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The international diamond trade and the Vancouver market Jordan, Andrew 1978

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THE INTERNATIONAL DIAMOND TRADE AND THE VANCOUVER MARKET by ANDREW JORDAN B.A., Queens U n i v e r s i t y , 1973 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Master of Science i n " t h e F a c u l t y of Commerce and Business A d m i n i s t r a t i o n We accept t h i s t h e s i s as conforming to the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1978 / T N Andrew Jordan, 1978 In presenting th i s thes is in p a r t i a l fu l f i lment of the requirements for an advanced degree at the Univers i ty of B r i t i s h Columbia, I agree that the L ibrary shal l make it f ree l y ava i lab le for reference and study. I fur ther agree that permission for extensive copying of th is thesis for scho la r l y purposes may be granted by the Head of my Department or by h is representat ives . It is understood that copying or pub l i ca t ion of th is thes is fo r f i n a n c i a l gain sha l l not be allowed without my wri t ten permiss ion. Cc Department of LOfy W\ C fC<2 The Univers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date A B S T R A C T The subject of this thesis is the structure of the d i s t r i b u t i o n channel of gem diamonds i n the world market, and certain v e r t i c a l stages of the channel are singled out for more detailed study. The main stages of the d i s t r i b u t i o n structure are: the mining of rough diamonds, the largely centralized sorting and d i s t r i b u t i o n of the rough, the manu-facture of polished diamonds i n a number world centres, the d i s t r i b u t i o n of the polished gems at several bourses connected with the manufacturing centres, and the operations of the lo c a l wholesalers, jewellery manufacturers, and r e t a i l e r s . Three areas are singled out for more detailed study: the De Beers group, which, through the Central S e l l i n g Organi-sation (S.C.O.), dominates the d i s t r i b u t i o n of rough; the I s r a e l i diamond industry, the largest manufacturing and dis -t r i b u t i n g centre of polished diamonds; and f i n a l l y , the Vancouver r e t a i l market for diamonds and diamond jewellery, which i s one of the many regional branches of the largely unexplored r e t a i l end of the d i s t r i b u t i o n channel. Chapter II provides a base for a l l that follows by describing in d e t a i l the four parameters that are basic for the appraisal of a polished diamond: colour, c l a r i t y , cut and weight. An Appendix studies the increment in the price per carat of a polished diamond as the weight of the stone i i i i i i n c r e a s e s . I t i s found, f o r example, that the t r a d i t i o n a l squaring r u l e gives r e s u l t s c l o s e t o , but c o n s i s t e n t l y h i g h e r than, the a c t u a l p r i c e s . Chapter I I I s t u d i e s the p r e v a i l i n g modes of p r o d u c t i o n i n the diamond-producing c o u n t r i e s , the h i s t o r i c a l e v o l u t i o n and present a c t i v i t i e s o f the diamond-c u t t i n g c e n t r e s , and the op e r a t i o n s of the major t r a d i n g c e n t r e s . I t i s found that c e r t a i n c h a r a c t e r i s t i c s of the diamond-cutting i n d u s t r y make i t an i d e a l f i e l d f o r cottage i n d u s t r i e s and small f i r m s , working i n p l a c e s s i t u a t e d f a r from e i t h e r the mining, the d i s t r i b u t i o n , or the consumer c e n t r e s . C e r t a i n r e c u r r e n t p a t t e r n s i n the c r e a t i o n and development of l o c a l c u t t i n g i n d u s t r i e s are d i s c u s s e d . Chapter IV focuses on the development of the I s r a e l i diamond i n d u s t r y . Since the f i r s t years of the State o f I s r a e l , the e x p o r t a t i o n o f p o l i s h e d diamonds was seen as one of the main sources o f f o r e i g n currency, and expansion of the i n d u s t r y was e n e r g e t i c a l l y supported by the I s r a e l i government. The main f a c t o r l i m i t i n g the growth of the i n -dus t r y , however, was the supply o f rough diamonds. The chapter s t u d i e s the changing r e l a t i o n s between the C.S.O. and the I s r a e l i i n d u s t r y , governmental p r o t e c t i o n o f the i n d u s t r y , and the export f i g u r e s . The second h a l f o f the chapter i s devoted to a d e t a i l e d d e s c r i p t i o n o f the a c t u a l t r a d i n g at the I s r a e l Diamond Exchange at Ramat Gan. Chapter V s t u d i e s the r o l e o f the C.S.O. i n the world market, i n the frame p r o v i d e d i v by the h i s t o r y of the De Beers group. The CS.O.'s avowed p o l i c y of s t a b i l i z i n g p r i c e s for. the b e n e f i t of the i n d u s t r y as a whole i s measured a g a i n s t the recent and on-going deve-lopments i n the world market, c h a r a c t e r i z e d by s t e e p l y r i s i n g p r i c e s , s p e c u l a t i v e t r a d i n g and r e l a t i v e shortages of rough, and some t e n t a t i v e e x p l a n a t i o n s are proposed. Chapter VI, f i n a l l y , d e s c r i b e s the Vancouver wholesale and r e t a i l diamond markets. Since diamonds are s o l d by r e t a i l e r s almost e x c l u s i v e -l y as p a r t of p i e c e s of j e w e l l e r y , a survey was made of Van-couver j e w e l l e r y s t o r e s to f i n d out the r e l a t i v e p o p u l a r i t y and average s e l l i n g p r i c e s o f the main types of diamond j e w e l l e r y . The method employed i n t h i s survey i n v o l v e d a p p r a i s i n g and coutning the j e w e l l e r y p i e c e s d i s p l a y e d , and d i r e c t e n q u i r i e s from the salesmen. The survey was complemented by s a l e s f i g u r e s and other i n f o r m a t i o n on the buying pr e f e r e n c e s of Vancouver j e w e l l e r s , f u r n i s h e d by a l o c a l w h o l e s a l e r . The r e s u l t s were t a b u l a t e d and compared with p u b l i s h e d Canadian and American data, and e x p l a n a t i o n s were proposed f o r the d i f f e r e n c e s found. The chapter concludes with a l i s t o f questions f o r f u t u r e r e s e a r c h on the r e t a i l market f o r diamond j e w e l l e r y . TABLE OF CONTENTS Page ABSTRACT i i LIST OF TABLES ix LIST OF FIGURES . x i i CHAPTER I INTRODUCTION 1 II SORTING OF DIAMONDS 9 OUTLINE 9 PHYSICAL PROPERTIES 10 The Atomic Lattice 10 Crystals 12 Crystal Form and Manufacture of Polished Diamonds 17 MINING OF DIAMONDS 21 Recovery of Diamonds From Blueground 21 Recovery of A l l u v i a l Diamonds 26 SORTING OF ROUGH DIAMONDS 2 7 Gems, Near-gems, Industrials 27 Sorting Gems 2 7 MANUFACTURING PROCESSES 29 Preparation 29 Sawing 29 Cleaving 31 Bruting or Rounding Up 34 Faceting 37 CUTTING STYLES 38 Early Forms of Cutting 38 The Most E f f i c i e n t Forms of Cutting 40 Departures From the Ideal 46 Other Modern Cuts 48 v v i CHAPTER Page GRADING POLISHED DIAMONDS 53 The Four C's 53 Grading Colour 53 Grading C l a r i t y 57 Grading Cut 64 Weight 66 V a l u a t i o n s 67 Fancy Colours 73 CONCLUSION 74 I I I PRODUCTION, DISTRIBUTION AND MANUFACTURE OF DIAMONDS 75 OUTLINE 75 THE DISTRIBUTION STRUCTURE . . . 75 THE PRODUCING COUNTRIES 7 8 U.S.S.R 81 South A f r i c a 81 South West A f r i c a (Namibia) 86 Angola 8 7 L i b e r i a 88 Z a i r e 89 S i e r r a Leone 90 Ghana 91 Tanzania 93 Other A f r i c a n Producers 94 Venezuela 94 B r a z i l . . . . . 96 Indi a 97 CUTTING AND TRADING CENTRES 9 7 I s r a e l 98 Antwerp 98 Antwerp's Exchanges 102 I n d i a 104 U.S.S.R 107 South A f r i c a 110 New York 112 Puerto Rico 114 Amsterdam 115 West Germany 116 France 117 Other C o u n t r i e s 118 CONCLUSION 120 v i i CHAPTER Page IV THE DIAMOND INDUSTRY IN ISRAEL 124 OUTLINE 124 DEVELOPMENTS UP TO 1948 12 5 THE RECOVERY AND GROWTH AFTER 1948 AND GOVERNMENT POLICIES TO DEVELOP THE INDUSTRY 12 8 Suppli e s o f Rough 130 C r e d i t to the Industry 135 Manpower 137 Research, Innovation and Promotion 141 Manufacturing P r a c t i c e s : P l a n t S i z e and Su b c o n t r a c t i n g 142 THE DIAMOND EXCHANGE 146 ISRAEL'S EXPORTS 156 CONCLUSION 160 V THE ROLE OF DE BEERS 164 OUTLINE 164 HISTORY OF DE BEERS . . 164 Foundation of De Beers C o n s o l i d a t e d Mines L t d . 164 From the Syndicates to the Present 168 The More Recent E v o l u t i o n of De Beers 174 THE CENTRAL SELLING ORGANISATION 176 The S i g h t s 178 Sales and P r i c e s 180 Purported P o l i c i e s of the C.S.O. and the Current S i t u a t i o n 184 ADVERTISING BY DE BEERS 191 CONCLUSION 198 v i i i CHAPTER Page VI THE VANCOUVER MARKET 199 OUTLINE 199 RESEARCH TECHNIQUES 201 Sources of Information 201 Techniques Used i n Surveying Vancouver S t o r e s . 201 The Survey Form 203 Data Gathered From A Vancouver Wholesaler. . . 207 RESULTS OF THE RESEARCH 209 R e s u l t s From the Data of a Vancouver Wholesaler 224 CONCLUSION 233 SOME INTERESTING TOPICS FOR FUTURE RESEARCH . . 235 Sources of Diamonds f o r the Vancouver Market . 235 Inf l u e n c e of the A c t i v i t i e s of the World T r a d i n g Centres i n the P r i c e and A v a i l a b i l i t y of Diamonds i n the Vancouver Market 236 R e l a t i o n Between Store Sales and D i s p l a y Space 236 The Preferences of the Vancouver Diamond-Buying P u b l i c Compared to Those of Other Se c t i o n s of the North American P u b l i c . . . . 236 Whether the Q u a l i t y (and s i z e ) of the Diamonds O f f e r e d i n the R e t a i l Market Has Been Decreas-ing i n Recent Years 237 APPENDIX 1 THE GEMOLOGICAL INSTITUTE OF AMERICA. . . . 239 APPENDIX 2 RELATIONSHIP BETWEEN PRICE AND WEIGHT FOR DIAMONDS 244 APPENDIX 3 THE SHORTAGE OF ROUGH AS REFLECTED IN THE TRADE'S COMMENTS 250 BIBLIOGRAPHY 257 LIST OF TABLES TABLE Page 11.1 G.I.A. PRICE REDUCTION CHART 70 11.2 COMPREHENSIVE WHOLESALE DIAMOND BASE PRICES . . 72 VIV.l IMPORT OF ROUGH GEM DIAMONDS 134 IV. 2 DIAMOND ENTERPRISES AND PROFESSIONAL WORKERS ACCORDING TO LOCATION 1973-74 . . . . . . . . . . 140 IV.3 ENTERPRISES ACCORDING TO NUMBER OF WORKERS OCTOBER 1974 145 IV. 4 IMPORTS, EXPORTS, NET EARNINGS AND CURRENCY EARNING RATE 159 IV.5 IMPORT OF ROUGH GEM DIAMONDS AND EXPORT OF POLISHED DIAMONDS 1949-74 . 161 IV.6 EXPORT OF POLISHED DIAMONDS 1951-74 162 V. l C.S.O. SALES OF COMBINED INDUSTRIAL AND GEM ROUGH FOR 1959-1977 182 V. 2 C.S.O. AVERAGE PRICE INCREASES IN PERCENTAGES SINCE 1949 182 VI.1 PROPORTION OF WINDOW OR INSIDE DISPLAY AREA ALLOCATED TO DIAMOND JEWELLERY 210 VI.2 AVERAGE SIZE OF THE (CENTREPIECE OR SOLITAIRE) DIAMOND IN ENGAGEMENT RINGS 210 i x LIST OF TABLES (Continued) Table Page VI.3 AVERAGE SELLING PRICE OF ENGAGEMENT RINGS. . . . 212 VI.4 AVERAGE SELLING PRICE OF LADIES' RINGS 212 VI.5 AVERAGE SELLING PRICE OF MEN'S RINGS 214 VI.6 AVERAGE SELLING PRICE OF EARRINGS. 214 VI.7 AVERAGE SELLING PRICE OF PENDANTS AND NECKLACES 216 VI.8 AVERAGE SELLING PRICE OF ALL DIAMOND JEWELLERY . 216 VI. 9 BEST-SELLING DIAMOND JEWELLERY ITEM 218 VI.10 THE FOUR LARGEST SELLING ITEMS OF DIAMOND " JEWELLERY SOLD, IN ORDER OF IMPORTANCE 218 VI.11 DEGREE OF TRAINING ON DIAMONDS OF THE STAFF. . . 221 VI. 12 AVAILABILITY OF LOOSE STONES FOR SALE 221 VI.13 WEIGHT OF STONES SOLD VI.14 CLARITY OF LOOSE STONES SOLD TO VANCOUVER JEWELLERS DURING NOVEMBER AND DECEMBER, 197 7 . . 22 5 VI.15 COLOUR OF LOOSE STONES SOLD TO VANCOUVER JEWELLERS DURING NOVEMBER AND DECEMBER, 1977 . . 22 5 VI.16 STYLE OF STONES WEIGHING OVER 15 POINTS SOLD TO VANCOUVER JEWELLERS DURING NOVEMBER AND DECEMBER, 197 7 LIST OF TABLES (Continued) x i Table Page VI.17 STYLE OF ENGAGEMENT RING STONES SOLD IN U.S.A. DURING 1976 229 VI.18 PREFERENCES OF VANCOUVER JEWELLERS IN TERMS OF THE FOUR PARAMETERS 2 31 VI.19 PREFERENCES OF THE AMERICAN DIAMOND-PURCHASING PUBLIC IN TERMS OF THE FOUR PARAMETERS. . . . 231 2.1 The a c t u a l f i g u r e s are from the G.I.A.'s 1975 Base P r i c e Chart, and apply to FL, D-Colour b r i l l i a n t cut diamonds 248 LIST OF FIGURES F i g u r e Page 1 A carbon atom bonded to f o u r others 11 2 The atomic l a t t i c e s o f g r a p h i t e ( l e f t ) and diamond ( r i g h t ) . . . 13 3 The i d e a l forms o f diamond c r y s t a l s 14 4 Combination of the octahedron 16 5 Growth markings 16 6 Examples of twinning 18 7 Macles 18 8 R e l a t i o n s of octahedron c r y s t a l axes to cube c r y s t a l axes ( l e f t ) , and d i f f e r e n t faces or d i r e c t i o n s i n an o c t a h e d r a l c r y s t a l ( r i g h t ) . . . 20 9 C l e a v i n g p l a n e s . 20 10 P o l i s h i n g d i r e c t i o n s . 22 11 Chambering: the blueground i s shown white . . . 24 12 Block c a v i n g : the blueground i s undermined and breaks up to f a l l i n t o draw p i t s 2 5 13 Sawing: two methods o f c u t t i n g two b r i l l i a n t s from one octahedron c r y s t a l 32 14 Sawing through flaws ( l e f t ) and c l e a v i n g to remove flaws ( r i g h t ) 32 15 Sawing and c l e a v i n g 33 16 The r e l a t i o n between g r a i n and grounding d i r e c t i o n s 35 17 The sequence of grounding operations 36 18 The p o i n t cut 39 19 The t a b l e cut 39 x i i x i i i LIST OF FIGURES (Continued) Fi g u r e Page 20 The i d e a l l y p r o p o r t i o n e d b r i l l i a n t ( l e f t ) r e t u r n s more l i g h t than a deep (centre) or shallow ( r i g h t ) stone 42 21 White l i g h t d i s p e r s e d and r e f r a c t e d to produce f i r e 42 22 The p r o p o r t i o n s of the i d e a l Tolkowski b r i l l i a n t cut 43 23 Development of the b r i l l i a n t or f u l l c u t . . . . 44 24 P a r t s and Facets of the b r i l l i a n t cut 45 25 Development o f the b r i l l i a n t or f u l l c u t . . . . 47 26 Cuts f o r small stones 49 27 Rose cuts 50 28 Some v a r i a t i o n s of the b r i l l i a n t cut 51 29 Emerald and step c u t s ; m i s c e l l a n e o u s cuts . . . 52 30 Comparison between the most common s c a l e s of c o l o u r 56 31 Symbols used to i n d i c a t e p o s i t i o n and nature of d i a m o n d - c l a r i t y c h a r a c t e r i s t i c s 60 32 C l a r i t y s c a l e s compared 61 33 A swindled b r i l l i a n t ( l e f t ) ; s e v e r a l b r i l l i a n t s t h a t can be obtained from the same h a l f octahedron ( r i g h t ) 65 34 A comparison of a c t u a l and c a l c u l a t e d p r i c e s . . 68 35 G e n e r a l i z e d gem diamond d i s t r i b u t i o n s t r u c t u r e . 76 36 World p r o d u c t i o n of diamonds 79 37 World p r o d u c t i o n o f diamonds 80 38 S i b e r i a n diamond mines 82 x i v LIST OF FIGURES (Continued) F i g u r e Page 39 Diamond mines i n South A f r i c a and neighbouring c o u n t r i e s 84 40 Diamond mines i n South A f r i c a and neighbouring c o u n t r i e s 85 41 Namaqualand mines .' . . 85 42 Ghana mines 92 43 Lesotho mines 95 44 S i e r r a Leone mines. 95 45 Import of rough diamonds 133 46 The e a r l y mines of Kimberley 166 47 The De Beers Companies 177 48 Pieces of b r i l l i a n t s up to 1 c a r a t 245 49 Pieces of b r i l l i a n t s up to 3 c a r a t s 246 50 Median p r i c e f o r 1 c a r a t , D FL diamonds . . . . 254 51 Median p r i c e f o r 0.50 c a r a t , VS 1 G-J diamonds . 256 52 Median p r i c e f o r 0.25 c a r a t S-, G-J diamonds . . 256 A C K N O W L E D G E M E N T S The author wishes to thank P r o f e s s o r H. D. D r e c h s l e r , without whose i n f i n i t e p a t i e n c e and i n s p i r i n g guidance t h i s t h e s i s would never have been w r i t t e n ; P r o f e s s o r s S. M. Oberg and J . W. C. Tomlinson, f o r t h e i r v a l u a b l e advice and t h e i r encouragement; Barbara, s e c r e t a r y of Graduate Studies o f the Department f o r her constant c o - o p e r a t i o n ; and Susan, of B l a z i n g F i n g e r s Typing S e r v i c e , f o r her c a r e f u l t y p i n g of the f i n a l manuscript. S p e c i a l thanks are due to the author's mother, f o r her understanding and f o r s h a r i n g the l o a d o f h i s business d u t i e s while t h i s work was being completed. xv CHAPTER I INTRODUCTION This thesis is submitted i n p a r t i a l f u l f i l l m e n t of the requirements for a Master of Science degree in Inter-national Business at the Faculty of Commerce and Business Administration at the University of B r i t i s h Columbia. The subject of the thesis i s the structure of the d i s t r i b u t i o n channel of gem diamonds in the world market, in which certain v e r t i c a l stages are singled out for more detailed study. The main stages of the d i s t r i b u t i o n structure are: the mining of rough diamonds, the largely centralized sorting and d i s t r i b u t i o n of the rough, the manufacture of polished diamonds i n a number of world centres, the d i s t r i b u t i o n of the polished gems at several bourses connected with the manufacturing centres, and the operations of the l o c a l wholesalers, jewellery manufacturers and r e t a i l e r s . Three areas are singled out for more detailed study: the De Beers group, which dominates the d i s t r i b u t i o n of rough; the I s r a e l i diamond industry, the largest manufacturing and d i s t r i b u t i n g centre of polished diamonds; and f i n a l l y , the Vancouver r e t a i l jewellery market, which i s one of the many branches of the largely unexplored r e t a i l end of the d i s t r i -bution channel. There is not a single u n i f i e d exposition of the di f f e r e n t stages of the world trading in diamonds i n the 1 2 published l i t e r a t u r e , and some areas are hardly covered at a l l , l i k e the operations of the various diamond bourses, while others are only represented by somewhat one-sided public relations l i t e r a t u r e . It i s hoped that this study, which is based not only on the available l i t e r a t u r e , but on the author's experience in the wholesale commerce of polished diamonds, and on f i e l d research conducted i n the Vancouver wholesale and r e t a i l markets, w i l l in a modest way f a c i l i t i a t e such an exposition. The author's background includes nine years in the import and wholesale of polished diamonds from the trading centres of Ramat Gan (Israel) and Antwerp (Belgium) to Montreal and Vancouver. His occupation involves buying, sorting, and s e l l i n g diamonds to jewellery manufacturers and r e t a i l e r s , managing a company, and training personnel in the various aspects of the business. In what follows, the chapters of the work w i l l be introduced. Chapter II is not d i r e c t l y concerned with the dis-t r i b u t i o n channel but provides a base for what follows by describing i n some d e t a i l the manufacture of polished diamonds and the appraising of the finished product. Diamonds are an exceedingly nonhomogeneous commodity, whose value varies r a d i c a l l y with minute differences i n internal color and the presence or absence of mineral imperfections i n v i s i b l e to the 3 naked eye. A science of grading has evolved that determines the r e l a t i v e value of a diamond in terms of four parameters: color, c l a r i t y (the degree of freedom from imperfections), cut (the extent to which the geometric proportions of the fashioned diamond conform to the established i d e a l ) , and weight: and a thorough a command of this science is v i t a l for anyone engaged in buying and s e l l i n g diamonds. Chapter III deals with the diamond-producing countries, the cutting industries, and the trading centres. Even though over 80 per cent of the world's production of rough is marketed through the De Beers group, the constit u t i o n of the producers i s by no means uniform; some are De Beers su b s i d i a r i e s , others have exclusive contracts with the group, and yet others are small-scale operators and individual miners whose output is purchased l o c a l l y by De Beers or else finds i t s way into the open market. I l l i c i t mining in the companies' leases i s also an established mode of production; and a s i g n i f i c a n t amount of smuggling goes with i t . Through the Central S e l l i n g Organisation (C.S.O.) of the De Beers group, the rough diamonds are channelled to the manufacturing centres. The diamond cutting industry i s unique in that the equipment is r e l a t i v e l y simple, inexpensive, and easy to transport; the power consumption i s minimal; and the transportation cost of the raw materials n e g l i g i b l e . There-i fore, i t i s an ideal f i e l d for cottage industries and small firms, working i n places situated far from either the mining, 4 the d i s t r i b u t i o n , or the consumer centres. H i s t o r i c a l l y , some of the most important cutting centres of today started as cottage industries. These industries were able to process certain kinds of diamonds that the established centres could not handle p r o f i t a b l y . These are the small or the d i f f i c u l t -to-cut diamonds, where labour costs amount to a s i g n i f i c a n t portion of the t o t a l cost of the finished product. As the new cutting centres grew, t y p i c a l l y t h e i r output, of i n f e r i o r quality and lower price, found a somewhat dif f e r e n t market than that of the established centres. Centre s p e c i a l i z a t i o n in quality and size of output, therefore, com-bined with an expanding market and a r i s i n g demand, contributed to blunt the competition between the centres. A d i f f e r e n t kind of centre, however, originated when a producing country saw f i t to s t a r t a l o c a l industry. Only the Soviet Union and South A f r i c a succeeded in establishing competitive industries, which in both cases found their own s p e c i a l i z e d niche in the market. Chapter IV focuses on the diamond industry in I s r a e l . The I s r a e l i industry started in the early 1930's, but only acquired momentum when World War II disabled the European centres, p a r t i c u l a r l y Antwerp, that had almost monopolized the world production of polished diamonds. Rough diamonds suddenly became available from the C.S.O. and a flood of s k i l l e d refugees helped to create a booming industry. As the war ended and the old trading patterns between the C.S.O. 5 and Europe reasserted themselves, the I s r a e l i manufacturers had to struggle to procure rough from other sources and create a new market. With government help, they succeeded so completely that today Israel i s the largest manufacturer in the world. Most of the production is exported, and the industry, which enjoys ample government protection as the main earner of foreign currency, netted over $200 m i l l i o n l a s t year. A large part of the I s r a e l i exporting a c t i v i t y takes place at the Ramat Gan Diamond Exchange. The second half of Chapter IV describes the actual process by which purchases are negotiated at the Exchange. The Exchange is a t i g h t l y protected medium where only established customers have access; this r e s t r i c t e d access is necessary because i n the diamond trade even wholesale purchases are made on a personal basis after careful inspection of the merchandise, which requires that the participants be absolutely trustworthy. Nowadays Israel's supplies of rough again come largely from the C.S.O. Chapter V studies the role of the C.S.O. in the world market, in the frame provided by the history of the De Beers group. De Beers Mining, l a t e r to merge into De Beers Consolidated Mines, was created i n 1880 by a f i n a n c i a l and administrative genius, C e c i l Rhodes, to control the t o t a l output of the South African mines and re-lease i t gradually into the market. Rhodes was well aware 6 that the producers' great mistake was s a t u r a t i n g the market with diamonds, which caused p r i c e s to c o l l a p s e ; t h i s p a t t e r n had occurred every time new diamond d i s c o v e r i e s had been made. By the end of the century, De Beers C o n s o l i d a t e d Mines had a t t a i n e d d i r e c t c o n t r o l of almost a l l the South A f r i c a n mines, and f o r the next decades i t endeavoured to a c q u i r e each of the new mines as they arose, or buy up t h e i r output. In 1930, however, a combination of a low demand f o r diamonds due to the world d e p r e s s i o n , and an enormous output from independent miners that the company had had to i n c o r p o r -ate i n t o i t s s t o c k , together with i t s own unsold p r o d u c t i o n , p r e c i p i t a t e d a change of s t r u c t u r e . A new purchasing agency was endowed with l a r g e reserves of c a p i t a l to buy the produc-t i o n from a l l sources and h o l d i t i n stock as needed, and the marketing of rough diamonds was g i v e n e x c l u s i v e l y to the newly c r e a t e d C.S.O. This arrangement has e s s e n t i a l l y l a s t e d to t h i s day. The C.S.O.'s p o l i c y , which i s supposed to b e n e f i t the whole i n d u s t r y , i s to h o l d the rough i n stock i n times o f s l a c k demand, keeping p r i c e s l e v e l , and r e l e a s e i t when the demand r i s e s , with s u i t a b l e i n c r e a s e s i n p r i c e s . Thus