Paul Rowley: Despite Uncertain Times Ahead It’s Encouraging To See The Recent Recovery In Demand

Taking time off from preparations for the May Sight Week, Paul Rowley, De Beers Executive Vice President of Global Sightholder Sales, spoke to Solitaire about De Beers’ outlook for the next two years, the impact of the second Covid wave in India, the midstream’s healthy inventory position at the start of 2021 and much more.

Paul Rowley
Photo credit: © De Beers

What impact could the devastating second Covid wave in India have on the global diamond business? Could it affect demand levels at De Beers’ Sight 4 in early May?

All our thoughts are with those in India, and, in particular, our friends and colleagues in the Indian diamond sector, as the country faces the challenges from the second Covid-19 wave. As has been the case since the start of the global pandemic, it’s not really possible to predict what kind of an impact there may be as the situation remains very unpredictable. However, the Indian diamond sector has proved its resilience many times before in the face of a range of challenges. Regarding Sight 4, we continue to offer flexibility for the viewing of Sight goods at centres such as Dubai, Antwerp and Tel Aviv, and with most of our Sightholders being global companies with international operations this will help support their ability to participate in the Sight.

How do you see rough prices trending during the rest of the year?

De Beers Group does not provide any forward-looking views on diamond prices so I’m afraid we are unable to offer a comment on this question. 

What’s your opinion about lower midstream debt levels and the relatively easy availability of credit since the pandemic?

The diamond industry in general, and the Sightholder community in particular, has done a lot of work in recent years to enhance financial transparency and robustness, and this supports the industry’s ‘bankability’. Meanwhile, midstream inventories were worked down effectively last year as there was a limited amount of new rough supply entering the pipeline due to the impacts of Covid-19. This means the midstream began 2021 with a healthy inventory position and the key now, as always, is that credit facilities are used responsibly and purchases are made on the basis of good underlying demand conditions. In recent months we have seen positive demand trends for diamond jewellery in the key consumer markets, so this is positive and supportive of trading conditions in the midstream.

Will the flexibility shown by miners to the midstream during this crisis extend to favourable credit terms for them?

We have focused on offering a range of flexibility measures during the pandemic, as we recognise that there has been significant impact across the pipeline. Such measures have included providing additional deferral options, flexibility on buybacks, and changes to viewing options for Sight goods. Our business does not operate on credit, but our approach undertaken during 2020 was supportive of the midstream as it sold down its inventories, which, in turn, assisted with midstream debt levels. It’s now important that midstream businesses use their credit facilities responsibly to support purchases on the basis of their own specific business needs.

Do you envision digital tenders becoming the norm going forward, or is it only an option of last resort?

Even before the pandemic, we were seeing a trend of greater digitalisation in the world more generally, and the pandemic has undoubtedly accelerated this trend. While it is unlikely that we will see digital business continue at the same scale after the pandemic, it is likely to play a greater role than it has in the past. As such, we will continue to look at ways in which to incorporate digital technologies into our business, but for Sights we expect that we will return to seeing Sightholders coming to southern Africa on a regular basis once the main challenges of the pandemic are over. Travelling to southern Africa for Sights enables our customers to visit other key sources of supply in the region, and there is also value in attending the Sight in person – partly to engage directly with the wider Sightholder community and De Beers Group executives, and partly to see goods in person before purchase. 

What is De Beers’ outlook for the next two years?

The experience of the last year or so has shown that it’s impossible to make meaningful predictions. The world is still facing the Covid-19 pandemic, and no one can say with any confidence how things will progress from here. We know of course, that there are reasons to be more optimistic for the future – the progress of the vaccine rollout in many parts of the world has begun to have a positive impact, and from a diamond industry perspective the recovery in economic conditions and consumer demand for diamond jewellery have been evident. These are supportive of seeing an improved situation for the diamond industry over the next two years, but predicting the pace and consistency of recovery is not possible. Overall, it has been encouraging to see the recovery in demand for diamonds witnessed to date, but it is very clear that many risks relating to the pandemic remain, and we must all remain responsible and prudent with our actions. 

Any other message for the Indian diamond industry? The Indian diamond industry has shown itself many times over to be endlessly resourceful and hugely resilient. While the diamond industry’s midstream is now very firmly centred on India, with the vast majority of the world’s cutting and polishing taking place in India, and while the diamond sector plays such a key role in the national economy, you only have to go back a few decades and there was virtually no diamond midstream in the country. This goes to show just how effective Indian businesses and professionals have been in finding ways to overcome challenges and seeking out new opportunities. These qualities will stand the Indian diamond industry in good stead as it faces the current challenges of the second Covid-19 wave in the country, and as the world gradually continues to recover from the pandemic in the coming months and years Indian businesses will undoubtedly be at the forefront of identifying and capturing the new opportunities that emerge. It is currently an incredibly difficult time, but the thoughts and support of the global diamond community are with our friends and partners in India.

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