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A well-known figure in the diamond industry, Charles Wyndham has been involved in the business for more than 30 years. He was a director of the former De Beers' selling unit, the Central Selling Organisation, before deciding to leave De Beers to set up his own diamond businesses in 1995.

Wyndham is co-founder of the Antwerp-headquartered WWW International Diamond Consultants Ltd and is engaged in related businesses. In recent years, he has come to be regarded as an authority on diamond pricing and price trends.

In this interview, he gives his perspective on the issues facing the global diamond business.

 

 

ANTWERP FACETS: After shooting up in the first six months of this year, rough diamond prices started falling back from July onwards. How would you describe the state of the rough diamond markets currently?

CHARLES WYNDHAM: At best, the market can be described as fragile. There are some who claim or hope, or both, that prices have stabilised. I also hope that they are correct, but I believe that it is too early to be certain. The fact is that rough was subjected to speculation which drove prices way beyond any rational level, be it in comparison with its previous high in 2008 or in relationship to polished prices.

 

ANTWERP FACETS: Do you believe, as some have said, that it is purely a technical correction, or do you think it is more serious than that?

CHARLES WYNDHAM: What is meant by technical? Rough prices got completely out of control and, in so far as at some point prices have to return to some semblance of normality, then it could be called a technical correction.

The medium to long-term prognosis for diamonds is remarkably favourable, but that does not provide comfort to the immediate problem given just how much prices had got out of kilter.

 

ANTWERP FACETS: Do you believe there has been a very large element of speculation and that was responsible for the sharp rises in the first half of the year?

CHARLES WYNDHAM: Yes. I think the market has suffered from a toxic mix of speculation and flawed dynamics. De Beers, as the major producer of diamonds at around 40 percent of the market, was selling up until the financial crash at absurdly cheap prices. The “spare” money generated by this, in my opinion, was one of the key reasons for the speculation that swept the market.

 

ANTWERP FACETS: How do you see the long-term outlook for rough diamond prices?

CHARLES WYNDHAM: I believe that the long-term prospects for rough diamonds are excellent.

 

ANTWERP FACETS: Have polished diamond prices managed to climb higher this year, or has their rise been much lower than that for rough goods?

CHARLES WYNDHAM: The index which we publish on PolishedPrices.com, and which, in turn, is published on Bloomberg and Reuters, is the only index based on actual transactional prices, and shows the most realistic move in polished prices. The index has drifted down from its year high, but still remains well above the year’s opening figure.

 

ANTWERP FACETS: Is there a danger that rising diamond prices will, in the future, mean a large swathe of consumers in the West will not be able to afford diamond jewellery, that they will be effectively priced out of the market?

CHARLES WYNDHAM: If rough prices had continued to rise as they were I think that this could or should have been a concern. Prices for polished have been much more reasonable and the issue is, I think, less of a worry about whether it will be the price of diamonds that excludes them from the Western market, but rather whether the general economic well-being of the West will allow the purchase of diamonds or other luxuries to the extent that they have in the past and which we would have hoped could be improved upon.

 

ANTWERP FACETS: In that case, is there a danger that such a situation will present an opportunity to the synthetic diamond manufacturers to get a foothold in the market?

CHARLES WYNDHAM: I have consistently argued for several years that cultured diamonds are not a threat if they are properly handled. Indeed, I see cultured diamonds as a tremendous opportunity to grow the market.

 

ANTWERP FACETS: As someone who has been involved in tenders, how would you respond to the widespread criticism of them in recent years? Do you believe they provide the diamond business with a transparent view of the state of the markets or are they responsible for pushing up prices?

CHARLES WYNDHAM: I believe that if tenders are conducted properly, they provide the most transparent way of selling diamonds, and maximising the price for the vendor while ensuring the widest opportunity for participation by the market. All this, while avoiding the damage of the opaque De Beers/DTC pricing system, amongst others, which has so obviously failed the market, and even De Beers.

 

ANTWERP FACETS: Around 20 years ago, De Beers accounted for about 80 percent of global rough supply. Its share is now estimated at about 38 percent as it has sold off smaller mines. Has the fractionalisation of the rough diamond market, with a proliferation of smaller producers, been detrimental to the diamond trade since, instead of supplying goods to the market via long-term contracts, the smaller miners sell their goods via tender, thus helping to push up diamond prices.

CHARLES WYNDHAM: No, I do not believe this to be the case.

 

ANTWERP FACETS: What is your view of the sales agreement signed in September by De Beers and the Botswana government, since many diamantaires criticised De Beers, saying it conceded too much ground in the agreement?

CHARLES WYNDHAM: Is it diamantaires or sightholders who are complaining about the recent sales agreement between De Beers and the Botswana government? I quite understand the sightholders complaining as potentially this agreement signals momentous change and the ending of the old DTC way of doing business and a reduction in their margins.

I use the word “potentially” advisedly as everything depends on how effectively the government of Botswana implements the agreement. I do not see how people can criticise De Beers as through their own long term incompetence and failure to change they simply did not and do not have a leg to stand on, it simply required government realising its position and enforcing its views.

I do not think choice, which is presumably an element of “conceding,” was available to De Beers.

 

ANTWERP FACETS: Can Botswana realistically build a diamond manufacturing and jewellery making centre and compete with other already existing manufacturing centres?

CHARLES WYNDHAM: I remain deeply sceptical about local cutting and "beneficiation" as I believe the key point for a producer is that it achieves the maximum market price for its diamonds and then decide how to invest the proceeds.

That said, there is no reason why a reasonable level of cutting and jewellery manufacturing cannot be built up over time, but I cannot ever see a country like Botswana being able to compete, if it wanted to, which I doubt, with countries such as India and China. It is an issue of scale, and if expectations are kept reasonable why should not there be a vibrant cutting business in Botswana and also some jewellery manufacturing.

Much of the success or failure of such a policy will depend on how the government creates a favourable environment. Simply making provision of rough dependent upon local cutting and jewellery manufacturing will be insufficient, inefficient and costly.

A combination of fulfilling an inevitable and legitimate political goal with an open and genuinely business friendly environment could allow for a meaningful capacity which actually adds value. But it is a very difficult goal to achieve.