the s t a b i l i t y of gradual i n c r e a s e i n the p r i c e s of diamonds i s assured. Such p o l i c i e s were t e s t e d s e v e r a l times, i n recent times most markedly during a r e c e s s i o n i n l a t e 1969 and 1970, when reduced s u p p l i e s of rough from the C.S.O. kept p r i c e s 7 from f a l l i n g . The present s i t u a t i o n ( e a r l y 1978), however, seems to be an e x c e p t i o n a l time, when s u p p l i e s are not forthcoming at a time of very s t r o n g demand, and p r i c e s are r a i s e d at a f a s t r a t e . Such manoeuvers have thrown the i n d u s t r y i n t o c o n f u s i o n and ca s t doubts about the capa-c i t y of the C.S.O. to govern the market. An appendix to the t h e s i s presents the most recent developments as r e f l e c t e d i n the trade j o u r n a l s . Chapter VI, f i n a l l y , d e s c r i b e s the Vancouver whole-s a l e and r e t a i l markets. Since diamonds are s o l d by r e t a i l e r s almost e x c l u s i v e l y as p a r t of p i e c e s of j e w e l l e r y , a survey was made of Vancouver j e w e l l e r y s t o r e s to f i n d out the r e l a -t i v e p o p u l a r i t y and average s e l l i n g p r i c e s of the main types of diamond j e w e l l e r y , as w e l l as the percentage o f t o t a l s t o r e s a l e s represented by diamond j e w e l l e r y s a l e s . There i s a dearth of r e s e a r c h i n t h i s f i e l d , due at l e a s t i n p a r t to the d i f f i c u l t y o f c o l l e c t i n g enough i n f o r m a t i o n from the r e t a i l e r s themselves. The method employed i n t h i s survey, which i n v o l v e s a p p r a i s i n g and counting the j e w e l l e r y p i e c e s d i s p l a y e d , suggests an a l t e r n a t i v e approach. Accu r a t e a p p r a i s a l s , however, can only be done with up-to-date i n f o r m a t i o n on the market p r i c e s , which was p a r t l y f u r n i s h e d by a l o c a l w h o l e s a l e r . T h i s w holesaler a l s o f u r -nished percentages o f s a l e s of loo s e diamonds i n the d i f f e r e n t weight, c o l o r , c l a r i t y , and s t y l e c a t e g o r i e s , that allowed the 8 completion o f t a b l e s showing the r e l a t i v e p r e f e r e n c e s of the Vancouver j e w e l l e r s , and hence of the Vancouver p u b l i c , i n terms of these parameters. Such data, as w e l l as those obtained from the survey o f j e w e l l e r y s t o r e s , were then com-pared with corresponding r e s u l t s p u b l i s h e d by trade magazines. Not s u r p r i s i n g l y , there was a good degree of s i m i l a r i t y , making allowance f o r the o v e r a l l p r i c e i n c r e a s e s s i n c e the l a s t surveys were p u b l i s h e d . T e n t a t i v e e x p l a n a t i o n s were o f f e r e d f o r the d i f f e r e n c e s observed, which allowed the be-ginnings of a p i c t u r e of Vancouver's i n d i v i d u a l i t y as a market to emerge, but new r e s e a r c h i s needed to produce t r u l y compar-able data and i n v e s t i g a t e f u r t h e r the proposed s o l u t i o n s . The chapter ends, t h e r e f o r e , by p o i n t i n g out some promising d i r e c -t i o n s f o r f u t u r e r e s e a r c h . In t h i s r e s e a r c h , i t i s hoped, the methods d e s c r i b e d i n the sequel may be found u s e f u l . CHAPTER II SORTING OF DIAMONDS OUTLINE The f i r s t s e c t i o n o f t h i s chapter i s concerned with diamond as a c r y s t a l , s t a r t i n g out with the way i n which the carbon atoms j o i n .together to form a l a t t i c e , and c o n t i n u i n g i n t o a d e s c r i p t i o n o f the i d e a l geometric diamond c r y s t a l s and the n a t u r a l l y o c c u r r i n g c r y s t a l s . The very p r a c t i c a l importance o f t h i s knowledge becomes evident next, upon st u d y i n g the sawing, c l e a v i n g , and p o l i s h i n g d i r e c t i o n s of a rough diamond. The second s e c t i o n d e s c r i b e s the two forms of diamond d e p o s i t s : a l l u v i a l d e p o s i t s and k i m b e r l i t e p i p e s , and e x p l a i n s very b r i e f l y the mining methods a p p r o p r i a t e to each. The t h i r d s e c t i o n sketches the way i n which rough diamonds are- s o r t e d i n c a t e g o r i e s p r i o r to d i s t r i b u t i o n . The f o u r t h d e s c r i b e s the manufacturing steps from rough to p o l i s h e d : p r e p a r a t i o n , sawing, c l e a v i n g , rounding up and f a c e t i n g . The f i f t h d e s c r i b e s the d i f f e r e n t s t y l e s of cut diamonds: the e a r l y attempts, the e v o l u t i o n o f the modern b r i l l i a n t c u t , the o p t i c reasons f o r the adoption of the b r i l l i a n t cut ( i . e . , the d e s i r e to a t t a i n maximum b r i l l i a n c e , i n the t e c h n i c a l sense of the word), and then the common p r a c t i c e of d e v i a t i n g from the i d e a l p r o p o r t i o n s o f the b r i l l i a n t cut i n order to 9 10 o b t a i n h e a v i e r diamonds from the rough. F i n a l l y , s t y l e s other than the b r i l l i a n t are mentioned and i l l u s t r a t e d . The s i x t h and perhaps more important s e c t i o n d e s c r i b e s the grading of p o l i s h e d diamonds, and s t u d i e s the parameters along which grading takes p l a c e : c o l o r , c l a r i t y , cut, and weight. The way of making a l l these parameters converge i n t o a v a l u a t i o n of a p a r t i c u l a r stone i s d e s c r i b e d next. A r e f e r e n c e to f a n c y - c o l o u r e d stones completes the chapter. PHYSICAL PROPERTIES The Atomic L a t t i c e . From the chemical p o i n t of view, diamond i s a carbon i n an extremely pure form. The only other element present i s n i t r o g e n , amounting to as much as 0.23 per cent; a r e l a t i v e l y s carce type o f diamond contains no n i t r o -gen at a l l . Other elements are only a few p a r t s i n a m i l l i o n . The carbon atom has the important p r o p e r t y of having f o u r e l e c t r o n s i n i t s outer s h e l l , which can h o l d up to e i g h t . Two carbon atoms l i n k together by s h a r i n g an e l e c t r o n from each one, which f i l l s a hole i n the s h e l l of the other. Thus, each atom can l i n k with four o t h e r s . Such bonds are c a l l e d c o v a l e n t . The four bonds to each atom are at 10.95° to each other, and each atom i s the geometric c e n t r e of an imaginary t e t r a h e d r o n having f o u r other carbon atoms as corners ( F i g . 1) The d i s t a n c e between the atoms i s 1.544 angstrom u n i t s (one E r i c Bruton. Diamonds (London: N.A.G. Pre s s , 1970), p. 300. F i g u r e 1 c a r b o n atom bonded t o f o u r o t h e r s . (From B r u t o n , F i g . 18.1) 12 angstrom u n i t i s one m i l l i o n t h of a m i l l i m e t r e ) . Covalent bonds can h o l d atoms together i n s t r u c t u r e s c a l l e d atomic c r y s t a l s . Carbon produces two kinds of c r y s -t a l l i n e arrangements: diamond and g r a p h i t e . In diamond, the arrangement i s as shown i n F i g . 2 ( r i g h t ) . The shaded l a y e r s show the puckered hexagonal r i n g s o f atoms. A l l bonds are 1.544 angstrom u n i t s long. In g r a p h i t e ( F i g . 2, l e f t ) , the atoms a l s o form hexagonal r i n g s , but these are f l a t , not puckered. Within each layer -, the atoms are c l o s e l y l i n k e d , with atomic bonds even s h o r t e r than diamond, 1.42 angstrom u n i t s , but the bonds between the l a y e r s are weaker, with a l e n g t h of 3.35 angstrom u n i t s . This e x p l a i n s why g r a p h i t e i s s o f t : the l a y e r s sheer e a s i l y . Diamond, on the other hand, i s extremely hard: the l a t t i c e i s e x c e p t i o n a l l y s t r o n g , with great r e s i s t a n c e to deformation. C r y s t a l s . Diamonds occur both i n s i n g l e c r y s t a l s and i n aggregates of c r y s t a l l i n e masses. C r y s t a l l i n e substances are c l a s s i f i e d on the b a s i s of the symmetry of the c r y s t a l s , r e s u l t i n g i n seven main systems. Diamond belongs to the most symmetrical o f thes-e systems, the c u b i c . W ithin the c u b i c system, there are a number of d i f f e r e n t p o s s i b l e forms that c r y s t a l s can take. F i g u r e 3 shows the i d e a l p o s s i b l e forms of diamond c r y s t a l . I t i s not yet known whether the t e t r a -hedron i s a p o s s i b l e form. The commonest form i s the o c t a -I-42& CLEAVAGE (OCTAHEDRAL) DIRECTIONS F i g u r e 2 The atomic l a t t i c e s of g r a p h i t e ( l e f t ) and diamond ( r i g h t ) (From Bruton, F i g s . 18.2 and 18.3) CUBE TETRAHEDRON TETRAKIS- H E X A H E D R O N TRIAKIS - O C T A H E D R O N (or TRIS -OCTAHEDRON) Possible forms of diamond cr RHOMBIC DODECAHEDRON ICOSI TETRAHEDRON H E X A K I S - O C T A H E D R O N (or H E X - O C T A H E D R O N ) s t a l , with c r y s t a l axes F i g u r e 3 The i d e a l forms of diamond c r y s t a l s (From Bruton, F i g . 18.4) 15 hedron.^. The i d e a l forms seldom occur i n n a t u r e , due to v a r i o u s f a c t o r s d u r i n g the growth p e r i o d o f the c r y s t a l s . Octahedron c r y s t a l s w i t h rough, curved or p i t t e d f a c e s are o f t e n found, but a l s o combinations o f two or more c r y s t a l forms, u s u a l l y w i t h the octahedron as the dominant form. F i g u r e 4 shows t h r e e combinations o f the octahedron: w i t h the t e t r a k i s - h e x a h e d r o n , w i t h the h e x a k i s - o c t a h e d r o n , and w i t h the rhombic dodecahedron. Growth markings o f t e n appear on the s u r f a c e o f n a t u r a l l y o c c u r r i n g c r y s t a l s . The s u r f a c e o f the stone i s c a l l e d the skin. Octahedron faces t y p i c a l l y show s m a l l t r i -a n gular d e p r e s s i o n s p o i n t i n g i n r e v e r s e to the octahedron shape, w h i l e dodecahedral faces show grooves ( F i g . 5 ) . Such growth marks are important i n s e v e r a l ways. A f t e r a stone has been p o l i s h e d , a fragment of s k i n may s t i l l show; t h i s i s c a l l e d a natural. A n a t u r a l may a f f e c t the v a l u e o f the stone c o n s i d e r a b l y . I t a l s o serves to i d e n t i f y a p i e c e 3 as a diamond. Besides the fundamental types o f c r y s t a l mentioned e a r l i e r , and t h e i r combinations, there i s another major way i n which c r y s t a l s can grow; i t i s c a l l e d twinning. Twinning Bruton, p. 303. See a l s o Gemo.logical I n s t i t u t e of America (G.I.A.), Diamonds: Production, Marketing, Buying, Gradi Appraising (Los Angeles, 1976), Assignment 3, p. 1. G.I.A., Diamonds, Ass, 3, p. 5. 16 Figure 4 Combination of the octahedron (From G.I.A., Diamonds, Ass. 3, Figs. 8, 9 and 10) 17 o c c u r s w h e n t h e c r y s t a l c h a n g e s t h e o r i e n t a t i o n o f i t s s t r u c -t u r e d u r i n g g r o w t h . T h e r e s u l t i s a c o m p o s i t e o r d o u b l e c r y s t a l , w i t h some o f i t s e d g e s ( o r f a c e s ) p a r a l l e l , a n d o t h e r s r e v e r s e d . T h e r e a r e two t y p e s o f t w i n s : interpene-trant a n d oontaat. I n t e r p e n e t r a n t c r y s t a l s a p p e a r t o h a v e g r o w n w i t h i n t h e same s p a c e so t h a t o n e seems t o p e n e t r a t e t h e o t h e r . C o n t a c t t w i n s a r e l i k e c r y s t a l s w h i c h h a v e g r o w n s i d e b y s i d e , b u t w i t h d i f f e r e n t o r i e n t a t i o n s ; one p a r t g i v e s t h e i m p r e s s i o n o f h a v i n g r o t a t e d 1 8 0 ° a r o u n d a n a x i s , t h e t w i n n i n g a x i s . T h e y a r e a l s o c a l l e d r o t a t i o n t w i n s , f o r t h a t r e a s o n . F i g u r e 6 shows s e v e r a l e x a m p l e s o f t w i n n i n g ; some o f t h e s e i n v o l v e m o r e t h a n one t w i n . The m o s t common t w i n n i n g i s c a l l e d a made ( F r e n c h f o r t w i n ) i n t h e d i a m o n d t r a d e ; F i g u r e 6 ( t o p ) s h o w s how o n e h a l f o f t h e b a s i c o c t a h e d r o n c a n be p i c t u r e d t o r o t a t e 1 8 0 ° t o p r o -d u c e a m a c l e . M a c l e s t e n d t o b e f l a t , s o t h a t t h e y l o o k l i k e t r i a n g l e s ( F i g . 7 , f i r s t o f b o t t o m r o w ) ; t h e i r r e - e n t r a n t a n g l e , w h e n p r e s e n t , shows t h a t t h e y a r e n o t j u s t u n t w i n n e d 4 f l a t c r y s t a l s . M a c l e s a r e h a r d t o p o l i s h a n d a l s o t h e i r f l a t n e s s c r e a t e s s p e c i a l p r o b l e m s o f w a s t a g e . C r y s t a l F o r m a n d M a n u f a c t u r e o f P o l i s h e d D i a m o n d s . The m a n u f a c t u r e o f p o l i s h e d d i a m o n d s , t o be d i s c u s s e d i n m o r e d e t a i l l a t e r o n , i n v o l v e s , among o t h e r o p e r a t i o n s , t h r e e f u n d a m e n t a l B r u t o n , p . 2 8 9 . 18 F i g u r e . 6 Examples o f t w i n n i n g (From B r u t o n , F i g . 17.15) F i g u r e 7 Macles (From B r u t o n , F i g s . 17.24 and 17.25) ones: sawing, cleaving, and polishing. These operations are only possible in certain directions i n the stone given by the cr y s t a l structure. Cleavage occurs almost exclusive-l y in directions p a r a l l e l to the octahedral (Fig. 9), the reason being that i n those directions there are fewer bonds to break. More pre c i s e l y , there are alternate lawyers with more and fewer bonds (see F i g . 2, right) and cleavage occurs between the close-bonded layers. Sawing i s best done p a r a l l e l to the cube face. Figure 8 shows the octahedron inscribed in the cube ( l e f t ) and a cube face (right, top). These sawing planes help to make an octahedron c r y s t a l , with r e l a t i v e l y l i t t l e waste, into the saleable shape of polished, the b r i l l i a n t . Hence the economic importance of octahedron c r y s t a l s . There are other sawing planes, p a r a l l e l to the six pairs of dodecahed-ron faces. Diamond can be polished i n certain directions much more e a s i l y than in others. The difference in hardness varies with the diamond and i t can range from under ten times between the hardest and the softest directions to as much as 100 times. The softest directions are, according to one source, as follows: 1. Dodecahedron p a r a l l e l to c r y s t a l axis. 2. Cube p a r a l l e l to c r y s t a l axis. 20 C U B E FACE (100) OR FOUR POINT F i g u r e 8 R e l a t i o n s of octahedron c r y s t a l axes to cube c r y s t a l axes ( l e f t ) , and d i f f e r e n t faces or d i r e c t i o n s i n an oc t a h e d r a l c r y s t a l ( r i g h t ) . (From Bruton, F i g s . 18.6 and 18.7) Fi g u r e 9 Cle a v i n g Planes (From G.I.A., Diamonds, Ass. 5, F i g . 3) 3. Octahedron towards dodecahedron.* 3 These are shown i n F i g u r e 10. Only the f i r s t two can be p o l i s h e d ; the t h i r d cannot be ground on the t r u e f a c e , and so c u t t e r s t i l t the p o l i s h i n g plane s l i g h t l y , as shown. A l s o , opposite g r i n d i n g d i r e c t i o n s are not of the same abra-s i o n hardness, which i s due to c r y s t a l faces being out of alignment with the l a t t i c e s t r u c t u r e . MINING OF DIAMONDS Recovery of Diamonds From Blueground. Diamonds can be found i n t h e i r o r i g i n a l rock matrix where they were formed only i n the diamond pipes, which are funnels more or l e s s o v a l i n s e c t i o n and narrowing w i t h i n c r e a s i n g depth. These pipes go down to unknown depths (some have been mined deeper than 4,000 f e e t ) and are e v i d e n t l y the r e s u l t o f some e r u p t i v e a c t i o n . The rock f i l l i n g the pipes i s an a l t e r e d and b r e c c i -ated b a s i c rock r e l a t e d to p e r i d o t i t e and known as kimherlite ( f o r Kimberley, the name of the e a r l i e s t major mine) or blue-ground. The k i m b e r l i t e must have been f o r c e d up from great depths, because i t i s e n t i r e l y u n r e l a t e d to the country rock surrounding the pipes . I t i s b e l i e v e d that the diamonds were formed i n the depths of the e a r t h under c o n d i t i o n s of great heat and p r e s s u r e , and reached the s u r f a c e by e x t r u s i o n up E. M. and J . Wilks, quoted i n Bruton, p. 306. 22 F i g u r e 10 P o l i s h i n g d i r e c t i o n s (From G.I.A., DiamondsAss. 5, F i g . 3) 23 pipes l i k e Kimberley. Indeed, i t was i n such c o n d i t i o n s of extreme pressure and temperature that the f i r s t s y n t h e t i c diamonds were produced by General E l e c t r i c Co. i n 1955.^ Mining the diamond pipes i n the e a r l i e r days at Kimberley was done by i n d i v i d u a l miners working t h e i r own p i t s , but as the excavations got deeper the claims were con-s o l i d a t e d (which helped b r i n g about the formation of the De Beers Company) and the blueground was hauled to the edge of the mine by w i n d l a s s e s . F i n a l l y , open p i t mining became im-p o s s i b l e and mining u s i n g underground methods was begun by the newly-formed De Beers C o n s o l i d a t e d Mines L t d . One of the main methods i s chambering; a main h o i s t i n g s h a f t i s l o c a t e d some 800 f e e t or more from the pipe rim, and sunk w e l l below the lowest l e v e l worked so f a r . The working l e v e l s are 40 f e e t apart v e r t i c a l l y . Cuts of blueground are mined out between adjacent l e v e l s , supported by p i l l a r s o f rock. This method depends upon n a t u r a l c a v i n g . F i g u r e 11 shows the process of chambering. The method most used at present i n the:.South A f r i c a n mines i s block caving, schematized i n F i g u r e 12. This i s a common underground mining technique. A f t e r the blueground has been h o i s t e d from the mines, i t goes through three stages: c r u s h i n g , washing, and recovery. G.I.A., Diamonds, Ass. 4, p. 9. L E V E L S 4 0 FT. A P A R T 1 6 0 0 F T . L E V E L F i g u r e 11 Chambering: the blueground i s shown white (From Bruton, F i g . 4.16) 25 Figure 12 Block caving: the bluegound (shown white) is undermined and breaks up to f a l l into draw p i t s (From Bruton, F i g . 4.18) .2 6 The ore i s crushed i n t o fragments 1% inches or l e s s i n s i z e and c a r r i e d to the washing p l a n t , where i t i s reduced to a f r a c t i o n o f i t s o r i g i n a l volume by v a r i o u s washing processes . Concentrates from.the washing p l a n t go to the recovery p l a n t , where they are f e d onto s l o p i n g or stepped t a b l e s covered with grease. Wash water i s a p p l i e d to the grease t a b l e s and the concentrates are dropped onto the grease through the stream of water. The waste rock drops o f f and the diamonds, which are nonwettable but have an a f f i n i t y towards grease, adhere to the t a b l e s . P e r i o d i c a l l y , the grease i s scraped and then b o i l e d 7 o f f to allow the recovery of the stones. Recovery o f A l l u v i a l Diamonds. U n t i l 1870, when the f i r s t diamond pipe was found i n present-day Kimberley, South A f r i c a , a l l diamonds recovered had been of a l l u v i a l o r i g i n . A l l diamonds i n a l l u v i a l d e p o s i t s o r i g i n a l l y formed, i t i s presumed, i n k i m b e r l i t e , were l a t e r r e l e a s e d by e r o s i o n from t h e i r mother rock and c a r r i e d away by r i v e r s and streams. Some of them were washed as f a r as the sea, but others were d e p o s i t e d i n potholes and other depressions o f the stream beds. R i v e r s i n time o f t e n dry up or change course, and so the d e p o s i t s are found a l s o i n dry beds of an c i e n t watercourses. A l l u v i a l d e p o s i t s are worked i n a v a r i e t y of ways, from the p r i m i t i v e to the e l a b o r a t e . Large s c a l e mining i s done by t a k i n g the G.I.A., Diamonds, Ass. 9, pp. 1-7. 2 7 g r a v e l from open p i t s w i t h modern earth-moving equipment and washing the co n c e n t r a t e s , which are e i t h e r hand-picked or passed through an e l e c t r o s t a t i c s e p a r a t o r . SORTING OF ROUGH DIAMONDS Gems, and diamonds i n p a r t i c u l a r , are i n v a r i a b l y s o r t e d by hand. From the moment they are d i s c o v e r e d , they are handled as i n d i v i d u a l commodities. This i s due, not only to t h e i r h i g h v a l u e , but to the numerous, and o f t e n hard to discern,' v a r i e t i e s i n which they, appear. Such v a r i e t i e s are d e s c r i b e d i n the r e s t o f the chapter, s t a r t i n g with the kinds of rough diamonds and c o n t i n u i n g w i t h the p o l i s h e d stones. Gems, Near-gems, I n d u s t r i a l s . The i n i t i a l s o r t i n g i s between gems and i n d u s t r i a l s . T h i s t h e s i s i s concerned only with gems, which are the only diamonds used i n j e w e l l e r y . Besides the kinds of diamonds that are p u r e l y i n d u s t r i a l , stones that are of gem q u a l i t y but too small to use, or stones that are too awkwardly shaped, or o f poor c o l o u r or c l a r i t y (as d e f i n e d by some s t r i c t c r i t e r i a } which are d e s c r i b e d below) are c l a s s i f i e d as i n d u s t r i a l . Near-gems may be s o l d as top i n d u s t r i a l grades or r e c l a s s i f i e d as gems, depending on the market, because t h e i r c o l o r or c l a r i t y are marginal. S o r t i n g Gems. The f i r s t broad d i v i s i o n i s by s i z e ; u s i n g a s e r i e s o f s i e v e s , eleven s i z e c a t e g o r i e s are d i s t i n g -u i s h e d . A l l p i e c e s weighing one c a r a t or more (the c a r a t , the 28 t r a d i t i o n a l u n i t f o r weighing gems, has been f i x e d a t .2 grams) are known as sizes. Sizes are c l a s s i f i e d f i r s t a c c o r d i n g to shape, which i s the most important f a c t o r to determine the value of a c u t t a b l e rough diamond. In each category o f sizes, the f o l l o w i n g d i v i s i o n s are made: 1. Stones, unbroken c r y s t a l s , g e n e r a l l y octahedra, of r e g u l a r formation. 2. I r r e g u l a r s , s l i g h t l y d i s t o r t e d but f l a w l e s s c r y s t a l s . 3. Shapes, s l i g h t l y d i s t o r t e d and s l i g h t l y flawed, but unbroken, c r y s t a l s . 4. Cleavages, a l l broken stones, an. very i r r e g u l a r c r y s t a l s (many of the l a r g e s t rough diamonds ever found were cleavages. 5. Macles, the twinned c r y s t a l s d e s c r i b e d above. g 6. F l a t s , very t h i n macles. Those s i z e c a t e g o r i e s weighing l e s s than a c a r a t are d i v i d e d i n t o only three groups by shape: 1. Melee, e q u i v a l e n t to stones and shapes above. 2. Chips, l i k e cleavages. 9 3. Macles and F l a t s . The next d i v i s i o n i s by f a c t o r s r e l a t e d to transparency, which a l s o i n c l u d e s q u a l i t y , the s o r t e r ' s term f o r c l a r i t y as d e f i n e d below. S t a r t i n g with the stones, the grader takes away Bruton, p. 140. Ibid., p. 145. 28a a l l the brownies, greens, frosted crystals and oxidized c r y s t a l s . Some of these may turn out to be very valuable, but they require special assessment; in general they are less valuable. Then, the stones without v i s i b l e spots are color-graded in nine cate-gories, from c o l o r l e s s , to pale yellow, which i s the commonest and least valuable. Full-bodies yellow stones form a special category: diamonds possessing a full-bodied colour, l i k e yellow, green, or brown, are both valuable and rare. Since the colour of the rough stones may diminish or disappear when cutting (by d i l u t i o n due to mass loss or by being concentrated in a part that is cut away), the colour c l a s s i f i c a t i o n of the rough goods i s somewhat tentative. The spotted goods ( i . e . , gems with v i s i b l e spots) among the stones are then sorted i n seven or so classes from l i g h t l y spotted to heavily spotted. Then they are colour-graded into fewer categories than the purest stones. The remaining size and shape categories are divided into even fewer subgroupings. Flaws and blemishes i n the rough stones are only important i n -sofar as they affect the size and quality of the polished gems obtained from them, so that, for example, an octahedron with a heavy in c l u s i o n near an octahedron point w i l l be as valuable as a clean c r y s t a l , because the corners are cut away when pro-cessing; so the p o s i t i o n of the flaws i s very important. G.I.A., Diamonds, Ass. 11, p. 7 29 MANUFACTURING PROCESSES P r e p a r a t i o n . R o u g h d i a m o n d s , e s p e c i a l l y l a r g e r a n d b e t t e r o n e s , a r e c a r e f u l l y s t u d i e d b e f o r e f a s h i o n i n g . The o b j e c t i s t o y i e l d a maximum w e i g h t o f w e l l - f a s h i o n e d g o o d s w i t h a m i n i m u m o f f l a w s . The s t u d y may i n c l u d e t h e p o l i s h -i n g o f a window ( s o m e t i m e s s e v e r a l w i n d o w s ) t o l o c a t e e x a c t l y a n y f l a w s w i t h i n t h e c r y s t a l . - S u c h w i n d o w s a r e f l a t s u r f a c e s p e r p e n d i c u l a r t o t h e i n t e n d e d p l a n e o f s e p a r a t i o n . B e s i d e s t h e p r o p e r t i e s o f t h e s t o n e i t s e l f , t h e d e s i g n e r h a s t o c o n -s i d e r t h e c u r r e n t demand f o r v a r i o u s s i z e s a n d q u a l i t i e s o f p o l i s h e d g o o d s . One o f t h e d e c i s i o n s i s w h e t h e r t o c u t t o e x a c t a n g l e s ( i . e . , t h e s t a n d a r d p r o p o r t i o n s o f t h e v a r i o u s s t y l e s o f c u t , w h i c h o f t e n r e q u i r e more w a s t a g e ) , o r t o c u t f o r maximum w e i g h t u t i l i z a t i o n . T h e f a c t t h a t a l a r g e s t o n e i s much more v a l u a b l e t h a n two s t o n e s o f s i m i l a r q u a l i t y a n d t h e same c o m b i n e d w e i g h t m u s t a l w a y s be c o n s i d e r e d . F i n a l l y , t h e d e s i g n e r m a r k s t h e s t o n e w i t h I n d i a i n k t o i n d i c a t e t h e p l a n e o r p l a n e s a l o n g w h i c h i t i s t o be c u t . O f t e n t h e s e p l a n e s a r e c h o s e n so as t o go t h r o u g h a n y m a j o r i n n e r f l a w s i n t h e c r y s t a l , s o t h a t t h e y may be r e m o v e d b y l a t e r w o r k o n t h e v a r i o u s p i e c e s . S a w i n g . A s m e n t i o n e d b e f o r e , t h e r e a r e c e r t a i n d i r e c -t i o n s i n w h i c h s a w i n g c a n t a k e p l a c e ; t h r e e p a r a l l e l t o t h e c u b e f a c e s a n d s i x more p a r a l l e l t o t h e p a i r s o f r h o m b i c d o d e c a h e d r o n f a c e s ( F i g . 