHAIM PLUCZENIK: De Beers acted in a very wise and smart fashion last year. They did not overheat the market because clearly polished did not go up and is not going up as much as rough prices. De Beers and Alrosa kept production under control. But we need to continue to be very cautious.
 
ANTWERP FACETS: What line of action do you believe producers should follow this year since they will obviously need to stay in line with market demand in order not to bring down prices. Will they put too many goods on the market?
CHAIM PLUCZENIK: The producers are watching the market very carefully, as they always do, to get as precise as possible an indication of the state of affairs. I do not believe they would pump too much rough onto the market because in any case, they do not have the goods available since they cut back on production last year and it takes time to get output back up. I believe it will take until mid-2010 until the producers are able to get their output up again to normal production levels.
 
ANTWERP FACETS: You strongly attacked the marketing method of diamond tenders at the second annual Antwerp Diamond Symposium last November in your role as head of the workshop on rough supply. You said that tenders were a factor behind the rise in rough prices. What are the dangers inherent in the tender process, in your opinion?
CHAIM PLUCZENIK: Perhaps most importantly, we have seen that tenders do not allow manufacturers to have a steady supply of goods. In my 42 years in the business, I have never seen successful tenders – you either pay too much for the diamonds or you receive diamonds that you do not want or need. Tenders, in my opinion, are perhaps the most negative thing that can happen in the diamond trade. It forces those companies that take part in tenders to stretch themselves to possibly a dangerous extent, and is causing problems. You could find cheaper diamonds than the prices BHP Billiton sold its goods at the auction before last.
 
ANTWERP FACETS: There is general agreement that the recovery in the United States will be very gradual. Surveys show that American consumers are being more cautious in their spending, and concentrating on increasing their savings and paying off debts. What is your assessment of the state of the U.S. market?
CHAIM PLUCZENIK: The U.S. market has not recovered as fast as other markets;  that is very clear. My view is that it will take the U.S. market another two years to come back to where it was before the recession. Unemployment is still high and that will prevent a strong recovery at the retail level because people without jobs are going to buy only what they need for their daily needs.
In addition, there is going to be a rise in inflation in the United States as a result of the money that is being printed to pay for the stimulus package. But that could mean that diamonds, like gold, will be seen as an investment. People are scared to leave their money in their bank accounts because of the number of bank failures, and because of the extremely low interest they are receiving on their money. Diamonds are an even better investment than gold because they are far more portable.
 
ANTWERP FACETS: There is growing demand for diamond jewellery in China and India. Although this is a good sign, can these emerging markets make up for the drop in demand from the United States?
CHAIM PLUCZENIK: I estimate that only around 8-9 percent of Chinese possess diamonds, which means that the potential in the country is huge. The Pluczenik Diamond Company has been operating in China for the past five years, and we have opened two offices there. We have seen growing demand for SI quality diamonds in China which indicates that consumers there are becoming used to buying all qualities of diamonds, including better-quality gems.
 
ANTWERP FACETS: From approximately the middle of 2009, prices of rough diamonds have risen very strongly. The increases have been justified by the fact that prices simply rose because they fell so sharply when the financial crisis struck, there is a scarcity of some types of goods, and because companies are restocking. However, there is also a concern that diamantaires are speculating about rising prices. What is your view?
CHAIM PLUCZENIK: There is a possibility of a bubble forming and this is very dangerous. I would advise manufacturers to only produce what they need to complete orders. Unfortunately, people have short memories and they forget very quickly what happened a relatively short time ago.
It is true that there are not enough rough goods on the market, and that naturally has caused prices to rise. However, that does not in itself explain the strength of the rises of rough stones. We are not out of the tunnel yet, so I would advise members of the diamond trade to be cautious.
 
ANTWERP FACETS: The banks that provide finance to the diamond trade have received a great deal of praise for the way in which responded during the very difficult months following the start of the financial crisis towards the end of 2008 and through the first half at least of 2009. They continued to provide credit which enabled many diamond companies to keep on operating. What is your view of their actions?
CHAIM PLUCZENIK: I have great appreciation for the way the banks dealt with what was an extremely difficult and complex situation. They supported the diamond industry very well. They did not panic; they worked with the diamond firms to help them through a tough and dangerous period.
As a result of the good working relationships between the banks and their diamond clients, we did not see any catastrophes in the industry. There could potentially have been bankruptcies, but the banks wisely worked with us to ensure a relatively smooth passage.