8). T h e s e d i r e c t i o n s a r e v a l i d f o r 30 any form of diamond c r y s t a l , not j u s t an octahedron. In shapeless c r y s t a l s ( l i k e cleavages) some i n d i c a t i o n must f i r s t be obtained of the o r i e n t a t i o n of the stone. The c l u e s to the o r i e n t a t i o n i n such cases are t i n y s u r f a c e markings or v i s i b l e i n t e r n a l f e a t u r e s . Sawing i s done with a t h i n (.003 or .004 i n . ) phosphor-bronze blade of three to f i v e inches in.diameter, t u r n i n g at about 3,000 r.p.m. The saw i s charged with diamond dust i n o l i v e o i l , and d u r i n g the course of the o p e r a t i o n the dust from the stone i t s e l f i s used on the blade. The diamond i s mounted i n a dop (the t o o l t h a t holds a diamond d u r i n g process; i t secures the stone e i t h e r with mechanical claws or s p e c i a l kinds of cement) and p l a c e d i n a weighted arm to h o l d i t a g a i n s t the b l a d e . The r a t e of c u t t i n g i s slow (one study showed t h a t a r e l a t i v e l y t h i c k e r blade cut ten to f i f t e e n 11 sq. mm. per hour) but the diamond i s , of course, not very l a r g e . A knot, which i s an i n c l u d e d c r y s t a l , can, however, make the sawing d i f f i c u l t or even i m p o s s i b l e . The octahedron, the commonest c r y s t a l , i s always sawed, because, unless a major flaw i s p l a c e d i n an i n c o n v e n i e n t l o c a -t i o n , sawing allows to conserve more weight than c l e a v i n g . B r i l l i a n t - c u t gems ( F i g . 24) are g e n e r a l l y aimed a t . Sawing i s done through the centre or e l s e one of the p o i n t s i s sawed G.I.A., Diamonds, Ass. 16, p. 3. 31 of f (Fig. 13). Flawed octahedra are sawn through the flaws, with smaller b r i l l i a n t s as the results (Fig. 14, l e f t ) . In general, sawing off-centre is economically more advantageous, because of the premium on larger stones, and because more' weight is recovered. Cleaving. The directions where cleaving is possible have been stated before to be ( p r i n c i p a l l y ) the planes p a r a l l e l to the four pairs of octahedron faces. Cleaving is done only with s p e c i a l l y misshapen rough, or to remove flaws that sawing would only belable to cut through in a wasteful way. Figure 15 shows a combination of sawing and cleaving i n a common octahedron. Cleaving is done only by expert cutters, because a wrongly calculated cleaving d i r e c t i o n , a poor cleavage groove (see below), or a clumsily administered blow can shatter the stone. T r a d i t i o n a l l y the cleaver is also the designer, and expertise in designing and cleaving is handed down from gener-ation to generation within the family. In spite of i t s apparent s i m p l i c i t y , i t requires lengthy study and preparation of the stone to be cut, and so i t is an expensive process. To cleave a stone, a V-shaped groove is carved in i t s surface by a series of progressively sharper-edged diamonds. For the operation, the stones are cemented to dopsticks with a special cement, a combination of sealing wax and shellac, and then rubbed together by hand. F i n a l l y , a broad wedge is inserted in the groove and struck with a rod. The diamond is F i g u r e 13 S a w i n g : two methods o f c u t t i n g two b r i l l i a n t s f rom one o c t a h e d r o n c r y s t a l • • (From B r u t o n , F i g . 1 1 . 2 4 ; and G . I . A . , Diamonds, F i g u r e 14 Sawing t h r o u g h f l a w s ( l e f t ) and c l e a v i n g t o remove f l a w s ( r i g h t ) (From G . I . A . , Diamonds, A s s . 1 6 , F i g s . 6 and 7 ) F i g u r e 15 Sawing and c l e a v i n g (From G.I.A., Diamonds, A s s . 16, F i g . 8) 34 a c t u a l l y s p l i t by pressure a g a i n s t the si d e s o f the groove, not cut i n two by the wedge. B r u t i n g or Rounding Up. The stone to be rounded up i s set on a dop that i s mounted i n a l a t h e , with the saw cut per-p e n d i c u l a r to the a x i s o f r o t a t i o n and the p o i n t e d end on the axis ( F i g s . 16, 17). A second diamond, u s u a l l y a sawed stone to be bruted next, i s mounted on a dop with a long handle, which the worker f i t s under the armpit while h o l d i n g i t near the diamond end with h i s hands; t h i s works b e t t e r than a mechanical h o l d e r . The l a t h e turns r a p i d l y and the b r u t i n g diamond i s c a r e f u l l y brought a g a i n s t the stone to be brut e d . In t h i s way the sharp edges and corners o f the l a t t e r are slow l y ground down. Often the worker i n charge o f b r u t i n g has to remove flaws i n the stone; t h i s cannot be accomplished by t a k i n g o f f equal amounts on a l l s i d e s , because i t would mean a waste of rough. Th e r e f o r e , s p e c i a l l a t h e heads are used that can be ad j u s t e d f o r e c c e n t r i c motion. An expert worker removes only enough m a t e r i a l to allow f i n a l e r a d i c a t i o n o f the flaw i n the l a t e r p r o c e s s i n g . The rounding process can be done so s k i l l -f u l l y that naturals or small p o r t i o n s o f the o r i g i n a l c r y s t a l s u r f a c e are sometimes l e f t on opposite s i d e s o f the g i r d l e . T h i s i s not con s i d e r e d to be a flaw, and i t proves to the 12 foreman that the worker has indeed saved weight. 12 Bruton, p. 193. THREE POINT CLEAVED (IF NECESSARY] TWO POINT F i g u r e 16 The r e l a t i o n between g r a i n and grounding d i r e c t i o n s (Top stones are o c t a h e d r a l ; bottom i s dodecahedral) (From Bruton, F i g . 11.28) Figure 17 The sequence of grounding operations (From Bruton, Figs. 11.30, 11.31 and 11.32) 37 Cuts that are rounded but not c i r c u l a r , such as the marquise (Fig. 28) are also rounded on a lathe, but mounted o f f centre. This process requires more s k i l l . Faceting. The main instrument for grinding and polish-ing facets on the stones is a power-driven horizontal grinding wheel c a l l e d a soaife. The scaife is a cast-iron disc, ten to twelve inches i n diameter, and one inch thick when new ( i t gets grooved with use, and has to be refinished p e r i o d i c a l l y ) . The scaife is driven at over 2,500 r.p.m., and has to run absolutely true and free from vib r a t i o n . Its surface is scored to ret a i n diamond paste, often made with oliv e o i l . Several diamonds are often polished at the same time on a scai f e . The diamond is held i n a dop, which can be mechanical - - a s t e l l holder with two jaws, one fixed and one adjustable - - on a solder head, the t r a d i t i o n a l method. The dop is attached to a heavy copper wire which i n turn is held by the tang, a large support that holds the dop i n pos i t i o n over the s c a i f e . The tang can be weighted as needed to accelerate the polishing process, which requires, however, special s k i l l to avoid burns in the diamond and excessive deepening of the facets. The success of the operation depends on the correct positioning of the stone against the sc a i f e . The correct angles and settings are mostly determined by eye, although some factories employ automatic machines. 38 The directions in which the stone can be ground are given by the c r y s t a l structure. Polishers divide the stones into two-, three-, and four-pointers; Figure 16 i l l u s t r a t e s the difference in grain. The b r i l l i a n t cut is obtained by placing eighteen facets f i r s t {blocking) and then the remain-ing forty { b r i l l i a n t e e r i n g ) . Figure 17 shows the progressive stages. The facets are ground and then polished. An acid bath is given to the finished stone to remove any o i l and debris that may have entered the fractures and cleavages of the surface. CUTTING STYLES Early Forms of Cutting. Early polishing was done with the paramount purpose of conserving maximum weight: b r i l l i a n c e and symmetry were not so important. The form of the rough cr y s t a l was, therefore, rather closely preserved. The point cut (Fig. 18) is simply a polished octahedron, although some old point cuts have point angles below those of the natural octahedron and must therefore have been fashioned. The table cut i s an octahedron with i t s top point flattened to a square facet c a l l e d the table (Fig. 19). The table cut was the domi-13 nant style up to the 17th Century. The rose cut has a f l a t back and a domed and faceted front; this s t y l e , which is at least as old as the table cut, has many variations, and is Bruton, p. 159. Figure 18 The point cut (From Bruton, Fig. 1 Figure 19 The table cut (From Bruton, Fig. 1 40 e s p e c i a l l y adapted f o r f l a t t e r rough. Some rose cuts are i l l u s t r a t e d i n F i g u r e 27. As a r t i s a n s s t r o v e to i n c r e a s e the n a t u r a l beauty of the stone, the search f o r symmetry and b r i l l i a n c e l e d to a s e r i e s of s t y l e s , some of them i l l u s t r a t e d i n F i g u r e 23, u n t i l the f i r s t stone w i t h 58 vacets (same as the modern day b r i l l i a n t - c u t ) was developed by a V e n e t i a n c u t t e r , V i n c e n t P e r u z z i , i n the 17th Century. The P e r u z z i cut, shown i n F i g u r e 23 (bottom r i g h t ) , i s q u i t e c l o s e to the b r i l l i a n t , but d i f f e r s i n the angles of the crown and base. I t i s now c a l l e d old-mine cut. The Most E f f i c i e n t Forms of C u t t i n g . Diamond depends 14 f o r i t s beauty on i t s l u s t r e and i t s b r i l l i a n c e . L u s t r e i s the q u a l i t y of the l i g h t r e f l e c t e d from the s u r f a c e of a m a t e r i a l , and i t depends not only on the l i g h t r e f l e c t e d from the s u r f a c e i t s e l f but on rays t h a t have been p a r t l y absorbed b e f o r e being r e f l e c t e d back. Even though most t r a n s p a r e n t m a t e r i a l s are not very r e f l e c t i v e , diamond i s an e x c e p t i o n , sending back some 17 per cent of the l i g h t f a l l i n g d i r e c t l y on i t , as a g a i n s t some f i v e per cent f o r g l a s s . But the main c r i t e r i o n f o r diamond design i s the b r i l l i a n c e , which depends on two other q u a l i t i e s : l i f e and f i r e . L i f e i s the amount o f l i g h t that i s r e f l e c t e d back a f t e r e n t e r i n g the stone through the f r o n t , and f i r e i s the Bruton, p. 166. 41 amount of d i s p e r s i o n caued by the stone s p l i t t i n g white l i g h t i n t o the spectrum c o l o u r s . Since more l i g h t enters the stone than i s r e f l e c t e d back (83 per c e n t ) , the designer has to make sure t h a t the l i g h t i s not l o s t through the s i d e s and back, but r e f l e c t e d i n s i d e the stone and sent back to the v i e w e r . ( F i g . 20). The most important f a c t o r i s the c r i t i c a l angle, at which t o t a l r e f l e c t i o n o c c u r s . In diamond the c r i -t i c a l angle i s 24°26'; i . e . , l i g h t h i t t i n g the s u r f a c e at a s m a l l e r angle w i l l be r e f l e c t e d , and at l a r g e r angles w i l l be absorbed. On the other hand, the f i r e depends on the c o l o u r d i s -p e r s i o n of the m a t e r i a l and on the amount by which the white l i g h t i s r e f r a c t e d ( F i g . 21). The more the l i g h t i s bent, the more the f i r e . However, the l i f e i s decreased the more the l i g h t i s r e f r a c t e d , and so i t i s i m p o s s i b l e to a t t a i n both maximum f i r e and maximum l i f e . So the designer has to a t t a i n i n s t e a d an optimum balance of l i f e and f i r e , which occurs when l i f e m u l t i p l i e d by f i r e i s a maximum. L i f e times f i r e i s the t e c h n i c a l d e f i n i t i o n of b r i l l i a n c e . ^ " ' In 1919 Marcel Tolkowski c a l c u l a t e d the angles and p r o p o r t i o n s t h a t would make f o r maximum b r i l l i a n c e i n the 58-f a c e t design. Tolkowski's p r o p o r t i o n s are shown i n F i g u r e 22, and the p a r t s of the b r i l l i a n t - c u t diamond i n F i g u r e 24. L a t e r c a l c u l a t i o n s have d i f f e r e d somewhat from Tolkowski's. Bruton, p. 174. F i g u r e 20 The i d e a l l y p r o p o r t i o n e d b r i l l i a n t ( l e f t ) r e t u r n s more l i g h t than a deep (centre) or shallow ( r i g h t ) stone (From Bruton, F i g . 10.9) F i g u r e 21 White l i g h t d i s p e r s e d and r e f r a c t e d to produce f i r e (From Bruton, F i g . 10.10) 43 Figure 22 The p r o p o r t i o n s of the i d e a l Tolkowski b r i l l i a n t cut (From Bruton, F i g . 10.17 44 Figure 23 (From Bruton, Fig. 10.3) P A R T S A N D F A C E T S O F T H E B R I L L I A N T C U T VIEW FROM BOTTOM F i g u r e 2 4 (From B r u t o n , F i g . 10. 20 46 Today, there i s no u n i v e r s a l agreement, but s e v e r a l cuts are used, among them the American cut (a m o d i f i c a t i o n of Tolkowski's f i g u r e s ) and the European c u t , d e r i v e d from Dr. W. E p p l e r (1940). The geographic d e s i g n a t i o n s , however, are m i s l e a d i n g . F i g u r e 25 i l l u s t r a t e s the e v o l u t i o n of the b r i l l i a n t cut. Departures From the I d e a l . In p r a c t i c e , even hi g h q u a l i t y diamonds are not always cut to p r e c i s e angles. The crown angles, f o r example, set by Tolkowski at 34°30' ( F i g . 22), may be found to vary from 29° to 35°, w i t h small l o s s of b r i l l i a n c e . The p a v i l l i o n angle (40°45') i s , however, more c r i t i c a l , w i t h a t o l e r a n c e of some 2^. Deep stones (with a l a r g e r p a v i l l i o n angle) appear b l a c k i s h , and shallow ones (s m a l l e r p a v i l l i o n angle) look watery. F i g u r e 20 i l l u s t r a t e s r e f l e c t i o n l o s s i n a deep stone (middle) and a shallow one ( r i g h t ) . The common p r a c t i c e of reducing the p r o p o r t i o n s of the f i n i s h e d stone above the g i r l d e , which i s known as swind-ling, i s based on the g r e a t e r weight r e t e n t i o n from the cut. Indeed, i f an octahedron i s sawn i n h a l f , the l e s s removed from the crown the more the weight r e t a i n e d . F i g u r e 33 shows two swindled stones; the angles are r i g h t but the percentage above the g i r d l e may be as low as e i g h t per cent i n s t e a d of Tolkowski's 16.2 per cent. The e f f e c t , however, i s a reduced f i r e . But l i f e i s not reduced unless the angles are changed. BRAZILIAN CUT LISBON CUT OLD MINE CUT The illustrations on pages 168 to 173 are not exact as they are intended primarily for identification purposes. Girdles of round stones for example, are in fact scalloped. The English square cut was also called the double-cut and those in the diagrams from the Perruzzi to the old mine cut were called triple cuts. OLD EUROPEAN CUT ENGLISH ROUND-CUT BRILLIANT [JEFFRIES] EARLIER MODERN' BRILLIANT [TOLKOWSKY] MODERN BRILLIANT F i g u r e 25 (From B r u t o n , F i g . 10 .4 ) 48 The manufacturer i s always faced with a compromise between o b t a i n i n g the maximum weight and a r r i v i n g at the i d e a l p r o p o r t i o n s f o r maximum q u a l i t y of c u t . The high e r the q u a l i t y of the c r y s t a l , the more l i k e l y he i s to t r y f o r the best cut; but as the q u a l i t y lowers, he tends to optimize p r o f i t s by sa v i n g weight. Other Modern Cuts. S t y l e s other than the round b r i l l i a n t , the e i g h t - c u t or s i n g l e cut ( F i g . 26, top l e f t ) ^ and the rose cut ( F i g . 27) are c a l l e d fancy cuts. These are i l l u s t r a t e d i n F i g u r e s 26, 28 and 29. Fancy cuts may be d i v i d e d i n two c l a s s e s , the b r i l l i a n t cut v a r i a t i o n s (mar-qu i s e , pear, o v a l , and so on -- F i g . 28), and the step cuts, l i k e the emerald ( F i g . 29) and others used f o r small stones ( F i g . 26). There are no e s t a b l i s h e d p r o p o r t i o n s f o r such c u t s ; however, one r u l e that a p p l i e s i s that the angles and propor-t i o n s of the narrow cross s e c t i o n should be as c l o s e as p o s s i b l e 17 to the b r i l l i a n t cut i d e a l . In the emerald cut, f o r i n s t a n c e , the angles between the rows of f a c e t s should be almost imper-c e p t i b l e , and the angles of the c e n t r a l row should both be 34"30', as f o r a b r i l l i a n t . But most emerald cuts i n p r a c t i c e show p r o p o r t i o n s c a l c u l a t e d f o r maximum weight s a v i n g , with l i t t l e regard f o r b r i l l i a n c e . "^The e i g h t - c u t , which has 18 f a c e t s , i s used f o r v e r y small stones. 17 G.I.A., Diamonds, Ass. 15, p. 10. SINGLE C U T F R E N C H C U T / \ / \ / \ SWISS C U T X S Q U A R E =y C U T S P L I T - B R I L L I A N T C U T THE BRILLIANT IS ALSO USED FOR SMALL STONES. Ep> B A G U E T T E RHOMBOID CUT LOZENGE CUT TRIANGLE CUT THERE ARE MANY OTHER SHAPES OF SMALL STEP [OR TRAP] CUT STONES,THREE, SIX, AND TWELVE FACET ROSES ARE VERY COM-MON CUTS FOR SMALL STONES. Figure 2 6 the s i n g l e cut i s also c a l l e d eight-cut (From Bruton, F i g . 10.7) R O S E C U T S DOUBLE ROSE BOAT-SHAPED ROSE PEAR -SHAPED ROSE F i g u r e 27 (From B r u t o n , F i g . 10 .6 ) F i g u r e 28 [From B r u t o n , F i g . 10.5) 52 EMERALD CUT TRILLIANT // \\ SQUARE EMERALD CUT ^ggg^ STEP (OR TRAP] BRILLIANT CUT' STEP-CUT BEAD THE NUMBER OF STEPS VARY WITH THE SIZE AND DEPTH OF STONE. OTHER STEP CUTS ARE SHOWN UNDER "CUTS FOR SMALL STONES." PROFILE CUT [ IN VARIOUS SHAPESJ TWO TYPES OF RONDELLE BRIOLETTE Figure 29 (From Bruton, Fig. 10.8) 53 GRADING POLISHED DIAMONDS The Four C's. In the diamond trade the value of a p o l i s h e d diamond i s judged by assessment of four q u a l i t i e s : c o l o u r , c l a r i t y (or p u r i t y ) , cut ( p r o p o r t i o n s ) , and weight ( i n c a r a t s , whence the f o u r t h "C") . Grading Colour. Grading f o r c o l o u r means to decide how much a stone d e v i a t e s from being c o l o u r l e s s , i . e . , how much o f f - c o l o u r i t i s . Gem stones appear i n continuous s e r i e s from white ( c o l o u r l e s s ) to yellow, which i s the commonest group, from white to green, and from white to brown, and these s e r i e s can be d i v i d e d a r t i f i c i a l l y i n c e r t a i n c a t e g o r i e s , but, s i n c e there are no n a t u r a l d i v i s i o n s , there w i l l always be b o r d e r l i n e cases. Colour grading must be done i n white l i g h t , which im-p l i e s that no c o l o u r e d s u r f a c e s should r e f l e c t on the stone, and the stone i t s e l f must be set a g a i n s t a dead-white background. A common p r a c t i c e i s to p l a c e the stone on f l u t e d white paper with no t r a c e o f c o l o u r . A l s o f o l d e d white cards are s o l d f o r that purpose. The diamond must be examined through the s i d e of the p a v i l l i o n ; l o o k i n g at the t a b l e w i l l cause c o n f u s i o n due to the phenomenon of f i r e . Not every k i n d of white l i g h t w i l l do, because u l t r a -v i o l e t l i g h t , which i s i n v i s i b l e , i s l i k e l y to cause a v i s i b l e blue f l u o r e s c e n c e i n the diamond that w i l l c a n c e l any yellow c o l o u r . Since y e l l o w and blue are n e a r l y complementary, the 54 stone w i l l appear wh i t e r than i t i s . Such stones are mis-t a k e n l y c a l l e d "blue-white." Some stones, on the other hand, may e x h i b i t a yellow f l u o r e s c e n c e that w i l l push t h e i r c o l o u r towards the opposite end of the s c a l e . T h e r e f o r e , u l t r a v i o l e t l i g h t must be avoided. The sun's r a d i a t i o n , of course, contains u l t r a v i o l e t , but i t can be e l i m i n a t e d by u s i n g d a y l i g h t from a n o r t h - f a c i n g window ( s o u t h - f a c i n g i n the southern hemisphere). Another problem wi t h d a y l i g h t , however, i s that morning and evening l i g h t , that contains too much red, i s not s u i t a b l e . To a v o i d such problems, s e v e r a l standard l i g h t s have been developed t h a t c o n t a i n no u l t r a v i o l e t and are e q u i v a l e n t to n o r t h d a y l i g h t . The Gemological I n s t i t u t e of America (G.I.A.) i n t r o d u c e d the Diamondlite, a box with a niche i n the f r o n t , pained white, and f i t t e d with such a T i g h t . Another standard l i g h t i s the K o l o r i s c o p , a Swiss i n v e n t i o n . For grading c o l o u r c o n s i s t e n t l y , standard comparison stones are i n d i s p e n s a b l e . I n s t i t u t i o n s l i k e the G.I.A. w i l l grade a s e t o f comparison stones i n a standard manner. One d i f f i c u l t y encountered i n grading i s that the s i z e or bulk of the stone causes an i l l u s o r y d i f f e r e n c e i n c o l o u r . A 3-carat stone with a t i n g e of yellow w i l l appear darker than a % - c a r a t stone of the same d e n s i t y . T h e r e f o r e , when grading, allowance must be made f o r t h i s phenomenon. In any case, stones under % - c a r a t are not graded as a c c u r a t e l y as the l a r g e r s i z e s , s i n c e the p r i c e d i f f e r e n c e does not j u s t i f y i t . -55 Mounted stones are almost impossible to grade accur-ately, because the setting affects the colour and also the side of the p a v i l l i o n is obscured. Yellow gold tends to down-grade the colour, and blue sapphires w i l l improve i t . Small mounted stones w i l l appear colourless even when the i r larger 18 unmounted counterparts show more than a trace of colour. There are several colour grading systems, as shown i n Figure 30. "Wesselton" refers to the mine of that name and "Cape" to the Cape of Good Hope; these are t r a d i t i o n a l names, the G.I.A. scale consists only of l e t t e r s , started at D to avoid confusion with the A grades of many manufacturers. There are, indeed, numerous commercial scales; some use l e t t e r s and some use names l i k e Fine White, Commercial White, S i l v e r Cape, Dark Cape, and so on. One inevitable problem with such scales is that the same names correspond to very d i f f e r e n t colours, so that, say, Fine White w i l l be d i f f e r e n t for each manufacturer or dealer. The names Blue-White and Commercial White have been especially abused and in several countries there are rules regulating their use; for instance, Federal Trade Commission rules in the U.S.A., and similar rules i n 19 the U.K.iy Bruton, pp. 208-209. Ibid., pp. 210 and 212. 8s* i-a. ^ o 5-<? •S5 i l l A.G.S 0 9-10 G.I.A S C A N D . D . N S C A N . D . N under 0.50ct and 0.50ct over U.K M O s-x RAREST WHITE WHITE TINTED WHITE YELLOWISH YELLOW RIVER TOP WESSELTON WESSELTON WHITE TOP CRYSTAL COMMERCIAL WHITE CRYSTAL TOP CAPE CAPE LIGHT YELLOW YELLOW FINEST WHITE (BLUE-WHITE ) FINE WHITE TOP SILVER CAPE SILVERCAPE LIGHT C A P E CAPE DARK CAPE F i g u r e 30 ]omparison between the most common s c a l e s of c o l o u r A.G.S. G.I.A. SCAN.D.N. U.K. American Gem S o c i e t y Gemological I n s t i t u t e of America Scandinavian Diamond Nomenclature E n g l i s h System 5 7 Grading C l a r i t y . C l a r i t y refers to the presence or absence of inclusions, cleavages, cracks, or any other natural feature inside the stone, or any defect on the/surface. Such features, and others not normally v i s i b l e , such as twinning', w i l l cause a loss of b r i l l i a n c e i n the piece, making i t less valuable. The minimum equipment for grading by c l a r i t y is a pair of diamond tongs and a hand lens of lOx magnification. The tongs are provided with fine non-slip tips and are not so strongly sprung as watchmakers' tweezers. : The lens should be corrected for chromatic and spherical aberration ( l i k e the Zeiss). The magnification has been set at lOx as a standard; blemishes that are not v i s i b l e at that magnification are not considered, even i f they are v i s i b l e under a microscope. The stones can be examined in daylight or with the help of a lamp with an opaque shade. A lamp can be used so as to provide dark f i e l d i llumination, which i s the most useful to detect inclusions. The G.I.A. supplies a binocular microscope magnifying to ten times, provided with both l i g h t and dark f i e l d i l l u m i -nation and c a l l e d the Gemolite. It has a 50x zoom lens that allows the grader to f i n d small inclusions and then check i f they are v i s i b l e under lOx. This practice is considered un-f a i r by some dealers. According to G.I.A. terminology, external features are c a l l e d blemishes and internal features i n c l u s i o n s . A l i s t follows. 5 8 Blemishes: 1. C a v i t i e s -- openings on the s u r f a c e . 2. Nicks -- minor s u r f a c e chips o f t e n caused by long wear. 3. Twin l i n e s , knot l i n e s , or g r a i n l i n e s -- caused by twinning or by l a r g e i n c l u s i o n s with d i f f e r e n t l y o r i e n t e d g r a i n than the main c r y s t a l . 4. N a t u r a l s -- remnants of the o r i g i n a l c r y s t a l s u r f a c e or s k i n . 5. Scratches and g r i n d i n g marks. 6. E x t r a f a c e t s -- u s u a l l y made by the c u t t e r to e r a d i c a t e s u p e r f i c i a l i m p e r f e c t i o n . 7. Rough g i r d l e -- o f t e n caused by too r a p i d b r u t i n g . 8 . Facets n e a r l y p a r a l l e l to the g r a i n -- which show a gray or cloudy appearance. 9. Burn marks -- caused by o v e r h e a t i n g d u r i n g p o l i s h i n I n c l u s i o n s : 1. Cleavages -- any break along the g r a i n ( i . e . , p a r a l lel" ;.to one of the four p a i r s of o c t a h e d r a l faces) . 2. F r a c t u r e s -- any breaks that do not f o l l o w the g r a i n f o r the whole of i t s extent. 3. Feathers and h a i r l i n e f e a t h e r s -- i . e . , cleavages and f r a c t u r e s w i t h a f e a t h e r y appearance. 4. Included c r y s t a l s , a l s o c a l l e d bubbles -- which are dark by t r a n s m i t t e d l i g h t but t r a n s p a r e n t u s i n g dark f i e l d i l l u m i n a t i o n . 5. "Carbon" spots -- small cleavages or sometimes i n c l u s i o n s of diamond c r y s t a l s or other m i n e r a l s , dark or white. G.I.A., Diamonds, Ass. 2 0 , pp. 2 - 4 . 59 6. Pinpoint.inclusions -- minute "carbon" spots. 7. Clouds -- white cottony inclusions that are either minute hollow spaces or small patches of tiny cry-s t a l s . 8. Knots -- included crystals oriented d i f f e r e n t l y from the main c r y s t a l and standing out on the surface due to the extra hardness. 9. Percussion marks or bruises -- tiny white marks re s u l t i n g from blows. 10. Crystal growth lines -- a banding effect v i s i b l e only under certain l i g h t i n g conditions. 11. Bearded, or feathered, girdle -- minute h a i r l i k e fractures that extend into the stone from the gi r d l e , and are the result of abuse during bruting. 12. Fissures -- cleavages or fractures open at the surface as a long cavity.21 Such features are plotted on a chart representing the stone, as i n Figure 31, using a code of signs and colours to d i f f e r e n t i a t e each type of blemish and inclusion. There are several grading scales, some of which are compared i n Figure 32. The l e t t e r S stands for "small" ( i n c l u s i o n s ) . " Then VS i s "very small ( i n c l u s i o n s ) , " and VVS means "very, very small ( i n c l u s i o n s ) . " Pique means "pricked" i n French. In the English scale the top grades are Flawless, WS and VS; SI i s a middle grade; and Pique and the rest are low grades. Naturally, the terms i n each scale stand for a d e f i n i t e stan-G.I.A., Diamonds, Ass. 20, pp. 4-8. 6 0 r" SYMBOLS USED TO INDICATE POSITION AND NATURE OF DIAMOND-CLARITY CHARACTERISTICS Plot on the crown diagram all characteristics visible through the crown, unless they reach or are on the pavilion surface.. Be careful to keep all markings in their relative, size and location. If the plotting is executed carefully enough, the clarity should be almost self-evident. A char-acteristic for which there'.is no symbol should be covered by a written comment. Note: It is suggested that a green pen be used,to plot external characteristics, and red to signify internal characteristics. Ball-point pens with fine auditor's points are excellent for this purpose. . External Characteristics 1. 2. 3. 4. 5. 6.. 7. v EF A Cavity Nick External grain, knot or twinning line Natural Sratch or wheel mark Extra facet (actual shape) Rough girdle Internal Characteristics 1. Cleavage, feather and u ; -hairline feather' 2. Fracture, feather and - ' hairline feather 3. ' o Included crystal (actual shape) 4. • "Carbon" spot 5. • Pinpoint inclusion 6. . Group of pinpoint inclusions 7. O Cloud (actual shape) 8. x " : ® Knot 9. x Bruise 10. Bearded, or feathered girdle 11. J " Internal grain, knot or twinning line • 12 © Laser F i g u r e 31 From a brochure by the Diamond Brokers, Vancouver, B.C. A Scale Commonly Used in the U.K. Cemological Scandinavian Institute of America Diamond Nomenclature Scale Flawless (clean) F L I F (Internally Flawless) F L W S vvs, V V S , W S , vvs, V S V S , V S , V S , V S , SI S I , SI , S I , ist Pique1 S I , I, (Imperfect) ist Pique 2nd Pique 3rd Pique 2nd Pique la Spotted 3rd I'icjiid I. Heavy Spotted Rejection F i g u r e 32 C l a r i t y s c a l e s compared (From Bruton, p. 223) d a r d . I t would be i m p o s s i b l e t o d e t a i l f u l l y the meaning o f each c a t e g o r y , even i f space a l l o w e d ; the f o l l o w i n g i s l i s t o f examples o f maximum a l l o w a b l e blemishes and i n c l u -s i o n s under each c a t e g o r y o f the E n g l i s h s c a l e combined w i t h S c a n d i n a v i a n nomenclature. GRADE MAXIMUM ALLOWABLE IMPERFECTIONS (Examples) VISIBILITY Flawless WS (Scan. IF) WS (Scan. WS 1) VS SI 1st Pique Internal growth lines colorless from the front Minor natural on girdle Minor nicks and cavities not i n the table Slight facet abrasion removable by polishing Pinpoint inclusions above the table Slight bearding of the girdle not v i s i b l e from the front Small cleavages not under the table Some general abras ion Nick in girdle S l i g h t l y cloudy areas Dark cry s t a l not under table Cleavage v i s i b l e from the front Barely v i s i b l e with lOx lens Barely v i s i b l e with lOx lens Very d i f f i c u l t to find with lOx lens D i f f i c u l t to find with lOx lens Just v i s i b l e with watchmaker's lens Just v i s i b l e to naked eye 22 Bruton, pp. 224-225. 63 2nd, 3rd Pique Group of dark spots under More easily visible table to naked eye Dark cloud, under table Spotted Colored cleavage reaching Easily visible to under table naked eye Scratch on table Heavy Spotted Large or very numerous Very easily visible dark spots under table to naked eye Large areas of colorless crystals under table It should be noted that stones under \ carat need not be graded with the f u l l scale, because the p r i c e d i f f e r e n c e does not j u s t i f y i t . As with colour scales, there i s a wide discrepancy among the various dealers regarding the i n t e r p r e t a t i o n of terms commonly used in the trade, l i k e WS, VS, and other l i k e clean, eye-clean, arid commercially •perfect, which are also used. The term clean, i n p a r t i c u l a r , has been so abused i n the U.S.A. that the F.T.C. r e s t r i c t e d i t s use to 23 diamonds that f i t the Commission's d e f i n i t i o n of p e r f e c t . Another problem i s that, as with colour, diamonds present themselves i n continuous gradations, so that even the best defined scale w i l l have many borderline cases. For instance, a spot under the table i s more detracting to the value that a spot at the edge, but i f the spot l i e s between table and edge there i s no way to decide whether to downgrade the stone or not. 23 Bruton, p. 222 64 Grading Cut. A b r i l l i a n t - c u t stone with p r o p o r t i o n s s u f f i c i e n t l y c l o s e to the i d e a l d e s c r i b e d e a r l i e r w i l l have maximum f i r e and l i f e , i . e . , b r i l l i a n c e . The main reason that departures from the i d e a l are so common i s that c u t t i n g to these p r o p r o t i o n s causes a g r e a t e r wastage of rough. A manufacturer who cuts a spread table, i . e . , one that i s too l a r g e f o r the diameter of the stone, w i l l be able to o f f e r more weight f o r the same p r i c e , as i l l u s t r a t e d by F i g u r e 33. The i d e a l - c u t stone A (with c u l e t i n p o i n t 0) weighs 0.875 c t . , while an extremely spread stone, l i k e D, belongs to a h i g h e r weight bracket by being over a c a r a t , 1.08 c t . A spread t a b l e goes together with a t h i n crown, as can be seen. Other u s u a l departures from the i d e a l , i n order of d i m i n i s h i n g frequency, are: t h i c k g i r d l e , deep p a v i l i o n , major symmetry f a u l t s , t h i n g i r d l e , shallow p a v i l i o n , t h i c k crown. Vari o u s instruments are a v a i l a b l e f o r determining the a c t u a l p r o p o r t i o n s of a stone. The G.I.A.'s P r o p o r t i o n -scope c a s t s a m a g n i f i e d shadow of the stone onto a l i n e d i a -gram of the i d e a l c u t . Measuring devices and angle gauges may a l s o be used. However, V i s u a l estimates can be very accurate w i t h p r a c t i c e . The p a v i l i o n angle, f o r i n s t a n c e , may be estimated by observing the r e f l e c t i o n of the t a b l e on the p a v i l i o n f a c e t s . Looking through the f r o n t of the stone, 65 D—1.08 Ct. C—1.00 Ct. »- .94 Ct. .875 Ct. Figure 33 ( l e f t ) A swindled b r i l l i a n t ; the dotted l i n e shows the proper cut. (From G.I.A., Diamonds, Ass. 15, Fig. 16) Figure 33 (right) Several b r i l l i a n t s that can be obtained from the same half octahedron. Only A is a perfect b r i l l i a n t . (From G.I.A., Diamonds, Ass. 22, Fig. 1) 66 a bright image of the table can usually be seen, which i n a correctionly proportioned stone should be 33 per cent to 40 per cent of the diameter of the table i t s e l f . A shallow p a v i l i o n produces a fish-eye e f f e c t , and a deep p a v i l i o n large black r e f l e c t i o n s are seen in the centre of the table. The depth of the crown and the thickness of the g i r d l e af f e c t the r e f l e c t i o n in known ways. Besides the closeness of the stone's proportions to the i d e a l , another factor i s considered when grading for cut, namely the f i n i s h . F i n i s h is determined by q u a l i t y of p o l i s h , qu a l i t y of the g i r d l e surface (the ideal being a waxy, smooth f i n i s h ) , symmetry (perfection of shape and r e l a t i v e poisoning of the f a c e t s ) , size of the culet, facet edges, extra facets, and naturals, although some of these variables are also con-sidered under proportions and c l a r i t y . There are no scales for grading cut, but only descrip-t i v e terms l i k e very good, good, medium, and poor. However, for the purposes of valuation of a polished stone, the devi-ation from the ideal cut can be established as a percentage, using, for instance, the G.I.A. tables. Weight. The metric carat, now universally in use, amounts to 0.2 g. A carat was o r i g i n a l l y the weight of a dried seed of carob. The grain, the weight of a dried grain of weight, has come to mean h carat. Hundredths of a carat are c a l l e d points. 67 Loose stones are weighed i n o r d i n a r y chemical b a l a n c e s , accurate to about a p o i n t , and s e v e r a l s p e c i a l diamond bala n -ces, l i k e the O e r t l i n g and the M e t t l e r . The weight of mounted stones can only be estimated; f o r that purpose, hole gauges, c a l i p e r s , l i k e the Moe and the Leveridge gauges, and compari-son gauges are used. There are a l s o formulae that give the weight of an i d e a l b r i l l i a n t - c u t diamond as a f u n c t i o n o f 2 i t s l e n g t h measurements, l i k e , f o r i n s t a n c e , 0.024 5 hr = weight, i n c a r a t s (where h i s the height and r the r a d i u s , i n mm). Charts o f s i z e s and corresponding weights have a l s o been made. A l l these means are a l s o used on unmounted stones when p r e c i s i o n balances are not a v a i l a b l e . V a l u a t i o n s . The value of a p o l i s h e d diamond depends on i t s c o l o u r , c l a r i t y , c u t , and weight. Of these parameters, weight i s the most o b j e c t i v e and e a s i l y determined, so that i t forms the base f o r a l l v a l u a t i o n s . An a n c i e n t attempt to f i n d r e g u l a r i t y i n the p r i c i n g of diamonds by weight was formulated as e a r l y as 1638 by the merchant T a v e r n i e r , who s t a t e d the " r u l e of squares": 2 The p r i c e o f a diamond of x c a r a t s i s x times the p r i c e per 2 3 c a r a t of t h a t given q u a l i t y . T h i s formula has only a very g e n e r a l a p p l i c a t i o n to today's p r i c e s ; however, as Fi g u r e 34 shows, i t can be reasonably c l o s e to a c t u a l p r i c e s . The A. N. Wilson, Ed., International Diamond Annual (Johannesburg: Diamond Annual L t d . , 1971), p. 97. Bruton, p. 258, a t t r i b u t e s the r u l e to David J e f f r i e s , an 18th Cen-t u r y diamond merchant. WEIGHT Ct. 0-25 0- 50 1- 00 2- 00 3- 00 Market Price LOW QUALITY £ 27 72 3'5 1,260 2,580 Calculated Price £ 20 79 3'5 1,260 ',835 HIGH QUALITY Market Calculated Price Price £ 48 '75 935 3-400 5,000 £ 55 '34 935 3,74° 8A'5 Figure 34 A comparison of actual and calculated prices (From Bruton, p. 2 5 9 ) 69 chart shows p r i c e s f o r p o l i s h e d stones of low and hig h q u a l -i t y i n England and Belgium i n 1972; the base p r i c e f o r the a p p l i c a t i o n o f the r u l e i s the p r i c e of a one-carat stone i n each case. The r e l a t i o n between weight and p r i c e i s d i s -cussed more thoroughly i n Appendix 2. To e v a l u a t e a p o l i s h e d stone, the weight should be determined by weighing or u s i n g a gauge; then the cut, c l a r i t y and c o l o u r should be e s t a b l i s h e d . There are then standard c h a r t s , such as those p u b l i s h e d by the G.I.A., that give the value of a stone as a percentage of the value of a top qu a l -i t y stone. For i n s t a n c e , a G.I.A. ch a r t f o r round cuts appears as Table I I . 1 . The value of a stone o f . c o l o u r . D and c l a r i t y F (G.I.A. s c a l e s ) i s taken as 100 per cent, whereas an F c o l o u r of c l a r i t y weighing from 0.90 c t . to 0.96 c t . would be only 57 per cent. S i m i l a r l y , the G.I.A. o f f e r s c h a r t s o f percentage r e d u c t i o n o f value f o r poor c u t . To complete the v a l u a t i o n , a ch a r t of p r i c e s f o r top q u a l i t y diamonds i s necessary, and those are prepared p e r i o d i c a l l y by the G.I.A. from i n f o r m a t i o n s u p p l i e d by the wholesalers and importers (Table II.2). The G.I.A. v a l u a t i o n c h a r t s , are, of course, t a i l o r e d to the American market, and the p r i c e l i s t s o nly r e l e v a n t to an American buyer (wholesaler or j e w e l l e r ) wishing to buy from the importers. Regarding the percentage r e d u c t i o n of value f o r poor c u t , t h i s i s determined by comparing the present weight of a diamond to the weight that would have r e s u l t e d had i t been cut o r i g i n a l l y to an i d e a l p r o p o r t i o n . T h i s i s G.I.A. PRICE REDUCTION CHART ROUNDS and MARQUISE P E R C E N T A G E R E D U C T I O N C H A R T F O R DIAMOND C O L O R A N D C L A R I T Y GRADES Color D E F G H Color Clarity a b c d e f g h a b c d e f g h a b c d e f g h a b c d e f g h a b c d e f g h Clarity F 100% 90 91 87 - - - 1 0 0 % - - - 75 77 76 - - - 100% 63 65 64 80 81 86 85 94 53 55 56 70 75 77 78 90 F VVSj 74 75 72 77 83 88 83 93 68 69 67 77 83 88 83 93 62 63 62 77 83 88 83 93 53 55 54 69 75 80 78 91 46 48 48 62 68 72 73 88 V V S j v v s 2 62 60 60 67 75 80 76 91 58 57 56 67 75 80 76 91 53 52 53 67 75 80 76 91 46 48 48 60 70 74 73 88 42 44 42 56 63 68 68 86 J v v s 2 j 51 52 53 61 70 74 72 88 49 50 50 61 70 74 72 88 46 47 48 61 70 74 72 88 42 44 42 56 62 70 68 86 38 40 38 51 58 63 64 81 j V S i v s 2 46 48 48 57 65 70 68 86 _ 44 46 46 57 65 70 68 86 42 44 42 57 65 70 68 86 39 41 40 53 57 63 65 84 • — 1 36 38 35 48 52 58 61 78 j V S 2 s i i 43 45 46 54 60 66 66 84J42 44 42 54 60 66 66 84 40 42 38 54 60 66 66 84 37 39 36 50 51 56 61 78 3 4 3 6 32 46 48 52 58 72 j SI . SI 2 42 43 43 52 57 62 63 78 39 42 39 52 57 62 63 78 38 40 36 52 57 62 63 78 35 37 34 48 48 52 59 72 32 35 29 44 43 48 55 71 | 1 SI 2 I X * 38 39 39 47 52 56 57 71 35 38 35 47 52 56 57 71 35 36 33 47 52 56 57 71 32 34 31 44 44 47 54 65 29 32 26 40 39 44 50 65 I- * I 2 * 35 36 36 43 47 52 52 65 33 35 32 43 47 52 52 65 32 33 30 4.3 47 52 52 65 29 31 28 40 40 43 49 60 27 29 24 37 36 40 46 59 j I 2 * r 3 * 21 22 22 26 29 31 32 39 20 21 20 26 29 31 32 39 19 20 18 26 29 31 32 39 18 19 17 24 24 26 30 36 16 18 15 22 22 24 28 36 1 I 3 * : This is merely a guide. In actual trade practice, stones in the Imperfect grades are likely to be priced individually, depending on the nature and visibility of flaws. Stones in the lower color grades are also likely to be priced individually. E X P L A N A T I O N OF SYMBOLS: Column a - Includes sizes from 1.90 cts. thru 3. 10 cts. Column e - Includes sizes from . 68 ct. thru . 8 9 ct. Column b - Includes sizes from 1.36 cts. thru 1.89 cts. Column f - Includes sizes from .36 ct. thru . 6 7 ct. Column c - Includes sizes from . 9 7 ct. thru 1.35 cts. Column g - Includes sizes from . 18 ct. thru . 3 5 ct. Column d - Includes sizes from . 90 ct. thru . 96 ct. Column h - Includes sizes of . 17 ct. and below. o TABLE II.1 ' (Continued) ROUNDS and M A R Q U I S E P E R C E N T A G E R E D U C T I O N C H A R T F O R D I A M O N D C O L O R A N D C L A R I T Y G R A D E S Color I J K L M N O P * C lar i ty a b c d e f g h a b c d e f g h a b c d e f g h a b c d e f g h - a b c d e f g h a b c d e f g h F 42 46 47 63 66 71 72 88 35 40 40 49 55 63 65 84 30 34 34 41 47 57 57 82 26 30 28 36 41 49 49 76 21 25 26 32 36 44 44 64 18 22 23 27 26 37 38 56 V V S j 36 41 40 57 60 66 66 85 31 35 36 45 51 59 61 81 27 30 31 38 44 53 53 80 23 27 26 33 38 46 46 73 19 22 24 29 33 40 40 63 16 19 21 24 24 34 36 55 vvs 2 33 37 37 51 55 61 62 81 28 33 34 41 47 56 57 79 25 28 29 35 43 50 50 77 21 24 25 30 36 43 44 71 17 20 22 27 31 37 38 61 14 18 19 22 22 32 34 53 V S i 30 34 34 47 52 58 58 78 27 30 31 38 44 53 53 74 23 26 27 32 39 47 48 72 19 22 24 28 34 41 42 66 16 19 20 25 29 35 36 59 13 16 17 20 21 30 33 52 v s 2 28 32 31 44 48 53 56 72 26 28 28 36 41 46 51 71 22 24 25 30 36 44 46 68 18 21 22 26 32 39 40 64 15 18 19 22 27 33 34 57 12 15 16 18 20 28 31 48 S I 1 26 30 29 42 43 46 53' 71 24 27 26 34 37 41 49 68 20 23 23 28 32 39 44 66 17 20 20 24 29 36 38 62 14 17 17 20 25 31 32 53 11 14 15 17 18 26 29 44 SI 2 25 29 26 41 40 42 51 68 23 26 24 32 33 37 4? 66 19 22 21 26 30 35 41 65 16 19 19 22 26 34 36 59 13 16 16 19 23 29 31 50 10 13 14 16 17 24 28 42 h* 23 26 24 37 36 38 46 62 21 24 22 29 30 34 43 60 17 20 19 24 27 32 37 59 15 17 17 20 24 31 33 54 12 15 15 17 21 26 28 45 9 12 13 15 15 22 25 38 21 24 22 34 33 35 42 57 19 22 20 27 27 31 39 55 16 18 17 22 25 29 34 54 13 16 16 18 22 28 30 49 11 13 13 16 19 24 26 42 8 11 12 13 14 20 23 35 r 3 * 13 15 13 21 20 21 26 34 12 13 12 16 17 19 24 33 10 11 11 13 15 18 21 33 8 10 10 11 13 17 18 30 7 8 8 10 12 15 16 25 5 7 7 8 9 12 14 21 * T h i s is mere ly a guide. In actual trade practice, stones in the Imperfect grades are l ikely to be pr iced individually, depending on the nature and v i s ib i l i ty of flaws. Stones in the lower color grades are also l ike ly to be pr iced individually. E X P L A N A T I O N O F S Y M B O L S : Column a - Includes sizes from 1.90 cts. thru 3. 10 cts. Column b - Includes sizes f rom 1.36 cts. thru 1.89 cts. Column c - Includes sizes from .97 ct. thru 1.35 cts. Column d - Includes sizes from . 90 ct. thru . 96 ct. * l-> Column e - Includes sizes Column f - Includes sizes Column g - Includes sizes Column h - Includes sizes f r o m .68 ct. thru .89 ct. f r o m .36 ct. thru .67 ct. f r o m . 18 ct. thru . 35 ct. of . 17 ct. and below. TABLE.II .2 COMPREHENSIVE WHOLESALE DIAMOND BASE PRICES The prices compiled below are net cash per carat prices for flawless, finest color stones (entirely without body color, highly transparent and averaging no more than a 5% deduction for proportions and finish). Commercial price lists for this quality may show slightly higher figures, since they usually cover term rather than cash prices. Average Weight Range • Ovals, Pears Emerald Stone Size Covered* Rounds Marquise and Hearts Cuts 3 cts. 2. 90 cts. thru 3.10 cts. $11, 500 $10,200 $9, 200 $8, 500 2 3/4 cts. 2. 63 cts. thru 2. 89 cts. 10,300 9, 100"'- 8, 240 7,630 2 1/2 cts. 2.40 cts. thru 2.62 cts. 9,700 8, 550 7, 760 7, 190 2 1/4 cts. 2. 23 cts. thru 2. 29 cts. 9, 000 7, 920 7, 200 6, 680 2 cts. 1. 90 cts. thru 2.10 cts. 8, 750 7, 700 7, 000 6, 500 1 3/4 cts. 1. 63 cts. thru 1. 89 cts. 6, 850 6,030 5,480 5, 120 1 1/2 cts. 1.40 cts. thru 1. 62 cts. 5, 900 5, 200 4, 720 4,430 1 3/8 cts. 1. 36 cts. thru 1. 39 cts. 5, 300 4, 660 4, 240 4, 000 1 1/3 cts. 1. 30 cts. thru 1.35 cts. 5, 000 4,400 4, 000 3, 780 1 1/4 cts. 1. 23 cts. thru 1. 29 cts. 4,980 4, 250 3, 880 3, 670 Heavy ct. 1. 06 cts. thru 1. 22 cts. 4, 965 4, 220 3, 840 3, 640 1 ct. . 97 ct. thru 1. 05 cts. 4, 950 4, 180 3, 800 3, 600 Lt. 1 ct. . 90 ct. thru . 96 ct. 3,450 2, 720 2,470 2, 400 7/8 ct. . 84 ct. thru . 8.9 ct. 2,375 2, 110 1,920 1,800 3/4 ct. . 68 ct. thru . 83 ct. 2, 100 1, 980 1, 800 1, 600 5/8 ct. . 57 ct. thru . 67 ct. 1,460 1, 520 1, 380 1,120 1/2 ct. . 47 ct. thru . 56 ct. 1, 360 1,430 1, 300 1, 040 Lt. 1/2 ct. .41 ct. thru . 46 ct. 1, 060 1, 150 1, 040 815 3/8 ct. . 36 ct. thru .40 ct. 960 1, 050 955 735 1/3 ct. . 30 ct. thru . 35 ct. 910 1, 020 850 600 1/4 ct. . 23 ct. thru . 29 ct. 760 775 700 550 1/5 ct. . 18 ct. thru . 22 ct. 575 640 580 440 1/6 ct. . 15 ct. thru . 17 ct. 420 485 440 335 1/8 ct. . 12 ct. thru . 14 ct. 410 475 430 330 1/10 ct. . 09 ct. thru . 11 ct. 400 460 420 320 1/14 ct. . 07 ct. thru . 08 ct. 395 455 415 315 *These size ranges will vary slightly with different firms. 73 similar to the way i n which old-mine cuts and other old-fashioned cuts are evalued: one estimates the weight of the stone i f i t were recut to the b r i l l i a n t s t y l e , and c a l -culates the corresponding value (adding the price of re-cutting) . The valuation of modern fancy cuts, on the other hand, i s more complex than that of b r i l l i a n t s , although there are also tables. One problem is that there i s a less predictable demand for fancy cuts; another, that the ideal proportions are not established. Fancy Colours. Diamonds have been found in some tones and i n t e n s i t i e s of each of the six spectral hues, but usually they are either colourless or range from very l i g h t to very strong yellow or brown. As yellow and brown increase from the colourless end of the grading scale, value steadily drops to the point where the colour becomes deep enough to be an asset. In other words, deep tones of colour increase a diamond's d e s i r a b i l i t y . A fancy i s a diamond that possesses a d i s t i n c t body colour other than l i g h t yellow, l i g h t brown, or grey. These colours are excluded because they are the most common. The prices of fancies vary too widely to be worth co m p i l i n g . ^ G.I.A., Diamonds, Ass. 18, p. 4. 7 CONCLUSION Diamonds are a nonhomogeneous commodity, valuable enough to j u s t i f y the most careful individual appraisal. Minute observable differences in properties make for enormous differences in value. There is substantial, i f not t o t a l agreement, on what q u a l i t i e s are desirable; thes can be summarized as r a r i t y of the stone and beauty of the cut. CHAPTER III PRODUCTION, DISTRIBUTION AND MANUFACTURE OF DIAMONDS OUTLINE The f i r s t section presents a diagram of the complex network of organizations, firms and individuals that handle the flow of diamonds from the mines to the r e t a i l e r s . The central element in the schema, the De Beers group, i s l e f t for a subsequent chapter, and the second section instead deals one by one with the diamond-producing countries, with special reference to what kinds of e n t i t i e s engage in mining, v i z . , companies or private diggers, and the ways in which the production reaches the world market. The t h i r d section studies b r i e f l y each of the main centres of diamond cutting in terms of history, labour practices and type of output, and the p r i n c i p a l wholesale trading centres, which are most often closely connected to the industry. A conclusion points out certain recurrent patterns in the h i s t o r i c a l development of the cutting and trading centres. THE DISTRIBUTION STRUCTURE A diagram of the d i s t r i b u t i o n of gem diamonds is shown in Figure 35. The central role in the d i s t r i b u t i o n G E N E R A L I S E D G E M DIAMOND DISTRIBUTION S T R U C T U R E Dc Beers Producers Outside Goods Producers ZA The Central Selling Organisation The Diamond Trading Company 76 Syndicate Brokers Polished Manufacturers Polishid Brokers Rough Dealers Polished Dealers A Manufacturing Jewellers Wholesale Jewellers "N Diamond Investment Broking Companies A Retail Jewellers A Diamond Consumers F i g u r e 35 G e n e r a l i z e d gem diamond d i s t r i b u t i o n s t r u c t u r e . (From The Economist I n t e l l i -gence U n i t L t d . , I n f l a t i o n Shelters: Precious Metals aseInvestments (London: EIU 1 9 7 6 ) , p . 37. 77 system i s p l a y e d by the De Beers companies, which s e l l about 80 per cent of the world's rough gem diamond p r o d u c t i o n through the C e n t r a l S e l l i n g O r g a n i s a t i o n (C.S.O.) i n London. C.S.0.-marketed diamonds, t r a d i t i o n a l l y c a l l e d " s y n d i c a t e , goods", i n c l u d e the rough produced by the Russians and des-t i n e d f o r consumption o u t s i d e the Soviet Union. The Russians, however, p o l i s h p a r t of t h e i r own rough and d i s t r i b u t e i t i n the world market. Of the 20 per cent of the world's diamonds the C.S.O. doesn't handle ("outside goods"), the most important supply i s from Ghana; p a r t of the S i e r r a Leone S e l e c t i o n T r u s t supply a l s o goes to s p e c i f i e d buyers d i r e c t . I n d i v i -dual d i ggers and small mines i n South A f r i c a , South West A f r i c a , and Lesotho, s e l l to l i c e n s e d buyers. The C e n t r a l A f r i c a n R e p u b l i c , the Ivory Coast, Guinea, and the South American s t a t e s of Guyana, Venezuela, and B r a z i l s e l l out-s i d e the C.S.O. The small Indian p r o d u c t i o n i s a l s o o u t s i d e . A l s o o u t s i d e c o n t r o l are unrecorded but l a r g e numbers of diamond mined and s o l d i l l e g a l l y i n many producing c o u n t r i e s to end up i n c u t t i n g c e n t r e s . Regarding the i n t e r p r e t a t i o n of the d i s t r i b u t i o n diagram, i t should be noted that any one diamond f i r m of almost any s i z e can perform operations that embrace s e v e r a l of the separate f u n c t i o n s i n the boxes. Dealers handle both rough and p o l i s h e d , and they are o f t e n a l s o c u t t e r s as w e l l ; 78 a l s o , many of them have connections with b r o k e r i n g companies. The d i f f e r e n c e between a d e a l e r and a broker i s that the former works f o r h i s own account, while the broker works f o r o t h e r s . As b e f o r e , d e a l e r s o f t e n f u n c t i o n as br o k e r s , and c o n v e r s e l y . THE PRODUCING COUNTRIES S t a t i s t i c s r e g a r d i n g the p r o d u c t i o n and movement of diamonds are s t r i k i n g l y u n r e l i a b l e . For i n s t a n c e , the U.N. S t a t i s t i c a l Yearbook f o r 1976 ( F i g . 36) give s the world p r o d u c t i o n of gemstones f o r 1967 at 8.75 m i l l i o n c t . , f o r 1968 at 11.29 m i l l i o n c t . , and f o r 1969 at 14.35 m i l l i o n 2 c t . , whereas the International Diamond Annual g i v e s 8.5, 9.2 and 11.0 m i l l i o n c t . r e s p e c t i v e l y ( F i g . 37) - - a very c o n s i d e r a b l e d i f f e r e n c e . The reason f o r such d i s r e p a n c i e s i s t h a t most of the data are j u s t e s t i m a t e s . Sometimes o f f i c i a l data are wi t h h e l d ; i n other cases they are " i n v a l i -dated by smuggling and other i l l i c i t p r a c t i c e s , " as the I.D.A. puts i t . Besides, many of the producing c o u n t i r e s , s p e c i a l l y i n A f r i c a , have gone and are going through p e r i o d s "''The Economist I n t e l l i g e n c e U n i t L t d . , I n f l a t i o n Shelters, p. 36. 2 A. N. Wilson, Ed. International Diamond Annual (Johannesburg: Diamond Annual (Pty) L t d . , 1971). Hence-f o r t h r e f e r r e d to as I.D.A. ^I.D.A., p. 11. 79 Thouiond metric coroti A. Industrial diamonds. B. Gem diamonds. — A. Diamants Industrials B. Diamants prieleux Country or oroa Payi ou lono TOTAL Angola Botswana B r a i l l 1 — B r t t i l 1 , , . Control African Republic. . . Republlquo centrafrlcolne Congo 1  Gnano Oulnoo • 1 — Oulneo ' 1  Ouyona — Ouyono I^ndlo — Indo jlndonodo 1 — lndon4ile ' . . . . I i Ivory Cooif * ' . .! C6to d'lvolre * 1 j | Loiotho '• * Liberia 1 ' ' — U b o r l o 1 ' * N o m l b l o 1 — Nomlblo 1  Sierra l » o n c ' South Africa Afrlquo du Sud USSR • ' — U R S S " United Rep. of Tanzania. . . . Rop.-Unle de Tonzanle Venezuela Zaire — Zaire Code 1966 1967 1968 1969 1970 1971 1972 Mime 1973 r> de coroti 1974 motrlque* * 1973 A 6 30 970 8 7S0 31 300 9 740 28 490 11 290 28 730 14 330 29 630 13 910 29 770 12 770 11 130 13 690 30 932 13 340 12 160 , 1 3 140 10 130 11 170 A ' B 300 968 306 983 351 1 316 506 1 516 599 1 797 603 " 1 810 539 ' • 1 616 531 1 1 594 490 1 1 470 113 1 343 A + 6 — — 11 31 538 872 2 446 2 453 1 2 718 1 2 414 A B 20 13 10 15 0 1 4 10 35 10 31 25 63 1 37 1 36 1 127 1 127 1 133 1 133 A B 271 270 '261 260 304 305 187 348 169 313 164 304 178 346 183 341 1 118 i 220 1 1 19 I 220 A B 5 000 400 4 154 946 4 343 957 1 415 597 702 700 700 ... A B 2 537 282 2 283 254 2 202 243 2 152 239 2 293 235 2 306 236 1 2 393 266 1 2 083 232 1 2 315 ' 237 1 2 093 1 233 A B 31 21 31 20 49 21 50 22 52 22 32 22 53 25 53 25 33 23 33 25 A 3 40 59 33 64 27 39 21 31 37 24 29 19 27 20 32 21 29 21 20 A B 0 2 1 6 2 7 2 10 4 16 4 15 4 16 4 17 4 17 - 4 16 A B 3 14 3 14 •6 • 14 •6 • 14 •6 • 14 * 3 ' 12 • 3 , " 12 •3 • 12 •3 • 12 • 3 ' 12 A B 74 110 70 105 110 77 121 81 128 85 196 130 200 134 180 120 167 112 125 B4 A 0 " 9 • 3 • 17 • 3 • 10 ' 2 " 2 5 " 5 * 13 • 4 6 1 6 1 8 1 9 2 2 1 A B 212 • 343 ' 181 • 362 * 212 • 537 * 184 ' 562 • 234 • 577 277 532 350 414 308 509 239 377 163 241 A B 176 1 583 • 90 * 1 531 •86 • 1 636 • 101 • 1 923 • 93 • 1 772 * 82 * 1 566 • 80 * 1 520 80 1 520 79 1 490 80 1 660 A B * 833 ' 629 ' 873 * 560 * 962 * 560 ° 1 253 •736 1 232 723 1 168 778 • 1 080 • 720 ••738 " 6 4 6 » • 1 000 " 6 7 0 • » 9 9 0 • ' 660 A B 3 650 2 387 4 001 2 667 4 238 3 196 4 482 3 380 4 354 3 758 3 862 3 169 1 4 023 3 370 1 4 117 3 448 4 067 3 443 3 860 3 433 A 6 4 800 1 200 5 600 1 400 5 600 1 400 6 000 1 500 6 250 1 600 ' 7 000 1 800 7 350 1 850 7 600 1 900 7 600 1 900 7 750 1 950 B> > 473 474 410 517 336 366 417 361 471 237 486 352 398 254 306 196 ' 249 1 249 | 896 A B 54 31 32 38 56 62 76 118 380 129 385 114 315 141 537 241 540 279 ... A B 12 418 11 13 154 1 11 353 551 11 621 2 500 12 438 1 649 12 004 740 12 181 1 200 12 162 935 12 991 606 12 415 393 Note. The data relote to mine and alluvial production of uncut diamond! and cover both gom and Induitrlal itonei. Induitrlal dia-mond! aro imall and Impuro diamond), bort, carbonado, otc. suitable only for induitrlal ute at abrailvei, in cutting tooli, etc. 1 Sourcoi U.S. Bureau of Mlnoi (Indonoilai beginning 1968, Namibia, beginning 1967; Sierra teonei 1966-1969 and 1972-1974). * Export!. Remarquo. Lei donnoei 10 rapportent 6 la production mlniere » t allu-vionnaire de diamanti brut! et englobont lei dlamanti precloux et InduitrieU. Lol diamanti Indullrleli comprinn.nl lei diamanti peril! el Impuri, lei borti, carbonadol, etc., adaptable! teulement a dot Am Induitriallei comme obrai lf i , faUant partie d'outlli 6 tolller, etc. 1 Source i U.S. Bureau of Mlnoi (Indoneiie i 6 partlr de 1968, Nomlblo i 6 partir de 1967, Sierro Leone i 1966-1969 ot 1972-1974). 1 Exportation*. F i g u r e 36 W o r l d p r o d u c t i o n o f d i a m o n d s F r o m U.N. S t a t i s t i c a l Yearbook (New Y o r k : U n i t e d N a t i o n s , 1 9 7 7 ) 80 i r W O R L D D I A M O N D P R O D U C T I O N Country Congo (Kinshasa) U.S.S.R. South Africa South West Africa Chana Angola Sierra Leone Liberia Tanzania Central African Republic Brazil Venezuela Ivory Coast Guinea Guyana Lesotho India Indonesia TOTALS 1967 Gemstones Industrials carats 500,000 17,700,000 1,575,000 5,425,000 4,752,450 169,917 2,900,000 615,416 1,248,000 197,000 1,941,150 1,529,252 700,000 673,124 312,000 353,000 370,703 214,000 115,000 62,300 96,800 21,000 28,400 n/a 6,133 2,300 556,055 310,000 115,000 23,200 79,200 49,000 42,600 n/a 1,117 1,100 Total 200,000 .000,000 ,693,600 699,169 600,000 288,540 ,560,000 550,000 926,758 524,000 230,000 85,500 176,000 70,000 71,000 n/a 7,250 3,400 1968 Gemstones Industrials carats 350,000 17,150,000 17 1,912,500 6,587,500 8 5,255,169 172,225 4,600,000 666,875 1,328,000 213,000 2,204,580 1,550,034 400,000 1,000,312 332,000 540,000 280,940 213,280 138,000 102,500 102,850 28,000 20,620 10,500 7,259 14,200 421,437 396,080 137,000 37,900 84,150 65,000 30,929 1,414 1,505 6,200 Total ,500,000 ,500,000 ,459,749 ,722,259 000,000 ,667,187 660,000 753,000 702,377 609,360 275,000 140,400 187,000 93,000 51,549 11,914 8,764 20,400 8,500,162 34,185,055 42,685,217 9,207,575 37,154,384 46,361,959 1 9 7 0 P R O J E C T I O N 1969 Gemstones Industrials Total carats 344,000 16,856,000 17,200,000 2,362,500 8,137,500 10,500,000 2,412,243 5,496,298 7,908,541 1,934,046 214,895 2,148,941 830,000 3,320,000 5,150,000 1,212,920 808,614 2,021,534 386,990 1,547,989 1,934,979 610,884 241,116 852,000 310,906 466,360 777,266 184,420 342,526 526,946 125,000 125,000 250,000 171,537 48,750 220,287 104,500 85,500 190,000 28,500 66,500 95,000 26,525 39,787 66,312 17,480 12,308 29,788 9,517 2,379 11,896 11,071,968 37,811,522 48,883,482 Gemstones Industrials Total Congo (Kinshasa) 350,000 17,150,000 17,500,000 U.S.S.R. 2,700,000 9,300,000 12,000,000 South Africa 2,596,500 5,558,500 8,155,000 Ghana 300,000 4,600,000 4,900,000 South West Africa 2,056,000 229,000 2,285,000 Angola 1,305,000 870,000 2,175,000 Sierra Leone 400,000 1,500,000 1,900,000 Liberia 620,000 250,000 870,000 Tanzania 300,000 450,000 750,000 Central African Republic 150,000 225,000 375,000 Brazil 95,000 95,000 190,000 Venezuela 304,150 145,850 450,000 Ivory Coast 107,250 87,750 195,000 Guinea 22,500 52,500 75,000 Guyana 22,000 30,000 52,000 Lesotho 10,000 8,000 18,000 India 7,200 1,800 9,000 Indonesia 4,000 1,000 5,000 11,349,600 40,554,400 51,904,000 F i g u r e 37 World p r o d u c t i o n o f diamonds (From International Diamond Annual, 1971, pp. 12-13) 81 of p o l i t i c a l upheaval. In what f o l l o w s , the 1970 f i g u r e s from the I.D.A. w i l l be used, as the e d i t o r s seem to have taken pains to compensate f o r such f a c t o r s and to make ca r e -f u l estimates when no data were a v a i l a b l e . U.S.S.R. The U.S.S.R. i s one of the c o u n t r i e s t h a t do not r e l e a s e any data on diamond p r o d u c t i o n . The I.D.A. estimates f o r 1970 were 2.7 m i l l i o n c a r a t s f o r gems and 9.3 m i l l i o n c a r a t s f o r i n d u s t r i a l s , ^ which makes the U.S.S.R. i n t o one of the two or three g r e a t e s t producers. There are at l e a s t three p i p e s i n o p e r a t i o n , the M i r , Udachnaya, and A i k h a l ( F i g . 38) a l l i n the S i b e r i a n p r o v i n c e of Yakut. The l a s t two are j u s t below the A r c t i c C i r c l e , and the d i f f i -c u l t i e s o f the permafrost are very g r e a t , but work continues through the w i n t e r , using e s p e c i a l l y developed technology. It i s known that s e v e r a l pipes remain u n e x p l o i t e d and there are s t o c k p i l e s of unprocessed k i m b e r l i t e , which would a l l o w the Russians to i n c r e a s e p r o d u c t i o n c o n s i d e r -a b l y without any new f i n d s , but the S o v i e t a u t h o r i t i e s seem to have no wish to d i s r u p t the Western market by i n c r e a s e d o f f e r . South A f r i c a . The f i r s t A f r i c a n diamond was d i s -covered i n 1867 on the bank of the Orange R i v e r . For two years n o t h i n g e l s e was r e p o r t e d , but i n 1869 an 83.5 c t . stone was I.D.A., p. 13. Figure 38 Siberian diamond mines (From I.B.A., p. 80) 8 3 found that s t a r t e d the f i r s t rush to the V a a l and Orange R i v e r s . By 1870 some 10,000 persons were engaged i n r e c o v e r -ing diamonds from r i v e r g r a v e l s , using p r i m i t i v e hand methods. Towards the c l o s e of 1870, stones were found i n "dry d i g g i n g s " at J a g e r s f o n t e i n , D u t o i t s p a n , and B u l t f o n t e i n , f a r from the V a a l R i v e r , and i n 1871 at what i s now known as the Kimberley mine ( F i g s . 39, 40). These d i g g i n g s were at f i r s t thought to be a l l u v i a l i n o r i g i n , but i t was soon found that the diamonds were r e s t r i c t e d to v e r t i c a l p i p e s . The Kimberley d i s t r i c t , w i t h i n an area three miles i n d i a -meter, co n t a i n s f i v e famous p i p e s , a l l o f which are s t i l l p r o d u c t i v e : Wesselton, B u l t f o n t e i n , D u t o i t s p a n , De Beers, and Kimberley. Next to the p i t s l i e s the c i t y of Kimberley, where most of the rough s o l d through the De Beers a f f i l i a t e s i s s o r t e d . The l a r g e s t South A f r i c a n mine i s the Premier with 2.5 m i l l i o n c t . i n 1969, but of t h i s amount only 10 per cent was of gem q u a l i t y . By c o n t r a s t , the a l l u v i a l d i g g i n g s of Namaqualand y i e l d e d 700,000 c t . , of which 90 per cent was gems, making them i n t o the most p r o d u c t i v e of the South A f r i c a n o p e r a t i o n s . T h i s area of the A t l a n t i c Coast ( F i g . 41) has o n l y been e x p l o i t e d s i n c e 1927, and only l a t e l y on a l a r g e s c a l e . The t o t a l 1970 p r o d u c t i o n of gems f o r South A f r i c a was 2.4 m i l l i o n c t . De Beers owns or c o n t r o l s a l l of the important pipe mines of South A f r i c a as w e l l as the 84 Figure 39 Diamond mines i n South A f r i c a and neighbouring c o u n t r i e s (From De Beers C o n s o l i d a t e d Mines L t d . , Annual Report 1974, p. 20) 8 Windhoek « ...ORARA} * LETLHAKANE= IKOINGNAAS 0 ^ 20QKM LETSENG-^ R A | \ •^•O Bbemlontein/ M a s e r u j V-ESOTHO^ 'Figure 40 Diamond mines i n South A f r i c a and neighbouring c o u n t r i e s (From Mining Magazine, January 1978, p. 7) Figure 41 Namaqualand mines (From I.D.A., p. 53) 86 a l l u v i a l d i g g i n g s . But the government i s a l s o a mine owner and d i r e c t p r o f i t sharer, and the South A f r i c a n c u t t i n g i n -d u s t r y g e t s , by law, s p e c i a l treatment from the Diamond Tr a d i n g C o r p o r a t i o n . ^ South West A f r i c a (Namibia). T h i s p o l i t i c a l depend-ency of South A f r i c a produced 1.9 m i l l i o n c t . of gemstones i n 1969, mostly from c o a s t a l g r a v e l s and o f f s h o r e mining. The o p e r a t i o n s are c a r r i e d out p r i n c i p a l l y by the C o n s o l i -dated Diamond Mines of South West A f r i c a (C.D.M.), which i s c o n t r o l l e d by De Beers. The f i r s t recorded f i n d took plac e i n 1908 on the sand dunes near L u d e r i t z Bay. At t h i s time South West A f r i c a was a German colony. A rush took p l a c e , and f o r some years s e v e r a l German companies e x p l o i t e d the coast d e p o s i t s . The major d i s c o v e r i e s were not made u n t i l a f t e r 1927, when the s t r u c t u r e of the u p l i f t e d marine t e r -races was d i s c o v e r e d . I t i s now b e l i e v e d that diamonds from the i n t e r i o r of the c o n t i n e n t were washed out to sea by f l o o d s on the Orange River and d e p o s i t e d on the beaches n o r t h of the r i v e r ' s mouth. In the course of a m i l l i o n years the sea r e t r e a t e d g r a d u a l l y , c r e a t i n g no l e s s than four d i s t i n c t l e v e l s of beach. These were i n t u r n o v e r l a i n by marine and t e r r e s t r i a l d e p o s i t s of v a r y i n g t h i c k n e s s . As soon as the formation of the d e p o s i t s was understood, recovery SI.D.A.3 pp. 42 and 153; G.I.A., Ass. 13, pp. 7-9. 87 of the diamonds became an earth-moving o p e r a t i o n , s t r i p p i n g sand and g r a v e l overburden to expose the diamondiferous g r a v e l s and the g u l l i e s and p o t h o l e s of the ancient beaches, where accumulations of gemstones are o f t e n found. Since the d e p o s i t s o f t e n l i e lower than the t i d e -l i n e , a major o p e r a t i o n of f o r e s h o r e mining s t a r t e d i n 1965 by C.D.M. r e q u i r e d b u i l d i n g a sea w a l l of sand and concrete b l o c k s to h o l d back the sea while s t r i p p i n g the bedrock and s e a r c h i n g the p o t h o l e s . T h i s o p e r a t i o n proved h i g h l y produc-t i v e , o f f s h o r e dredging, on the other hand, s t a r t e d e a r l y i n the 1960's, has only been moderately rewarding, due to h i g h * 6 c o s t s . Angola. In 1969, the Companhia de Diamahtes de Angola (Diamang) had e x c l u s i v e mining r i g h t s to Angola, and the extended a l l u v i a l d e p o s i t s , a c o n t i n u a t i o n of the Kasai d e p o s i t s i n Z a i r e , that Diamang e x p l o i t s , y i e l d e d 1.3 m i l l i o n c t . of gemstones. There were over 42 mining areas along f i v e r i v e r s , and the operations moved downstream as the d e p o s i t s were exhausted. . Y i e l d from pipes was low. Diamang s o l d h i s output through the Diamond C o r p o r a t i o n , De Beers' purchasing agent. Nowadays Diamang i s owned by the Angola government. I.D.A.3 pp. 49 and 53; G.I.A. AssrL 10, pp. 6-7. 88 L i b e r i a . Although the 1969 f i g u r e s f o r the L i b e r i a n gem p r o d u c t i o n was 610,000 c t . (I.D.A.) or perhaps 562,000 c t . (U.N. S t a t i s t i c a l Yearbook), i t i s w e l l known that most of these diamonds are smuggled i n t o the country to be ex-p o r t e d from Monrovia, where they o n l y pay a r o y a l t y or export duty of three per cent, as compared wi t h 7% per cent i n S i e r r a Leone, where i t i s b e l i e v e d that the smuggled goods come from. Monrovia i s indeed, o n l y one hour's d r i v e from the S i e r r a Leone border. The goods so i n t r o d u c e d i n L i b e r i a are, of course, o n l y gem diamonds, so that L i b e r i a n diamonds exports are h e a v i l y weighted on the s i d e of the gem q u a l i t y . The ex-p o r t f i g u r e s , however, give a c l u e to what the r e a l p r o d u c t i o n of L i b e r i a may be; the I.D.A. estimates the f i g u r e at 250,000 c t . (gems) a r r i v e d at by computing the l i k e l y r a t i o of indus-t r i a l to gem p r o d u c t i o n . L i b e r i a n p r o d u c t i o n i s unorganized and s m a l l - s c a l e w i t h n e a r l y 400 l i c e n s e d c l a i m h o l d e r s and perhaps some 10,000 u n l i c e n s e d A f r i c a n d i g g e r s . The miners s e l l to the seven l i c e n s e d buyers i n Monrovia, among them r e p r e s e n t a t i v e s from Antwerp, London and New York. The buyers then take the d i a -monds to the Government A p p r a i s a l O f f i c e f o r v a l u a t i o n and assessment of d u t i e s . The l o c a l p r o d u c t i o n c o n s i s t s mostly of i n d u s t r i a l s and near gems, however. The diamonds are of 1I.D.A.3 p. 99. 89 a l l u v i a l o r i g i n , found in swamps and in a l l u v i a l sands by the banks of various r i v e r s : Lofa, Mano, Moro, etc. It is believed that some of them came from kimberlite fissures in the far northwestern d i s t r i c t . Zaire. The f i r s t diamonds were found i n the then Belgian Congo i n 1907. Two main areas were discovered by prospecting: one on the Kasai River, with centre at Tshi-kapa, and the other at Bakwanga. Organized mining was started in 1920. By 1970 the Tshikapa area was not being exploited, except for a few l o c a l diggers; on the other hand, the Bak-wanga region was producing about one-half of the world's output of i n d u s t r i a l diamonds. The I.D.A. figures are 350,000 ct. gems against 17 m i l l i o n ct. i n d u s t r i a l s (the U.N. Year-book's are very d i f f f e r e n t ) . The Bakwanga diamonds come from thirteen i d e n t i f i e d kimberlite pipes. Three of these occur in a c l u s t e r , as i t often happens (the best known example of a cl u s t e r being the f i v e Kimberley pipes i n South A f r i c a already mentioned). Diamondiferous material s p i l l e d out of these pipes in vast profusion and dispersed i t s e l f over an extensive region comprising the drainage area and surrounding the pipes. The M.I.B.A. (Societe Miniere de Bakwanga) works ten of the pipes as open-cast mines, using earth-moving equipment in a large scale. The concentrates are worked in two very large central plants. The output i s 98 per cent of i n d u s t r i a l q u a l i t y , suitable only for crushing. 90 B e t t e r diamonds are found, as i s customary, i n the a l l u v i a l d e p o s i t s C a l l u v i a l diamonds are g e n e r a l l y b e t t e r than pipe diamonds because water s e l e c t i v e l y t r a n s p o r t s gems r a t h e r than i n d u s t r i a l s , whose amorphous c r y s t a l l i n e s t r u c -t u r e makes them d i s i n t e g r a t e on the way). The a l l u v i a l diamonds are o f t e n p i c k e d up by i l l i c i t d i g g i n g and smuggled g out of the country to Burundi. S i e r r a Leone. Almost a l l d e p o s i t s are a l l u v i a l because the main diamond content of the k i m b e r l i t e i n the e x i s t e n t k i m b e r l i t e pipes had a l r e a d y been d i s p e r s e d over the r i v e r systems. The diamond-bearing g r a v e l s y i e l d 40 per cent gem q u a l i t y , and a s i g n i f i c a n t number of stones are over 40 c t . The 1969 output was 610,000 c t . 9 I t i s of g e o l o g i c a l i n t e r e s t to note that S i e r r a Leone and B r a z i l are the only two c o u n t r i e s that produce the hard i n d u s t r i a l diamond c a l l e d carbonado; i t i s nowadays accepted that once the two c o u n t r i e s were i n c o n t a c t , before the c o n t i n e n t s d r i f t e d a p a r t . U n t i l 1970 the mining was done by the S i e r r a Leone S e l e c t i o n T r u s t (S.L.S.T.) which e x p l o i t e d two l e a s e s , Yengema I.D.A., pp. 69-70. 9 I.D.A.t p. 100. ^G.I.A., Diamonds, Ass. 8, p. 11. 91 and Tongo ( F i g . 44). S.L.S.T. o r i g i n a l l y had the monopoly of mining r i g h t s , but i n 1955 the government t r i e d to stop the i l l i c i t d i g g i n g by l i c e n s i n g a number of l o c a l s m a l l - s c a l e miners. These o p e r a t i o n s were w e l l - r u n and prosperous, but n e v e r t h e l e s s i l l i c i t mining w i t h i n S.L.S.T.'s l e a s e s , which were the r i c h e s t areas, continued unabated u n t i l i t provoked the n a t i o n a l i z a t i o n of the mines under the N a t i o n a l Diamond Mining Company, p a r t l y owned by S.L.S.T. S i e r r a Leone markets i t s output l a r g e l y through the Diamond C o r p o r a t i o n of West A f r i c a , which s e l l s through De Beers's C.S.O., but some American wholesalers buy d i r e c t l y through the Government Diamond O f f i c e . Ghana. Diamonds were d i s c o v e r e d i n Ghana i n 1919. The d e p o s i t s were a l l u v i a l , l o c a t e d along the B i r i m and Bonsa R i v e r s ( F i g . 42). The e x c e p t i o n a l l y small s i z e of the stones (20 to 25 per c a r a t ) and the r a t h e r poor q u a l i t y are the reasons f o r t h e i r low p r i c e per c a r a t ; b e s i d e s , the produc-t i o n i s 85 per cent i n d u s t r i a l . N e v e r t h e l e s s , the concen-t r a t i o n of diamonds i n some o f the a l l u v i a l g r a v e l s i s ex-c e e d i n g l y high. For i n s t a n c e , three m i l l i o n c t . were recovered from one 160-acre p l o t , with the t h i c k n e s s of the g r a v e l l a y e r r e a c h i n g o n l y from two to f i v e f e e t . ^ G.I.A., Diamonds, Ass. 10, p. 9. F i g u r e 42 Ghana mines (From I.B.A., p . 100) 93 The major mines i n Ghana are operated by C o n s o l i -dated A f r i c a n S e l e c t i o n T r u s t (C.A.S.T.), which c o n t r o l s concessions i n B i r i m and Akwatia. A few small f o r e i g n con-cerns operate as w e l l . But many n a t i v e diggers a l s o operate, both with and without l i c e n s e s . The t o t a l p r o d u c t i o n of the l i c e n s e d d i g gers exceeds t h a t o f the companies, but t o t a l p r o d u c t i o n f i g u r e s are hard to estimate due to the amount of smuggling t h a t takes p l a c e out of Ghana and i n t o Togo and Dahomey. The I.D.A. r e p o r t s , as an example, that whereas i n 1958 from two to three m i l l i o n c t . ( i n c l u d i n g i n d u s t r i a l s ) were s o l d i n the orga n i z e d market, a f t e r the i n t r o d u c t i o n of currency c o n t r o l s by the government the exports f i g u r e dropped to 3,000 ot. The I.D.A.'s estimate i s 300,000 c t . of gem-stones. Tanzania. F i r s t d i s c o v e r e d i n 1910, diamonds were not s y s t e m a t i c a l l y mined i n Tanganyika u n t i l 192 5. The a l l u v i a l d e p o s i t s then e x p l o i t e d were not very p r o d u c t i v e . But i n 1939 a Canadian g e o l o g i s t , Dr. John Thorburn W i l l i a m -son, d i s c o v e r e d a f t e r a long and systematic search, an enor-mous pipe at Mwadui, 90 miles south of Lake V i c t o r i a . W i l l i a m -son Diamonds L t d . , now e x p l o i t s an area of f i v e square miles that produce a high y i e l d . About 80 per cent i s of gem q u a l i t y , and many stones are o f a high grade. Most o f Tanzania's p r o d u c t i o n comes from Mwadui, and the t o t a l was 2I.D.A., p. 100. 94 estimated at 300,000 c t . i n 1970. Williamson Diamonds ex-p o r t s through the Diamond C o r p o r a t i o n . The Tanzanian govern-ment imposes a 15 per cent r o y a l t y and a f i v e per cent l e v y , 13 and the o p e r a t i o n s are run l a r g e l y by Tanzahians. Other A f r i c a n Producers. Other A f r i c a n c o u n t r i e s with important p r o d u c t i o n are Botswana, the Ivory Coast (107,000 c t . ) , C e n t r a l A f r i c a n R e public (150,000 c t . ) , Guiriea (22 ,000 c t . ) , and Lesotho (10,000 c t . ) ( F i g ' . 43). The f i g u r e s r e f e r to gems on l y . Venezuela. I n i t i a l d i s c o v e r i e s i n 1901 were not f o l l o w e d by s i g n i f i c a n t p r o d u c t i o n u n t i l 1940, but now Venezuela i s one of the l a r g e s t exporters (304,000 c t . of gems), and r e c e n t d i s c o v e r i e s are v e r y p r o m i s i n g . The occurrences are t y p i c a l l y r i v e r a l l u v i a l , with f i e l d s i n Gran Sabana, upper Caroni R i v e r , and upper Cuyuni R i v e r . The l a t t e r two f i e l d s are extensions of the f i e l d s of Guyana. The reocvery operations take p l a c e by p r i m i t i v e d i v i n g and d i g g i n g by l o c a l miners, as w e l l as some Ameri-can companies u s i n g p o r t a b l e c a i s s o n s f o r e x p l o i t i n g r i v e r g r a v e l s . The marketing i s somewhat c h a o t i c , with l i c e n s e d buyers f l y i n g i n to the t r a d i n g c e n t r e s i n the i n t e r i o r and having the stones brought to them. Buyers come from America, I.D.A., p. 71; Bruton, p. 65. BOTSWANA J ^ 8 S.W.A. \y S W A Z I L A N D / " ^ SOUTH AFRICA / $ K a " ) Aetseng SCALE 1:1,900,800 REFERENCE f ^ i M p n r Aux V Diamond areas Sourcej R . S . A zthedral Dome . 0>amp*Bnes CasS Mokhotlong "habani* l/rnyana Map Studio , / Figure 43 Lesotho mines (From I.D.A.., p. 65) SCALE 1:390,000 KILOMETRES ^ Lease ..FREETOWN L ? w " 1 < ^ / TongoLe^e^ 1 O C T ^ ( Bo-SCALE 1:7,700,000 Figure 44 Sierra Leone mines (From J.Z?.4.3 p. 88) 96 Europe, I s r a e l , and even I n d i a . Venezuelan p r o d u c t i o n i s thus marketed o u t s i d e the De Beers s y s t e m . ^ B r a z i l . B r a z i l i a n p r o d u c t i o n i s not very h i g h ( f i g -ures vary w i d e l y , with the I.D.A. g i v i n g 95,000 c t . of gems i n 1970 a g a i n s t 31,000 c t . from the U.N. d a t a ) , " ^ but the mines have the d i s t i n c t i o n of being the o l d e s t known i n South America. B r a z i l i a n diamonds were d i s c o v e r e d i n the 18th Century, at the time when the Indian sources, the only known ones, were running out. In the b e g i n n i n g , they were shipped to Goa i n I n d i a , and then brought to Europe as Indian diamonds. P r o d u c t i o n became important i n 1740 and from that time u n t i l the d i s c o v e r y o f South A f r i c a n gems i n the 1860's B r a z i l was the world's l a r g e s t producers. B r a z i l i a n d e p o s i t s are a l l u v i a l , but there has been no evidence o f an o r i g i n a l k i m b e r l i t e source. V a r i o u s t h e o r i e s were proposed to e x p l a i n t h e i r o r i g i n , but the g e o l o g i c a l o p i n i o n i s now t h a t the diamonds found have come from the weathering and e r o s i o n of a n c i e n t con-glomerates of k i m b e r l i t e . A s i n g l e source i s proposed f o r most of the d e p o s i t s , even though these are nowadays widely s c a t t e r e d . Mining i s done by l o c a l diggers c a l l e d " g a r i -mpeiros", many of whom are small h o l d i n g farmers who leave I.D.A., p. 105; G.I.A., Diamonds, Ass. 7, p. 3. 'I.D. A., p. 104. 97 t h e i r lands in the dry season to dig the gravels along the r i v e r s . " ^ D i s t r i b u t i o n takes place largely through i l l i c i t channels, because of high taxes and bureaucratic compli-cations. De Beers has at times bought part of the B r a z i l i a n 17 production through i n d i r e c t channels. India. Diamonds have been mined in India from the e a r l i e s t times, but today the production i s i n s i g n i f i c a n t , the main deposits having been exhausted long ago. The large diamonds of centuries past came from the Kollur group, near the Kistna River. CUTTING AND TRADING CENTRES The manner i n which De Beers performs i t s function of d i s t r i b u t o r of most of the world's rough w i l l be dis-cussed in the next chapter. From the C.S.O.'s o f f i c e s in London, and from a few other sources as well, rough diamonds go to the dealers and the manufacturers (cutters) who are concentrated in a few centres, usually far from the produc-t i o n areas. The high price-to-volume r a t i o of gems makes i t possible to carry out production, sorting, manufacture and consumption of diamonds in places far apart, dictated more by h i s t o r i c a l , labor, and marketing reasons than by geography. G.I.A., Diamonds, Ass. 7, pp. 1-3. I.D.A., p. 104. 98 I s r a e l . This nation has one of the most important cutting industries and i s one of the largest trading centres in the world. Israel w i l l be discussed i n Chapter IV. Antwerp. This Belgian c i t y has a long t r a d i t i o n as a diamond cutting and trading centre. About the middle of the 15th Century, Jewish diamond cutters and merchants started receiving rough diamonds from Venice, which did most of the trading with Asia, then the only source of diamonds. At the end of the century, the Portuguese discovered the direct sea route to the East round the Cape of Good Hope, and they supplanted the Venetians as the world's traders with India. Antwerp received the rough from them,fashioned i t i n the workshops in the outskirts of the town, and became the most important manufacturing and trading centre in Europe. When the Dutch East India Company became the main trader with India, Amsterdam rose to prominence, and the Jewish cutters and dealers gradually moved there from Belgium; the decline of Antwerp continued even after the Dutch yielded to the B r i t i s h in 1670. By the middle of the 18th Century, Antwerp barely survived as a centre, getting what i t could from the B r a z i l i a n diamonds mined in Bahia and sent mostly to Amsterdam. But the discovery of the South African mines changed the picture once again, and Antwerp rose while Amsterdam declined. In the f i r s t 99 decades of t h i s century, arrangements wi t h the De Beers companies and the d i s c o v e r y o f diamonds i n the B e l g i a n 18 Congo (now Z a i r e ) i n s u r e d a new p e r i o d of p r o s p e r i t y . Nowadays the i n d u s t r y i s again slowly d e c l i n i n g , although t r a d i n g remains very a c t i v e . F a c t o r s that have been mentioned to e x p l a i n the d e c l i n e o f the i n d u s t r y a re: f i r s t , the high r a t e of i n c r e a s e o f wages and f r i n g e bene-f i t s ; and second, i n c r e a s i n g c o m p e t i t i o n from the Indian c u t t e r s i n the smalls market (smalls are p o l i s h e d p i e c e s of l e s s than four p o i n t s o f 0.04 c t . ) , from the Russian c u t t e r s i n the melee market (melees are from 5 to 15 p o i n t s ) , and p r i n c i p a l l y from the I s r a e l i s , on a broad range of s i z e s and q u a l i t i e s . ^ 9 Working i n Antwerp's favour were, according to the I.D.A.j the good o r g a n i z a t i o n of the i n d u s t r y ; the hig h l e v e l of s k i l l o f the workers, and t h e r e f o r e the q u a l i t y of the c u t t i n g ; the great r e s e r v e s o f money and c r e d i t ; the w e l l - e s t a b l i s h e d c u t t i n g and t r a d i n g a c t i v i t y ; and the s t a b i l i z i n g s t r e n g t h d e r i v e d from i t s wide d i v e r s i f i c a t i o n i n the range of p o l i s h e d goods i t o f f e r s . There are two branches to the c u t t i n g i n d u s t r y : Gross ( i . e . , l a r g e ) t h a t works with one c a r a t upwards; and I.D.A.j p. 109; Bruton, p. 150. I.D.A.j p . I l l . 100 K l e i n ( s m a l l ) , that processes even the s m a l l e s t goods. The Gross branch i s l a r g e l y l o c a t e d i n Antwerp i t s e l f , where over 25 manufacturers have t h e i r own f a c t o r i e s , employing from 20 to 150 p o l i s h e r s i n each of them, The K l e i n branch operates from the "kempen", l o c a t e d o u t s i d e the town. In 1968 there were about 15,000 workers i n a l l . One of the s p e c i a l t i e s 2 0 of the K l e i n branch i s the p o l i s h i n g of e i g h t - c u t s of s i z e s ranging from 30 to 200 stones a c a r a t (about 3 p o i n t s to % p o i n t ) . In Antwerp the trade unions are w e l l o r g a n i z e d and wage s c a l e s and f r i n g e b e n e f i t s are r e l a t i v e l y h i gh. The h i g h l y p a i d workers can only be employed by the Gross branch, where the f a c t o r of labour cost i s to some extent o f f s e t by the high p r i c e o b t a i n a b l e f o r the l a r g e r w e l l - p o l i s h e d goods. In the "kempen" wage r a t e s are lower, and besides the so-c a l l e d e n t r e p r e n e u r i a l system (a form of o u t s i d e c o n t r a c t -ing) reduces or e l i m i n a t e s f r i n g e b e n e f i t s , making i t p o s s i b l e f o r the B e l g i a n s to p a r t i c i p a t e i n the small goods market, where labour c o s t s have a g r e a t e r i n f l u e n c e ( t h i s i s because the work i n v o l v e d i n p o l i s h i n g one small stone i s not much l e s s than the work i n p o l i s h i n g one l a r g e diamond, which s e l l s f o r a much higher p r i c e ) . An 18-facet cut f o r small stones ( F i g . 26, top l e f t ) . 101 The entrepreneurial system developed over the years to f i t into the fluctuations of the diamond market. The manufacturer of merchant in the "kempen" generally has no factory of his own; he gives out his rough goods to entrepreneurs, perhaps to two or three, but often many more. Each entrepreneur has his own group of workers, commonly from ten to twenty. The manufacturer contracts with the entrepreneur for the f i n i s h i n g of a s p e c i f i c caratage of diamonds; and that is the extent of his legal obligation to the entrepreneur. The entrepreneur, i n turn, hands out the rough goods to a group of workers, again on a contract basis. In p r a c t i c e , manufacturers tend to stay with the same entrepreneurs and the l a t t e r tend to go to the same workers; but, in tight market conditions the manufacturers can cut down t h e i r a c t i v i t i e s without having to go and i n -cur mounting losses, as would be the case i f they owned the i r own f a c t o r i e s . In 1969-70 the system was tested when after a boom in demand that lasted two years the market reduced, and 5,000 employees had to leave the industry. There were no mass "layof f s and many of the workers were reabsorbed into new auto f a c t o r i e s . It is a common observation that one of the best defined trends of the diamond market has been the lowering 21 of size and quality of the average goods sold. The I s r a e l i 21 I.D.A., p. 113 and passim, 102 i n d u s t r y prospered on f i n d i n g a market f o r melee (5 to 15 c t . ) of a q u a l i t y and p r i c e s l i g h t l y lower than the B e l g i a n melee, and the Indian i n d u s t r y i n tu r n i s f i n d i n g a market f o r goods o f even lower q u a l i t y and p r i c e . The p l a c e f o r the B e l g i a n i n d u s t r y , a c c o r d i n g to the I.D.A., would l i e i n the b e t t e r -q u a l i t y market, which i s not n e c e s s a r i l y i n competition w i t h 22 the lower q u a l i t y goods. Besides, the Antwerp c u t t e r s are s k i l l e d i n h a n d l i n g d i f f i c u l t r o u g h - l i k e c l e avages, macles, f l a t s and coateds, which r e q u i r e d h i g h l y t r a i n e d and v e r s a t i l e workers f o r e f f i c i e n t u t i l i z a t i o n . Such d i f f e r e n t i a l s k i l l s would i n s u r e Antwerp's c u t t i n g i n d u s t r y a continued share o f the world market. (There i S j however, no agreement i n the trade that B e l g i a n s s t i l l r e t a i n the l e a d i n s k i l l s , p a r t i c u -l a r l y among I s r a e l i diamond men). Antwerp's Exchanges. The goods produced by the manufacturers are l a r g e l y traded i n Antwerp's a c t i v e diamond exchanges. There are three diamond bourses i n the c i t y , the o l d e s t o f which, the Diamond Club of Antwerp, founded i n 1893, had over 4,000 members - - b r o k e r s , d e a l e r s and manufacturers --i n 1970. Trading i s not r e s t r i c t e d to p o l i s h e d goods; by f a r the g r e a t e s t part of the world p r o d u c t i o n of rough that i s not s o l d through the C.S.O. f i n d s i t s way to Antwerp, and through the t i e s that Belgium has had si n c e 1920 with diamond I.D.A.j p. 113. 103 p r o d u c t i o n i n A f r i c a , Antwerp buyers supplement t h e i r C.S.O. a l l o c a t i o n s by purchasing d i r e c t l y at the A f r i c a n markets. The Antwerp market i n rough, moreover, i s the p l a c e where d i r e c t buyers of p a r c e l s of rough from the C.S.O. (C.S.O.'s " c l i e n t s " ) can s e l l the rough they do not need and buy a d d i t i o n a l q u a n t i t i e s of rough i n which they s p e c i a l i z e , which s u b s t a n t i a l l y helps the C.S.O.'s marketing system. I t i s d i f f i c u l t to measure a c c u r a t e l y the extent of the trade i n Antwerp, due to a l a r g e p r o p o r t i o n of un-recorded exports. For i n s t a n c e , i n 1968 and 1969 the o f f i c i a l f i g u r e s were ( i n m i l l i o n s of U.S. d o l l a r s ) : IMPORTS EXPORTS 1968 452 415 1969 573 . 464 Since the B e l g i a n p u b l i c cannot p o s s i b l y purchase s i g n i f i -cant q u a n t i t i e s o f diamonds, the l a r g e excess of imports over exports must be accounted f o r somehow. The e x p l a n a t i o n i s that u n t i l J u l y 1969, there was a c o n s i d e r a b l e d i f f e r e n c e between the o f f i c i a l r a t e o f exchange and the s o - c a l l e d " f r e e " r a t e (which i s , n e v e r t h e l e s s , under government s u p e r v i s i o n ) ; The device of having two exchange r a t e s has been B e l g i a n p o l i c y f o r many ye a r s . The o f f i c i a l r a t e i s used f o r o r d i -nary trade t r a n s a c t i o n s o u t s i d e the sphere of investment, 104 while the " f r e e " r a t e i s designated to encourage investment of funds from abroad. The " f r e e " r a t e a l s o serves the func-t i o n of d i s c o u r a g i n g e x c e s s i v e demands f o r f o r e i g n exchange, i n that such demands w i l l induce a d e c l i n e of the r a t e . During the c u r r e n c y d i s e q u i l i b r i u m of 1968 and 1969, the d i f f e r e n c e between the o f f i c i a l r a t e and the " f r e e " r a t e became about s i x per cent. In those c o n d i t i o n s i t be-came p r o f i t a b l e to make l a r g e purchases of rough and p o l i s h e d goods and export them through H o l l a n d and other f o r e i g n coun-t r i e s , r e c e i v i n g the proceeds v i a the f r e e market. E v e n t u a l l y , the a u t h o r i t i e s d i s c o v e r e d what was happening and a p p l i e d a 30-day r u l e f o r f o r e i g n exchange accounting by diamond expor-t e r s and importers; and i n a n t i c i p a t i o n of tax i n v e s t i g a t i o n s , a b r i s k brokerage business i n i n v o i c e s developed. According to the I.D.A.'s sources, i n one year some $120 m i l l i o n (U.S.) worth of goods were sent to other markets, l i k e S w i t z e r l a n d and the U.S.A. Th i s i l l u s t r a t e s both the u n r e l i a b i l i t y of f i g u r e s r e l a t i n g to the diamond trade and c e r t a i n common 23 p r a c t i c e s of the b u s i n e s s . I n d i a . It i s thought that diamond c u t t i n g was f i r s t p r a c t i c e d i n I n d i a . However, many c e n t u r i e s ago t h a t i n d u s t r y completely disappeared. I t was o n l y during World War II that a group of refugees from Antwerp and I.D.A.3 p. 115. 105 Amsterdam started in the Surat area, north of Bombay, to t r a i n Gujarati workers in the manufacture of diamonds. When these Dutch and Belgians returned to Europe the Indian industry started declining. Some Gujaratis in turn went to Antwerp and established themselves in the industry there, while supplying some rough to t h e i r compatriots to keep the shops a l i v e . By 1959, however, the number of workers i n Bombay, Surat, and Navsari had f a l l e n to 1,000 which, i n an Indian-cottage industry, which i s typ i c a l l y very labour-intensive, means a very small production. The supply of Indian rough was inade-quate, and the Antwerp goods had to pay 2 0 per cent customs duty upon import, which made the operation unprofitable. In 19 58, however, the Bombay Diamond Merchants' Association persuaded the Indian government to as s i s t the industry. The f i r s t measure was a refund of import duties to the exporter of polished diamonds, and since then a num-ber of other concessions were made, l i k e f i s c a l and currency adjustments. With that help, the Indian cutters were able to buy some r e l a t i v e l y i n f e r i o r goods and start building up the trade. The Indian cutting industry is e s s e n t i a l l y an unorganized, very large-scale, labour-intensive cottage industry. Even though some modern factories exist in Bombay, for the most part the conditions are pri m i t i v e . 106 The s c a i f e s are mostly hand-driven and the labour f o r c e i s s e a s o n a l , because many workers are a l s o farmers. I t was estimated i n 1970 that between 15,000 and 45,000 people were employed, the d i f f e r e n c e perhaps being due to the seasonal v a r i a t i o n s . (Industry sources i n I s r a e l e s t i -mate the f i g u r e f o r 1978 to be between 200,000 and 300,000). Labour costs a r e , n a t u r a l l y , very low, but the workers are o f t e n u n s k i l l e d , and both the p r o d u c t i v i t y and the q u a l i t y of the output are i n f e r i o r . But i t i s tr u e that the Indians o f t e n work with stones that no other i n d u s t r y would accept, l i k e non-sawable goods that can onl y be p o l i s h e d by hours of g r i n d i n g . The rough they work with may cost from $3.00 to $10.00 per c a r a t . The workers get $1.50 per stone, i r r e s -p e c t i v e o f s i z e ($1.00 i n the v i l l a g e s ) . But t h e i r output, however low i t s q u a l i t y , i s r e a d i l y s o l d i n the cheaper whole-s a l e markets of America, I s r a e l , and the Far East, and thus b r i n g s to the country some much-needed f o r e i g n exchange. I n d i a now has twelve buyers t h a t are c l i e n t s of the C.S.O., and four Indian companies buy i n Antwerp. In a d d i t i o n , the Indian government concluded an agreement with Ghana to p a r t i c i p a t e i n the diamond a u c t i o n s h e l d i n t h a t country. T o t a l trade f i g u r e s f o r 1969 were $34 m i l l i o n (U.S.) i n imports, and $51 m i l l i o n (U.S.) i n expo r t s , a c c o r d i n g to an o f f i c i a l source I.D.A.3 p . 221. 107 U.S.S.R. Very l i t t l e i s known about the Soviet cutting industry, but i t is believed that there are at least three c i t i e s where factories are established. In Moscow diamond cutting has-been going on for many years as part of the Soviet watch-making industry, and now there are some very large factories (in other manufacturing countries, large factories are not the rule) that also cut diamonds for s c i e n t i f i c uses. There is also a large plant at Kiev, and perhaps another plant at Sverdlovsk, close to the Vishera River where some diamond findings have been.reported. Estimates of the t o t a l number of workers are quite diver-gent, because, among other things, i t i s disputed to what extent the Russian production has been automatized. The I.D.A.'s figures are 4,000 to 10,000 workers, and the same Annual contends that the production i s not nearly as mech-25 anized as some Western sources fear. The polished diamonds exported to Western markets are small. It seems that, before cutting, the diamonds are most c a r e f u l l y selected for size and quality. The Russians emphasize that grading is done systematically and s c i e n t i f i c a l l y . Sizes are melee ranging up to 0.33 ct. For the most part, exports comprise remarkably uniform 20-pointers. It has been said in the trade that above that size Russian I.D.A.} p. 216. 108 q u a l i t y tends to d e t e r i o r a t e . In any case, i t i s evident t h a t the Russians concentrate upon e s t a b l i s h i n g a market i n melee of a s p e c i a l s i z e and u n i f o r m i t y . They are so con-f i d e n t of t h e i r u n i f o r m i t y that they a d v e r t i s e t h e i r a b i l i t y to accept repeat o r d e r s , which i s almost unheard of i n the trade. Such u n i f o r m i t y of s i z e and shape, i t i s b e l i e v e d , could not be achieved without a heavy wastage of rough, of the order of 60 per cent, and much more labour than i s em-ployed i n other c u t t i n g i n d u s t r i e s i n the world. But such f a c t o r s are not so s i g n i f i c a n t i n R u s s i a , because the rough i s State p r o p e r t y , and the labour c o s t s are p a i d i n i n t e r n a l currency, whereas exports earn f o r e i g n currency. Exports have been guessed to be some 60,000 c t . of p o l i s h e d . There has been the f e a r , ever s i n c e Russian produc-t i o n s t a r t e d , that they would undercut the other producers, but, as the I.D.A. says, There has been no i n d i c a t i o n whatever that the S o v i e t Russian a u t h o r i t i e s have the s l i g h t -est i n t e n t i o n of "dumping" t h e i r p o l i s h e d goods on the Western market. On the c o n t r a r y , the S o v i e t a u t h o r i t i e s appear to accept that the i n d u s t r y they have been at such pains to develop and estab-l i s h would f l o u n d e r i f the markets f o r diamonds i n the Western world were undermined or were not h e l d i n s t r o n g hands.26 I. D.A.j p. 218. 109 Moscow is a centre for s e l l i n g the Russian production of polished, and many Western buyers make their purchases there. The Russians also have permanent centres set up in the West, l i k e King Mines in London, which boasts "the largest o f f i c e block i n the world b u i l t exclusively for the selection 27 of polished diamonds by one organization," and o f f i c e s in Antwerp, Germany, Switzerland, and other important trading places. In 1977, the author v i s i t e d the Soviet o f f i c e in Ant-werp. What follows i s an account of his experience. When i t came time, to see the merchandise, I was shown into a room and l e f t alone with hundreds of packages, which showed some trust on t h e i r part, since i t •.would have taken them hours to check every package afterwards. The packages are prepared in Moscow, and the o f f i c i a l s in charge of sales are not allowed to break them up; they have to s e l l by l o t . It i s true, however., that they were smaller than i s customary in the I s r a e l i exchange, and more homogeneous as to s i z e and q u a l i t y . After some time of checking the packag es, one employee came in and I asked him i f I could have the prices of the mer-chandise. Ee went to consult his superiors and an o f f i c i a l came, who said, "Why do you ask my men prices? That i s not the procedure." I was somewhat taken aback, and asked him what the procedure was. Ee then said, "Make a l i s t of everything you need and give i t to us." So I spent that day and part of the next examining the merchandise and on the second day presented a l i s t to the o f f i c i a l s . They' took i t away, Advertisement in I.D.A., p. 223. 110 deliberated for about two hours, and dame back with the prices, which were somewhat high. Before I could ask about t h e i r procedure for negotiating the prices, they volunteered the information that 'We can negotiate on the t o t a l price alone, and only i f we are within 10 per cent. ' I didn't close a deal, having decided that i t wasn't advantageous to do so. .My conclusion was that the method of s e l l i n g was too r i g i d and un-imaginative. In the f i r s t place, wholesale diamond buyers have to know the prices of the merchandise they are examining in order to see how i t relates to other offers in the market and t h e i r own possi-b i l i t i e s ; i t ' s not enough just to make a l i s t of needs, because the needs are influenced by the market prices and a v a i l a b l e q u a l i t i e s and sizes. And also, the task of examining every package in order to see what was a v a i l a b l e was extremely time consuming. One should compare t h i s method of s e l l i n g with that commonly used in Western Bourses, l i k e the Israel Diamond Exchange (Chapter IV). But I was favourably impressed by the q u a l i t y of the "make." Also, the s i z e of the gems offered has increased since the publication of the I.D.A. (1971), becouse I saw larger stones, of up to 2 cts.. South A f r i c a . The industry was established i n 1927 under government protection and encouragement, and since then i t has prospered and expanded. From one factory i n Kimberley i t has gone to 51 licensed manufacturers: 47 in Johannesburg, three in Capetown, and a new factory in Kimberley. There are about 1,250 employeesj divided into 700 journeymen and 550 apprentices; these figures vary as apprentices become journey-men, but the size of the labour force i s regulated by the Depart-ment of Labour. One reason that the numbers are increasing is that the size of rough is diminishing. I l l From the beginning, the South Af r i c a n government determined that the C.S.O. would s e l l larger rough to the l o c a l industry, to allow i t to compete better with cutters abroad. But i n the l a s t years, with the general decrease i n the size of rough, the average for white goods received is 2 8 1.65 ct. and for Capes 2.80 c t . , down from about 4 ct. Therefore, to maintain i t s output, the industry needs more labour. This creates d i f f i c u l t i e s , since the wages have always been high, which was only economically sound when 29 the rough was larger. Costs of cutting run about $25.00 a carat in 1970, and fringe benefits are very favourable to the worker. The cutters are served by "sights" held at Johannesburg instead of London, but in the same respects i d e n t i c a l to the l a t t e r (see next chapter for a description of the sig h t s ) . They are not allowed to r e s e l l abroad the rough purchased. They can, however, buy from overseas and from independent South Af r i c a n miners. They can also export th e i r chips; they are not, i n any case, equipped to deal with small s i z e s . South A f r i c a i s not a large diamond trading centre, although there i s a flux of buyers to Johannesburg. The s l i g h t l y larger size of the South African product commands a See Figure 30 for colour nomenclature. I.D.A., p . 153. 112 world market, and goods are s o l d mainly to America, Belgium, the U n i t e d Kingdom, West Germany, France and Japan. Sales abroad i n 1969 were $90 m i l l i o n , but they went down i n 1970 30 due to the worldwide r e c e s s i o n i n the market. New York. The American c u t t i n g i n d u s t r y i s c e n t r e d i n New York and Puerto Rico. There are about 3,500 workers, i n c l u d i n g 385 Puerto Ricans who p o l i s h diamonds i n the work-shops of the i s l a n d , the Puerto Ricans who work i n New York and other p l a c e s i n the mainland, and the American Indians who p o l i s h i n a f a c t o r y i n A r i z o n a owned by Harry Winston Ltd. the New York j e w e l l e r s . Most of the workshops are i n New York i t s e l f . Wages are high ($200.00 to $250.00 per week i n 1970) and s o c i a l s e c u r i t y and other charges amount to 25 per cent over the wages. ^ For s e v e r a l years the s a l a r i e s of American workers were c o n s i d e r a b l y above those earned i n other c o u n t r i e s , and t h e r e f o r e a 10 per cent t a r i f f on imported p o l i s h e d was imposed to p r o t e c t the i n d u s t r y . T h i s t a r i f f was p r o g r e s s i v e -l y reduced, as p a r t of a general round of t a r i f f r e v i s i o n s , and meanwhile wages i n the c u t t i n g i n d u s t r i e s abroad have been approaching the American r a t e s . The t a r i f f s d i s c r i m i n a t e be-tween c o u n t r i e s , with G.A.T.T. c o u n t r i e s being t r e a t e d more I.D. A. t p . 153 . I.D.A., pp. 197-198. 113 f a v o u r a b l y (seven per cent f o r l a r g e stones, f i v e per cent f o r 0.5 c t . and s m a l l e r ) . Russian p o l i s h e d diamonds are sub-j e c t to the f u l l 10 per cent duty, and f o r that reason they o f t e n come i n t o the country v i a Belgium and other G.A.T.T. c o u n t r i e s -- a manoeuver which has many precedents. Most of the s u p p l i e s of rough come through the C.S.O. i n London, although a d d i t i o n a l rough comes from Venezuela, S i e r r a Leone, South A f r i c a and elsewhere. American buyers from the C.S.O. r e c e i v e l a r g e amounts of stones, i . e . , un-broken c r y s t a l s weighing 1.5 c t . and up; there are, of course, small gems i n the p a r c e l s , and these are sent to I s r a e l and Germany f o r p o l i s h i n g . Gems between 1 and 2 c a r a t s are most o f t e n sent to Puerto Rico, and so the American c u t t e r s concen-trade on the l a r g e r p i e c e s . There are two o f f i c i a l exchanges i n New York, both on West 47th S t r e e t ; the Diamond D e a l e r s ' Club at 30 West 47th S t r e e t , with some 1,500 members; and the Diamond Trade A s s o c i -a t i o n of America at 15 West 47th S t r e e t , with 600 members. In the v i c i n i t y of these exchanges, about 800 d e a l e r s , 200 c u t t e r s , 300 s e t t e r s , and more than 1,000 j e w e l l e r s , a p p r a i -s e r s , trade lawyers and insurance men have t h e i r o f f i c e s and shops, making t h i s area i n t o the hub of the American diamond tr a d e . The American market f o r p o l i s h e d diamonds i s the l a r g e s t i n the world, absorbing about 60 per cent of the world 114 32 output, and f o r that reason the American c u t t e r s do r e l a t i v e -l y l i t t l e e x p o r t i n g . The o f f i c i a l f i g u r e s o f t o t a l exports and imports f o r 1969 are as f o l l o w s : e x p o r t s , $90 m i l l i o n rough and $122 m i l l i o n p o l i s h e d ; imports, $287 m i l l i o n rough and $216 m i l l i o n p o l i s h e d . These d a t a , as u s u a l i n a t r a d e so g e o g r a p h i c a l l y f l e x i b l e as the diamond b u s i n e s s , are s w o l l e n by the c o n s i d e r a b l e amount o f t r a d i n g back and f o r t h t h a t takes p l a c e among d e a l e r s b e f o r e the merchandise f i n d s i t s way to the j e w e l l e r y manufacturers. The c o r r e s p o n d i n g data f o r 1975 are: e x p o r t s , $80 m i l l i o n rough and $279 m i l l i o n p o l i s h e d ; imports, $348 m i l l i o n rough and $383 m i l l i o n p o l i s h e d . Puerto R i c o . The diamond-cutting i n d u s t r y o f Puerto R i c o i s c l o s e l y i n t e g r a t e d w i t h that o f New York. There i s i n t e r -change o f diamonds and p e r s o n n e l , w i t h manufacturers o f t e n having f a c t o r i e s i n both p l a c e s . The arrangement i s due to the h i g h e r l a b o u r c o s t s f o r the s m a l l e r s t o n e s , which are t h e r e f o r e sent to the lower p a i d Puerto R i c a n workers. A l s o , the l o c a l workers can be r e a d i l y c a l l e d to New York when t h e r e i s a boom and l a b o u r shortages develop. There are 13 c u t t i n g e s t a b l i s h m e n t s , s p e c i a l i z i n g i n f i n i s h i n g diamonds from .25 c t . 3 2I.D.A., • p. 196. 55I.D.A., p. 198. Jewelers ' C i r c u l a r - Keystone, D i r e c t o r y I s s u e , June 21, 1977. and up; the average size is 3 to the carat."" The Puerto Rican industry dates back to 1914, and i t was founded, not by an American, but by a prestigious Antwerp cutter, Lazare Kaplan, who was v i s i t i n g New York when World War I broke out. Stranded i n America, he t r i e d to establish himself i n New York, but the l o c a l industry did not allow him. He then went to Puerto Rico and b u i l t up an expert s t a f f there. Amsterdam. Amsterdam has been associated with the diamond trade for several centuries. The fortunes of Amster-dam and Antwerp rose and f e l l alternately from the 15th Century on, as the monopoly of the commerce with India changed hands (from Venetian to Portuguese to Dutch to Eng-l i s h ) , as r e l i g i o u s persecutions and wars drove the Jewish cutters and traders back and forth, and as diamonds were discovered in B r a z i l and then in A f r i c a . The Dutch sought to secure a l l the rights to B r a z i l i a n diamonds in the beginning of the 18th Century, but had to allow London and Antwerp a share of the trade. The discover-ies i n A f r i c a led to London's d e f i n i t i v e pre-eminence as a trading centre and Antwerp's as a cutting centre, and the Dutch industry slowly declined, u n t i l f i n a l l y during World I.D.A., p. 199. bI.D.A., p. 187. 116 War II i t was t o t a l l y eliminated and the workshops dis-mantled and carried to Germany. Nowadays the industry has been set up again, using e n t i r e l y new machinery, and employs some 800 workers; i t has also d i v e r s i f i e d by going into the manufacture of jewellery to cater to the t o u r i s t trade. Amsterdam's importance as a d i s t r i b u t i o n centre is based not so much on the l o c a l industry as on the t r a f f i c from Israel and Europe to the U.S.A. and back, some of which is done for i l l e g a l purposes, as we described e a r l i e r in the section on Antwerp. S t a t i s t i c s , therefore, would be 37 hard to interpret i f they were available. West Germany. The German t r a d i t i o n of diamond cutting goes as far as 1538, when the f i r s t faceting m i l l s were estab-lished i n Augsburg by a family of merchants with contacts with the Lisbon market. Other m i l l s were established i n Nuremberg in 1550. But the modern-day industry goes back only to 1864, in Hanau. Idar-Oberstein in the Pfalz d i s t r i c t also started production about that date, as a cottage industry. The small German industry only survived by cutting diamonds that were too small for Antwerp and Amsterdam to handle p r o f i t a b l y . These were sent to the cottage workers for f i n i s h i n g . There-fore, the Germans became experts on working with stones as small as one point, which were done as eight-cuts. Work was done on a contract basis. I. D. A. 3 p . 135 . 117 In 1970 the i n d u s t r y had grown to 1,500 workers, s p e c i a l i z e d i n small b r i l l i a n t s and melee. The cottage i n d u s t r y had d e c l i n e d , because the market i n e i g h t - c u t s had become more co m p e t i t i v e and the labour c o s t s were grow-i n g . Contract work, mostly done by the cottage workers, had a l s o d e c l i n e d ; i n s t e a d , company workshops handled most of the goods. There were seven German buyers i n v i t e d to the C.S.O.'s s i g h t s , but, on a world s c a l e , the t o t a l purchases 3 8 were r e l a t i v e l y s m a l l . In 1971 a new Diamond and Precious Stone Exchange was opened at the t r a d i t i o n a l centre of I d a r - O b s e r s t e i n , housing 39 100 d e a l e r s i n diamonds and other gems. France. The diamond-cutting i n d u s t r y i n France serves the l o c a l j e w e l l e r y manufacturers, and, i n f a c t , can only supply a small p o r t i o n of t h e i r needs. The main c u t t i n g c e n t r e i s at S a i n t Claude i n the Jura Mountains, no r t h of Geneva, where some 300 workers were i n 1970 employed p o l i s h -ing melee and l a r g e r diamonds up to 1.5 c t . The main product i s melee, and the French i n d u s t r y i s s a i d to produce a s p e c i a l l y good "make" ( c u t ) . Some 50 workers are employed i n the environs of P a r i s , and i n a d d i t i o n there are s p e c i a l i z e d and h i g h l y s k i l l e d craftsmen working on commission or c o n t r a c t f o r the I.D.A., p. 208. Diamond World Review, May 1975, p. 23. 118 leading Parisian jewellers. The Paris workers do fancy cuts on larger stones. Supplies of rough come from the C.S.O. in London, wholesalers in Paris and Antwerp, and agents i n 40 African markets. enough to provide for most of the needs of the l o c a l jewellery manufacturers. The main centre is Petropolis, near Rio de Janeiro, where several factories cut small melee. Wages are low and so i s productivity. The I.D.A. has no s t a t i s t i c s . In Tanzania, the cutting industry started i n the 1960's using the production from the l o c a l mines. There was only one factory in 1970, where Antwerp technicians trained 300 Tanzan-ians to become experts in cutting. Interestingly enough, Tanzanian diamonds requiring sawing or cleaving were f i r s t shipped to Antwerp for processing and then shipped back to Tanzania. S i e r r a Leone i n 1968 established a factory i n Freetown to process the l o c a l output; i t was set up by a New York firm and run by I s r a e l i technicians, who trained the l o c a l workers. The enterprise was not yet economic i n 1970, according to the Other Countries. Brazil, has a small industry that is I.D. A. 4 2 40 I. D.A p. 175. 41 I. D.A. 201. > P-4 2. I.D.A. > P- 205 . 119 There is a small and specialized industry in the United Kingdom, a remnant of the f l o u r i s h i n g manufacture of the 17th Century. Three factories employ about 100 men, most of them London-trained. One manufacturer specializes in larger diamonds and supplies American and French jewellers with goods of high quality. Another cuts extremely small dia-monds for Swiss watches. London, on the other hand, is the main centre i n the world for diamond trading; the C.S.O. of f i c e s are located there, and around them the o f f i c e s of their brokers and other dealers. London's a c t i v i t i e s w i l l be dealt with in the next chapter, as part of the C.S.O.'s marketing mechanism.^ Bong Kong has a special p o s i t i o n in the diamond trade. Its geographical location makes i t a natural l i n k between East and West, and being a "free port", i t attracts foreign buyers from a l l over the world who want to p r o f i t from the absence'of import and sales taxes. Also, the cost of labour is low, and there is a long t r a d i t i o n of buying and s e l l i n g . It has been said i n the trade that Hong Kong i s the cheapest place for diamond jewellery and single loose diamonds. Before 1970 there was no cutting done i n Hong Kong, but only commerce in polished goods. These came f i r s t from I.D.A., p. 185. I.D.A., p . 242 . 120 Antwerp, South A f r i c a and Amsterdam; i n the 1950's Israel became a source; and now India and the U.S.A. also. The l a t e s t source, somewhat su r p r i s i n g l y , has been the United Kingdom. Business i s done p r a c t i c a l l y a l l on c r e d i t , some-times on extended cr e d i t . There is also a practice of send-ing goods abroad on consignment, which are returned i f unsold. (This practice i s less widely used at times l i k e the present, when prices are rapidly r i s i n g ) . The main customer abroad is Japan. Singapore used to be a so-called entrepot for the re-d i s t r i b u t i o n of both cut and uncut diamonds among Malaysia, Indonesia, Thailand, and other Far East countries, but now Hong Kong has occupied that place. The I.D.A. says that o f f i c i a l s t a t i s t i c s of what trade there s t i l l i s are worth-less due to smuggling.^ CONCLUSION Production of diamonds is carried out by operators of a l l s izes, from giant companies to small l o c a l miners to i l l i c i t diggers. De Beers, through i t s own subsidiaries, through con-tracts with independent producers, and through licensed buyers active in most markets, manages to absorb about 80 per cent of the output of rough; the rest finds i t s way to the trading I.D.A., p. 243. 121 centres i n various ways, that often include smuggling. The U.S.S.R. is i n a class by i t s e l f , with i t s production and d i s t r i b u t i o n carried out s o l e l y by the State. In the cutting industry, one of the h i s t o r i c a l patterns i s the s h i f t i n g in and out of prosperity of a centre as p o l i t i c s and monopolies s h i f t e d , and as the rough consequently became available or was withdrawn. Another pattern arises from the fact that small stones require more labour in proportion to t h e i r price than larger stones. Thus, the more established centres f i n d i t impossible to process the small stones, due to high labour and overhead costs, and send them to be processed elsewhere, often i n cottage industries, and always by lower paid workers. Many centres have started by f i l l i n g that niche, and some of them have grown into larger and more d i v e r s i f i e d cutting industries. The new industries do compete with the old ones, but often the market accommodates i t s e l f so that there is a s p e c i a l i z a t i o n of functions, and each cutting centre w i l l then produce a certain range of sizes and q u a l i t i e s that w i l l not greatly overlap with that of the others. This i s connected to the phenomenon of the progressive lowering of quality i n the average goods sold, as new markets are being created for goods that are smaller, or of poorer q u a l i t y , than those commonly sold before. Thus, certain centres grow by special-i z i n g i n a lower quality than i s currently available, and the 122 prime example is Israel succeeding Antwerp and India in turn producing even cheaper goods. The development of cutting centres is closely tied to the fact that diamonds have such a high value-to-weight r a t i o that transportation expenses of the rough, even over long distances, are r e l a t i v e l y i n s i g n i f i c a n t . This is true nowadays, with cheap a i r t r a v e l , but i t was true even centuries ago, and made possible the creation of the var-ious European centres to process Indian and then B r a z i l i a n diamonds. These manufacturers were close to consumption centres, but in the present century the I s r a e l i and Indian industries were created far from both the producers and the consumers, and they did not experience any disadvantage therefrom. By the same reason, d i v i s i o n of labour is highly p r a c t i c a l , an example being Tanzanian diamonds flown to Ant-werp for sawing and back to Tanzania for polishing; then per-haps back to Antwerp for s e l l i n g , and so on. The ease of transportation of diamonds also allows for much trading back and forth between the various bourses. (As diamonds are a nonhomogeneous commodity, they must be ph y s i c a l l y transported to be appraised by the buyer). It also greatly f a c i l i t a t e s smuggling, which is a common prac-t i c e in certain sectors of the trade. In connection with smuggling, there is the fact that diamonds are quite hard to appraise accurately, even for the experts; so the declared 123 value of imported and exported diamonds may not have much connection with r e a l i t y . Governments are not d e f e n c e l e s s a g a i n s t such p r a c t i c e s , but the d i f f i c u l t i e s remain. CHAPTER IV THE DIAMOND INDUSTRY IN ISRAEL OUTLINE The f i r s t s e c t i o n of t h i s chapter d e a l s with the h i s t o r y o f the I s r a e l i diamond-cutting i n d u s t r y from i t s modest beginnings i n 1934, through the war-time boom, to the t r y i n g p e r i o d a f t e r World War I I . The second s e c t i o n d e t a i l s the growth that has taken p l a c e s i n c e 1948, with s p e c i a l a t t e n t i o n to the fundamental r o l e of the government i n a s s i s t i n g the i n d u s t r y ' s development. Subsections of t h i s s e c t i o n d eal w i t h the way i n which rough was procured to feed the i n d u s t r y a f t e r the De Beers sources d r i e d out; with the f i n a n c i a l a s s i s t a n c e to the i n d u s t r y from the government; wit h the procurement of manpower; and with the i n s t i t u t i o n s that have been b u i l t to organize r e s e a r c h and promotion. A l a s t s u b s e c t i o n deals with the d i v i s i o n of labour among c u t t i n g p l a n t s and the p r a c t i c e of s u b c o n t r a c t i n g . The t h i r d s e c t i o n d e a l s with the I s r a e l Diamond Exchange and d e s c r i b e s i n de-t a i l the way i n which the whole purchases are n e g o t i a t e d among d e a l e r s . One l a s t s e c t i o n s t u d i e s I s r a e l ' s l a t e s t export f i g u r e s . 125 DEVELOPMENTS UP TO 1948 The beginnings of the I s r a e l i i n d u s t r y go back to 1934, when Zwi Rosenberg, who was born i n Hungary and spent some years i n Antwerp l e a r n i n g the c r a f t , went to P a l e s t i n e , and a f t e r two or three years set up p o l i s h i n g m i l l s i n a d i s u s e d s t a b l e i n Petak T i k v a . There he. was j o i n e d by h i s c o u s i n , Anton D a s c a l , a l s o from the Antwerp i n d u s t r y , and together they were the f i r s t diamond c u t t e r s to operate i n P a l e s t i n e . Even b e f o r e them, however, another Antwerp manuacturer, Shlomo Weinstein, had brought equipment to P a l e s t i n e i n 1910; but he abandoned h i s idea and only i n 1940, a f t e r Rosenberg and Dascal had e s t a b l i s h e d themselves i n Natanya, d i d he j o i n them to s t a r t h i s own shop there."*" The major of Natanya, Oved Ben Ami, had seen the p o s s i b i l i t i e s o f the i n d u s t r y and had o f f e r e d f r e e l a n d , loans on easy terms, and other b e n e f i t s to the manufacturers to a t t r a c t them to the town, s e t t i n g a p a t t e r n of government help that would continue to the present day. Ben Ami succeeded i n making Natanya i n t o a centre f o r the c u t t i n g i n d u s t r y , and with the developments of World War I I , i t became the only o p e r a t i n g c e n t r e f o r Europe. Refugees from Amsterdam and Antwerp f l o c k e d to i t , and the i n d u s t r y and the trade grew q u i c k l y , due to the s k i l l s and connections of the newcomers. International Diamond Annual (I.D.A.), p. 229. 126 0. Ben Ami was a l s o i n s t r u m e n t a l i n a r r a n g i n g a meeting with George P r i n s . o f the London f i r m of diamond b r o k e r s , I. Henning and Co. L t d . , which brought about the diamond s y n d i c a t e ' s f i r s t i n t e r e s t i n the young i n d u s t r y i n P a l e s t i n e . Through the Diamond T r a d i n g Company (D.T.C.) the manufacturers were promised enough rough to s u s t a i n and expand t h e i r p r o d u c t i o n . The imports Avere r e g u l a t e d by the c o l o n i a l a u t h o r i t i e s of P a l e s t i n e , who d i r e c t e d the l o c a l manufacturers to form an a s s o c i a t i o n that would become the s o l e importer o f rough f o r i t s members. F u r t h e r , t h e i r s o l e source of supply should be the D.T.C. At the end of 1942, the government r e g u l a t e d again the growth of the i n d u s t r y , when the S e c r e t a r y of State f o r the C o l o n i e s , . t o " p r e s e r v e the sound development of the i n d u s t r y , " forbade the issuance of new manufacturing l i c e n s e s or the a d d i t i o n o f new s h a r e h o l d e r s to the e x i s t i n g f a c t o r i e s . Governmental i n t e r v e n t i o n was probably m o t i v a t e d by the c l o s e c o - o p e r a t i o n of the B r i t i s h a u t h o r i t i e s with the B e l g i a n and Dutch governments i n e x i l e , and the B r i t i s h must have been concerned about the c o m p e t i t i o n o f the I s r a e l i i n d u s t r y to 2 M i c h a e l Szenberg, The Economics of the I s r a e l % Diamond Industry (New York: B a s i c Books, Inc., 1973), p. 19. 127 the European c e n t r e s once the war was ended. 0 Be that as i t may, the new r e g u l a t i o n s helped the i n d u s t r y f o r the time being by b r i n g i n g i n s t a b i l i t y , c e n t r a l i z e d p r o d u c t i o n , freedom from e x c e s s i v e c o m p e t i t i o n , and t h e r e f o r e a hi g h degree of p r o s p e r i t y . ^ At the end of the war i n Europe, however, the refugees began streaming back to Antwerp and to Amsterdam, and the B e l g i a n and Dutch governments s t r o v e to r e c o n s t r u c t t h e i r s h a t t e r e d i n d u s t r i e s . The D.T.C. a l s o s t a r t e d r e d i r e c t i n g the rough to Europe, f o r reasons t h a t the I.D.A., which i s a De Beers p u b l i c a t i o n , e x p l a i n s as f o l l o w s : Antwerp, as both the l e a d i n g diamond c e n t r e i n pre-war days, and as the c o n t r o l l e r of a vast p r o d u c t i o n of mainly i n d u s t r i a l diamonds from the (Belgian) Congo c o u l d c l a i m s p e c i a l r i g h t s and p r e f e r e n c e from the D.T.C. i n London. I n d u s t r i a l diamonds from the Congo had become supremely impor-tant f o r war i n d u s t r i e s " i n America and Great B r i t a i n and, i n post-war i n d u s t r i a l developments, Congo boart was becoming p r o g r e s s i v e l y more impor-t a n t . Marketing a l l o c a t i o n s i n London of both gem and i n d u s t r i a l diamonds had to take account of sources of supply, long-established associations, marketing networks and the general desire to a s s i s t the Belgians and the Dutch in t h e i r great e f f o r t s to restore t h e i r i n d u s t r i e s and t h e i r marketing arrangements. (Emphasis added). Szenberg, p. 28, n. 4 Ibid., p. 19. SI.D.A., p. 229 . 128 So, after the favourable conditions provided by the war evaporated, the industry was threatened with extinction. Firms disintegrated and mass layoffs took place. In 1947 the Histadrut (the I s r a e l i Labour Federation) t r i e d to a l l e -viate the economic hardships by a s s i s t i n g the workers to form 20 co-operatives, but by then the I s r a e l i War of Independence, the m i l i t a r y mobilization i t required, and the cutting off of rough from the D.T.C. had aggravated the c r i s i s . Eventually, a l l the c o l l e c t i v e s f a i l e d . ^ THE RECOVERY AND GROWTH AFTER 1948 AND GOVERNMENT POLICIES TO DEVELOP THE INDUSTRY Before proceeding with the history of the industry, i t may be useful to consider the attitude of the I s r a e l i govern-ment towards the development of the several sectors of the econ-omy during th i s period. U n t i l the middle of the 1950's the main concern of the government was to supply the basic needs of the rapidly growing population through expansion of a g r i c u l -ture, construction and infrastructure. As for manufacturing, the leadership continued i n i t s t r a d i t i o n a l pre - independence p o l i c y of largely 'ignoring i t . (The f i r s t Zionist s e t t l e r s , reacting to t h e i r former l i v e s in Europe, had a distate for i n d u s t r i a l and f i n a n c i a l a c t i v i t i e s and a preference towards s e t t l i n g and working the land, and i t was these same early 6 Szenberg, p. 19. 129 s e t t l e r s who dominated the post - independence government). C o n s i d e r i n g that during the e a r l y post-independence years i t was the government who f i n a n c e d most of the development i n the country (between 50 to 80 per cent o f gross c a p i t a l f o r m a t i o n i n the years 1950 to 1958) i t i s c l e a r t h a t manu-f a c t u r i n g couldn't prosper without o f f i c i a l h e l p , and, indeed, i t d i d d e c l i n e d u r i n g those years (the share of manufacturing 7 i n the G.N.P. went from 25 to 22 per cent i n that t i m e ) . But i n the l a t t e r p a r t of the 1950's, the govern-ment s t a r t e d a s h i f t towards h e l p i n g the development of I s r a e l i ' s i n d u s t r i e s , probably due to the l e s s e n i n g i n immi-g r a t i o n p r e s s u r e s and the prospects f o r d i m i n i s h e d f o r e i g n a s s i s t a n c e . The diamond i n d u s t r y from the beginning appeared as one of the most pr o m i s i n g , f o r the f o l l o w i n g reasons: 1. The i n d u s t r y i s e x c l u s i v e l y e x p o r t - o r i e n t e d and capable of earning f o r e i g n c u r r e n c y . 2. Investment per employee i s s m a l l , from $150 to $600 ( i n 1969) . 3. T r a n s p o r t a t i o n c o s t s are minimal. 4. E d u c a t i o n a l requirements f o r the t r a i n i n g of the workers are a l s o minimal. 5. Consumption of water (scarce i n much of I s r a e l ) and e l e c t r i c i t y i s n e g l i g i b l e . 6. The commercial, f a m i l i a l and e t h n i c r e -l a t i o n s between l o c a l producers and mar-k e t i n g channels abroad f a c i l i t a t e access to f o r e i g n markets.^ Szenberg, p. 104. Ibid., p. 105. 130 T h e r e f o r e , a number of government programs s t a r t e d about t h i s time to help the i n d u s t r y i n i t s many needs: p r o c u r a t i o n of raw m a t e r i a l s , c r e d i t , r e s e a r c h and manpower r e c r u i t m e n t . S u p p l i e s of Rough. A f t e r the s u c c e s s f u l c o n c l u s i o n of the War o f " Independence i n 1948, the i n d u s t r y began i t s slow r e c o n s t r u c t i o n , marked by a constant s t r u g g l e to secure s u p p l i e s of rough. Lengthy and onl y p a r t i a l l y s u c c e s s f u l nego-t i a t i o n s with the D.T.C. i n 1950 f i n a l l y secured a f r o z e n y e a r l y quota of between $5 m i l l i o n and $8 m i l l i o n worth of rough, estimated enough to employ 1,500 workers. At t h a t time, t h i s quota c o n s t i t u t e d about 80 per cent i n value of I s r a e l ' s t o t a l rough imports, the remaining 20 per cent coming from B e l g i a n and Dutch c l i e n t s of the s y n d i c a t e , which t r a n s f e r r e d t h e i r a l l o t m e n t but charged a premium over the s y n d i c a t e ' s p r i c e s . I t was r e a l i z e d t h a t these channels would not be enough f o r the development of the i n d u s t r y , and i n l a t e r years they became even l e s s adequate, with the c e s s a t i o n o f the shipment of c h i p s i n 1950 (chips have a high added valued and are t h e r e f o r e a d e s i r a b l e type of rough), and the newly imposed r e s t r i c t i o n s i n Belgium a g a i n s t the export of rough diamonds. 9 I t thus became necessary to i n v e s t i g a t e new ways of p r o c u r i n g rough. As an i n i t i a l e f f o r t , the government sent two n e g o t i a t o r s to A f r i c a , Menahem F r u c h t e r and Joseph Nadel, Szenberg, p. 107. 131 and urged p r i v a t e d e a l e r s to j o i n them. In 1958 a government-owned c o r p o r a t i o n , P i t u a c h , was founded to i n i t i a t e c o n t a c t s w i t h the newly-emerging A f r i c a n n a t i o n s f o r the purpose of diamond p r o s p e c t i n g and procurement. At that time I s r a e l was h e l d i n high esteem by many A f r i c a n governments, l i k e those of the Ivory Coast, Ghana, Guinea, and the C e n t r a l A f r i c a n R e p u b l i c , and P i t u a c h was s u c c e s s f u l i n p r o c u r i n g rough: i n 1959 imports from A f r i c a amounted to onl y $170,000, but i n 1961 they had grown to over $5 m i l l i o n . At the same time, r e l a t i o n s were a l s o expanded w i t h independent mining and rough-diamond marketing concerns, l i k e the New York-based Diamond D i s t r i b u t o r s Inc. It i s c o n c e i v a b l e that the s y n d i c a t e , composed as i t i s of South A f r i c a n i n t e r e s t s , f e l t threatened by the I s r a e l i a c t i v i t y i n A f r i c a , because i t s p o s i t i o n i n the bl a c k r e p u b l i c s was and i s p r e c a r i o u s ; f o r t h i s or other reasons, i t consented i n 1960 to re-open n e g o t i a t i o n s to expand the quota of rough f o r I s r a e l (having r e f u s e d up to that p o i n t to do s o ) . The terms of the 1961 agreement were not p u b l i s h e d , but the r e s u l t was c l e a r ; the C.S.O.'s per-centage (by value) of the I s r a e l i imports of rough was i n 1959 at an a l l time low of 16.4, down from 81.3 i n 1951; but i t s t e a d i l y climbed from 1960 to a value of 58.3 i n 1965, and t h e r e a f t e r f l u c t u a t e d i n response to the v a r i o u s develop-ments, but always remained h i g h , while the value of the imports 132 went up q u i t e s t e a d i l y over these y e a r s . 1 U In 1977 i t was over 50 per cent from d i r e c t C.S.O. s a l e s and a c o n s i d e r a b l e but hard to estimate a d d i t i o n a l percentage from a d d i t i o n a l 11 s a l e s . Table IV.1 and Fi g u r e 45 show I s r a e l ' s imports and the share of the C.S.O. i n them. In 1969 there were about 50 manufacturers and 10 d e a l e r s , i n c l u d i n g P i t u a c h , that had access to syndicate s i g h t s . P i t u a c h continues a l s o to procure rough from other sources, a v o i d i n g c o mpetition with the sy n d i c a t e (which perhaps was one of the terms of the 1961 agreement), and s e l l i n g to cus-tomers both i n I s r a e l and abroad. In 1965 i t was s h i p p i n g to 100 customers, of which o n l y 50 were i n I s r a e l , and i t s s a l e s were over $14 m i l l i o n . P a r a l l e l to the growth of I s r a e l ' s share of the C.S.O.'s s a l e s (from 5.9 per cent of the t o t a l rough s o l d by the C.S.O. i n 1952 to a low of 2.7 per cent i n 1959 and from then up to a t h i r d and more of a l l C.S.O. s a l e s ) there has been a d e c l i n e i n Antwerp's share, from 36.4 i n 1952 to 23.8 i n 1966 and s t i l l d e c r e a s i n g . (Percentages are on v a l u e , not c a r a t s ) . 1 0 S z e n b e r g , p. 107. ^Israel Diamonds, 46:32. 12 Szenberg, p. 109. 475 Figure 45 Import of rough gem diamonds Cl. from D.T.C. , 2 from _ other sources (From I s r a e l Diamond De- — oartment, Annual Report 'for 1 974) . -Lr4 TABLE IV.1 IMPORT OF ROUGH GEM DIAMONDS ( 1 . from D.T.C., 2. from other sources) 1952-74 (From State of Israel, Ministry of Commerce and Industry; Diamond Department, Annual Report for the Year 1974 (Feb. 1975) _y_rp.ii o t h e r source3 2 , 2 2 9 , 2 7 6 5 , 1 0 1 , 4 7 7 5 , 2 2 4 , 1 6 0 5 , 3 1 0 , 6 3 3 1 6 , 2 2 6 , 3 6 5 2 2 , 9 1 3 , 7 4 0 1 9 , 0 4 2 , 8 0 9 3 5 , 4 3 6 , 9 3 0 4 0 , 7 5 3 , 8 3 3 3 6 , 9 9 3 , 5 4 2 3 7 , 6 7 3 , 8 3 4 4 3 , 6 6 4 , 1 2 2 5 4 , 7 3 2 , 4 7 5 4 6 , 1 4 2 , 9 9 4 65 ,112 ,179 6 5 , 3 3 7 , 9 1 9 8 7 , 1 1 1 , 9 4 2 1 2 2 , 3 2 2 , 5 6 8 1 1 6 , 3 5 5 , 9 7 2 1 4 7 , 9 6 0 , 7 3 8 2 1 2 , 5 5 9 , 5 6 6 3 2 2 , 7 4 1 , 4 9 3 2 6 3 , 2 6 5 , 9 1 9 From D. ?~ LTT caraa 1 5 0 , 4 7 2 2 0 7 , 5 9 3 2 1 2 , 9 1 0 3 3 4 , S 0 7 +06,955 6 5 4 , 8 1 8 5 9 7 , 1 0 8 1 , 0 6 3 , 7 9 4 1 ,181 ,091. 1 , 1 7 5 , 7 4 2 1 , 2 0 2 , 1 0 3 1 , 3 4 9 , 9 5 7 1 , 3 4 5 , 9 1 7 1 , 1 6 5 , 4 4 7 1 , 4 9 6 , 1 3 5 1 , 5 1 0 , 6 7 9 1 , 9 2 6 , 7 3 9 2 , 4 3 8 , 7 1 3 2 , 7 1 9 , 8 1 5 3 , 5 4 0 , 1 5 8 4 , l S 5 , 0 2 5 • 4 , 5 6 2 , 0 1 8 3 , 4 5 1 ,371 V» O f icport value 7 7 . 3 5 6 . 8 62.1 4 2 . 7 2 4 . 8 2 0 . 5 2 5 . 5 1 6 . 4 20.4 35.2 ' 4 8 . 0 5 6 . 4 5 3 . 3 5 8 . 3 53.2 52.6 51.7 41 . 8 33.4 38.4 36.9 33.8 40 .6 carats 7 , 5 S 7 , 5 2 4 6 , 6 9 2 , 5 2 3 8 , 5 6 3 , 2 4 0 6 , 9 3 4 , 9 6 7 5,361 ,135 5,898,060 6 , 5 0 9 , 1 5 4 6 , 9 9 6 , 8 7 5 1 0 , 4 2 9 , 4 7 6 2 0 , 0 5 3 , 1 4 1 3 4 , 7 6 0 , 2 4 5 5 6 , 4 2 9 , 0 5 0 6 2 , 4 6 8 , 5 2 9 6 4 , 5 3 2 , 6 2 1 . 7 3 , 7 4 2 , 8 1 7 7 2 , 5 S 9 , 3 2 5 93,414,619 — 8 3 , 0 5 0 , 1 0 1 — 5 8 , 4 2 8 , 6 3 6 - — 9 2 , 3 0 3 , 2 0 9 — 124,030,531 -165.27S.3-i6 1 7 9 , 6 ^ 4 , 7 5 0 2 2 0 , 3 2 3 2 3 9 , 0 0 2 2 9 4 , 1 9 0 2 0 9 , 0 9 3 1 5 2 , 3 4 5 1 5 9 , 7 3 2 1 7 5 , 3 6 2 191,103 2 6 0 , 6 0 2 4 3 6 , 8 9 7 952 ,553 1 , 5 9 0 , 0 1 1 1 , 6 5 2 , 3 5 0 1 , 5 4 2 , 3 0 2 1 , 6 2 8 , 3 8 3 1 , 5 7 5 , 3 2 7 1 , 9 5 0 , 6 2 6 1 , 8 6 7 , 7 7 4 1 , 3 7 7 , 3 2 7 2 , 1 2 3 , 6 7 4 2 , 5 5 " , 0 5 9 2 , 6 7 6 , 4 7 1 ~Cro33 ioport carats 9,316 ,300 1 1 , 7 9 4 , 0 0 0 1 3 , 7 9 3 , 0 0 0 1 6 , 2 4 5 , 6 0 0 21,5S3,COO 2 8 , 8 1 1 , 8 0 0 2 5 , 5 5 1 , 9 6 3 4 2 , 4 3 3 , 8 5 5 51 , 1 3 3 , 3 6 4 5 7 , 0 4 6 , 6 3 4 7 2 , 4 3 4 , 0 7 9 100 ,093 ,172 ' 117 ,251 ,007 110 ,725 ,615 1 3 8 , 8 5 4 , 9 9 6 137 ,927 ,244 ICO,526,561 210 ,372 ,669 174 ,734 ,658 2*0 ,263 ,947 3 3 6 , 5 9 0 , 0 9 7 4 3 3 , 0 1 7 , 8 3 9 -442 ,V i4J,609 370,300 446 ,600 507,100 5 4 3 , 9 0 0 6 3 9 , 8 0 0 8 1 4 , 6 0 0 7 7 2 , 4 7 0 1 , 2 5 9 , 9 0 2 1 , 4 4 1 , 693 1 , 6 6 2 , 6 3 9 2 , 1 5 4 , 6 5 6 2 , 9 3 9 , 9 6 3 2 , 9 9 8 , 7 6 7 2 , 7 0 7 , 7 4 9 3 , 1 2 4 , 5 1 8 3 , 0 3 9 , 0 0 6 3 , 8 7 7 , 3 6 5 4 , 3 0 6 , 4 3 7 4 , 0 9 7 , 1 4 2 5 , 6 6 8 , 8 3 2 6 , 7 3 9 , 0 8 4 7 , 2 3 3 , 4 8 ? 6,119 ,314 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 • 1965 • 1966 1967 " 1968 . 1969 1970 1971 1972 1973 1974 135 Credit to the Industry. It i s a p e c u l i a r i t y of the industry that even though the value of fixed equipment is very low (except that the new automatic machines are considerably more expensive than ordinary scaifes) working c a p i t a l require-ments are very high, due to the cost of the raw materials. In the early post-war years, the import of rough was financed by acceptance credits put at the disposal of the l o c a l banks by t h e i r foreign correspondents. These were repaid out of '. the proceeds from the sale of the polished goods, usually after 90 days. However, the extremely rapid growth of the industry, i t s seasonal pattern, and keen competition in the major export markets led to longer c r e d i t extensions to foreign customers. Orders were shipped on consignment rather than on " f i x " (payment agreed upon before delivery) which generated a severe shortage of cash. This shortage could not be met by the usual banking sources; and even i f i t had been possible, the interest paid on loans would have threateried or even eliminated the industry's p r o f i t s . The government, recognizing the problem, formed a special fund within the general fund for financing exports, i n which the Bank of Israel and s p e c i a l i s t banks p a r t i c i p a t e . (Since diamond financing demands an intimate knowledge of the product by the bank, i t i s mostly done by s p e c i a l i s t banks, of which the p r i n c i -pal is the Union Bank, a subsidiary of Bank Leumi, and the 136 o t h e r s f a r e the Discount and B a r c l a y ' s Banks). Twenty per cent of t h i s fund i s p r o v i d e d by the government budget, 20 per cent by Bank of I s r a e l r e d i s c o u n t s , and the remainder by the s p e c i a l i s t banks. One-half of the l a t t e r i s s u b j e c t to l i q u i d i t y r e s t r i c t i o n s . The diamond fund ($70 m i l l i o n i n 1969) f i n a n c e s up to 80 per cent of the cost of a c q u i r -i n g stones, and m a i n t a i n i n g s t o c k s , and up to 90 per cent of the export d e l i v e r i e s , at an i n t e r e s t r a t e of o n l y 6.2 per cent. The comparatively low i n t e r e s t r a t e , l e s s than h a l f of what would !have to be p a i d i n the open market, i s granted to i n c r e a s e the competitiveness of the i n d u s t r y i n 13 world markets. There was c r i t i c i s m about both the l i b e r a l i t y with which these loans were granted and the h e a v i l y s u b s i d i z e d r a t e s of i n t e r e s t and i t i s undeniable that there were abuses and t h a t o f t e n some of the weakest and most i n e f f i -c i e n t f i r m s r e c e i v e d undeserved support. To meet the c r i -t i c i s m , the Diamond C o n t r o l Department r e v i s e d the l e n d i n g p o l i c i e s , t r y i n g to prevent u n j u s t i f i a b l y l a r g e loans and a l s o the d i v e r s i o n of funds i n t o other a c t i v i t i e s , l i k e r e a l e s t a t e , f o r i n s t a n c e . The p o l i c i e s were m o d i f i e d , so t h a t c r e d i t i s obtained o n l y i n f o r e i g n exchange and can o n l y be redeemed i n f o r e i g n exchange. Szenberg, p. 110. 137 C e r t a i n p r i v i l e g e s enjoyed by the t r a d e , which c o u l d be c l a s s i f i e d as a government support of s o r t s , are not made p u b l i c , but are probably w e l l known. In the Diamond Exchange at Ramat Gan, which i s only open to members (manufac-t u r e r s , b r o k e r s , and d e a l e s r ) , there are, i n the author's ex-p e r i e n c e , money changers that work without f a n f a r e but q u i t e openly, exchanging f o r e i g n currency at r a t e s b e t t e r than the o f f i c i a l ones. It i s hard to b e l i e v e that such a c t i v i t i e s can take p l a c e without the government's knowledge, so i t must be concluded that the government t a c i t l y consents to them i n the i n t e r e s t of the i n d u s t r y ' s w e l f a r e . 14 One more p r i v i l e g e enjoyed by men i n the diamond i n d u s t r y i s a l i t t l e known 10 per cent discount on a l l h o t e l b i l l s . I t would be i n t e r e s t i n g to a s c e r t a i n whether the h o t e l s are reimbursed, and i f so, by whom, whether by a government source or other sources. Manpower. The speed with which the i n d u s t r y was b u i l t c r e a t e d some s p e c i a l f e a t u r e s i n the manufacturing pro-cess, e s p e c i a l l y as.regards the d i v i s i o n of labour. It was not p o s s i b l e to spend years t r a i n i n g a p p r e n t i c e s i n every branch o f c u t t i n g and f i n i s h i n g . T r a i n i n g had to be quick; and t h i s c o u l d best be achieved by l e t t i n g one workman " ^ h e r e are very few women i n the I s r a e l i diamond i n d u s t r y . 138 con c e n t r a t e on one p a r t i c u l a r p a r t of the process. T h i s con-c e n t r a t i o n l e d to the method c a l l e d c h a i n - o f - s i x . F i r s t a sawer cuts a stone i n two h a l v e s , and then one man does the g r i n d i n g , another the top main (four) f a c e t s , then the bottom main f a c e t s , then the top corner f a c e t s , then the bottom corner f a c e t s , and f i n a l l y the top and bottom b r i l l i a n t e e r -i n g . The c h a i n - o f - s i x system d i f f e r s from the more t r a d i t i o n -a l p r a c t i c e of a b l o c k e r and a b r i l l i a n t e e r e r , which employs j u s t two workers, and i s p a r t i c u l a r l y w e l l adapted f o r f a s t p r o c e s s i n g of melees that r e q u i r e sawing i n h a l f . The wide employment o f t h i s system, which gave I s r a e l i f o r some time almost a world monopoly i n p o l i s h e d melee, b e n e f i t t e d the worker i n that i t i n c r e a s e d p r o d u c t i v i t y and earnings, but i t a l s o engendered boredom, a r e d u c t i o n i n the s a t i s f a c t i o n d e r i v e d from doing the work, and a f e e l i n g o f i n s e c u r i t y because of the i m p o s s i b i l i t y of any advancement. This i n t u r n leads o f t e n to a d r i f t i n g away to other t r a d e s . ^ Industry workers tend to be younger on the average than workers i n other i n d u s t r i e s ; f o r i n s t a n c e , i n 1961 workers of ages 18 to 34 were about 55 per cent of the t o t a l of 5,000 diamond workers at that time, whereas i n a l l i n d u s t r i e s i n I s r a e l combined, t h a t age group amounted to about 38 per cent o f the t o t a l work f o r c e . One of the reasons f o r t h i s d i f f e r e n c e c o u l d be the p i e c e - r a t e system of remuner-a t i o n , which favours the young worker, while d i s c r i m i n a t i n g I.D.A., p. 230. 139 a g a i n s t those who cannot keep up with the s t r a i n . i u The r e c r u i t m e n t of workers f o r the diamond i n d u s t r y i s c o n s i d e r e d to be so important that i t has been approached as a n a t i o n a l g o a l . A vigorous press and r a d i o campaign with the slogan p o l i s h i n g and cutting diamonds is a c r a f t was launched i n 1966 to modify n e g a t i v e a t t i t u d e s among diamond workers and a t t r a c t new a p p l i c a n t s . An a p p r e n t i c e s h i p pro-gram s t a r t e d i n 1969 enables boys of 14 to 18 to l e a r n the trade and at the same time attend a v o c a t i o n a l s c h o o l . A p p r e n t i c e s are p a i d a s m a l l wage and given p o s s i b i l i t i e s o f r a p i d advance i n pay. T h i s r e v e r s e s the previous p o l i c y of making a p p r e n t i c e s pay from 300 I s r a e l i pounds upwards 17 to the employer f o r t h e i r t r a i n i n g . Such measures have succeeded i n s e c u r i n g enough manpower to the i n d u s t r y to allow i t to expand r a p i d l y ; i n 1961 there were 5,100 workers, i n 1974 about 8,000, and at p r e s e n t , a c c o r d i n g to i n d u s t r y 18 sources, about 20,000. Table IV.2 shows the d i s t r i b u t i o n o f the employees i n 1974, by s p e c i a l i z a t i o n (sawers, c u t t e r s , p o l i s h e r s ) and l o c a t i o n (Tel A v i v , Ramat Gan, etc):". "''"Szenberg, p. 115, 1 1 Ibid. 3 p. 118. 1 8 I n t e r v i e w w i t h Mr. Gadstein, D i r e c t o r of the I s r a e l Gemological I n s t i t u t e , 15 January 1978. TABLE IV.2 DIAMOND ENTERPRISES AND PROFESSIONAL WORKERS ACCORDING TO LOCATION 1973-74 September 1973 October 1974 Sawers Cutters Pol. Total j profes. employees I Total enterpri • Savss Cutter? Polish. Total p r o f 6 3 . employees Total Kntsrprisea " 437 1,070 7,165 8,692 (yV.i 4 0 3 92-; 6 , 7 5 5 7 5 3 TOTAL 1 8 5 3 6 8 2 , 3 4 2 •2,^95 210 1 o 6 315 2 , 1 5 4 -> t ~> r: 2 3 6 Tel-Aviv' 1 0 0 1 9 0 1 >410 1 ,7i : o 1 5 7 S 5 1 6 2 1 , 4 2 9 1,6 7 6 : 194 Ramat-Gan 1 8 8 4 459 561 29 • ~>~> 99 4 5 3 574 32 Bnei-Brak 10 4 3 579 6 3 2 39 14 3 2 525 . 571 Potah-Tikvs 9 5 2 4 5 1,630 1 ,97w 146 91 211 • 1 , 4 6 1 I ,763 1 5 9 Nathanva • 1 0 51 3 5 2 4 1 3 19 10 41 3 4 1 3 9 2 • 2 3 " Jerusalem -11 7 9 3 1 7 4 0 7 ' 3a 1 2 6 2 3 6 3 4 3 7 41 Dev. Areas 8 1 0 9 6 114 11 o 2 9 39 1 2 Others (From Israel Diamond Department, Annual Report for 1974). 141 Research, Innovation and Promotion. One c h a r a c t e r i s t i c of the i n d u s t r y i s t h a t the equipment i s h i g h l y durable, and wi t h proper maintenance can l a s t f o r decades. T h i s i s one rea-son why manufacturers are not too i n t e r e s t e d i n experimenting w i t h new equipment. Other reasons are that a s i g n f i c a n t propor-t i o n of the manufacturers are small e n t e r p r i s e s that p r e f e r to i n v e s t i n raw m a t e r i a l s r a t h e r than equipment. There has been, n e v e r t h e l e s s , some movement towards g r e a t e r u t i l i z a t i o n of automatic machines, due i n p a r t to inducement from the government, r e s e a r c h i n s t i t u t e s , and trade o r g a n i z a t i o n s . Automatic machines can only process e f f i c i e n t l y cer-t a i n types of rough, which can c r e a t e d i f f i c u l t i e s i f t h a t rough i s not a v a i l a b l e . During the author's v i s i t to I s r a e l i n 1977, a manufacturer complained to him that i n order to continue d e a l i n g with the C.S.O. he had had to buy a number of automatic machines produced by a s u b s i d i a r y of De Beers, which i m p l i e d that he was o b l i g e d to secure a c e r t a i n type of rough. Now the rough was not forthcoming i n the r e q u i r e d q u a n t i t i e s , and he had only been able to procure from h i s C.S.O. sources about o n e - t h i r d of h i s requirements. The new automatic equipment, then (which s t i l l r e q u i r e s one worker to take care of 16 to 24 machines), may d i m i n i s h f l e x i b i l i t y to some ext e n t . T e c h n i c a l advance i s , of course, not r e s t r i c t e d to automatic machines. To r e s e a r c h i n t o improved methods of p r o d u c t i o n , the government set up an experimental p o l i s h i n g 142 p l a n t i n Ramat Gan, which has a l r e a d y l e d to some achieve-ments, among them a g i r d l i n g machine that uses a diamond-g r i n d i n g w h e e l . ^ In 1965 the M i n i s t e r of Commerce and Industry c r e -ated the Diamond I n s t i t u t e , an o r g a n i z a t i o n designed to f o l l o w up on t e c h n i c a l advances, advise on labour t r a i n i n g and conduct market r e s e a r c h and promotion of the I s r a e l i i n d u s t r y . A c t u a l l y , the I n s t i t u t e 1 s s e r v i c e s are a l s o a v a i l -able to manufacturers from abroad, and i n 1969 e n q u i r i e s from abroad exceeded i n number those from I s r a e l . The I n s t i t u t e p u b l i s h e s a trade paper i n Hebrew, Hayaholom, and an E n g l i s h - F r e n c h magazine, Israel'Diamonds. In 1977 the IsraelGemmological I n s t i t u t e was set up by the Diamond I n s t i t u t e along the l i n e s of the Gemological I n s t i t u t e of America. The I.G.I, p r o v i d e s , among other t h i n g s , standard-i z e d grading and v a l u a t i o n of diamonds, and i s s u e s c e r t i f i -20 cates and gemprints f o r p a r t i c u l a r stones. Manufacturing P r a c t i c e s : P l a n t Size and S u b c o n t r a c t i n g . The c h a i n system, p r e v a l e n t i n the diamond i n d u s t r y , i s h i g h l y adaptable to volume ope r a t i o n s i n p r o c e s s i n g melees. Large f i r m s operate p r i m a r i l y i n t h i s segment. But a l a r g e number of small and medium-sized f i r m s are a l s o able to operate v i a b l y , 19 Szenberg, p. 114. Israel Diamonds, 45:22. 143 c r e a t i n g an e x t r e m e l y c o m p e t i t i v e environment. One r e a s o n f o r the v i a b i l i t y o f s m a l l e r - c a l e f i r m s (which can be as s m a l l as a one-man o p e r a t i o n ) i s the d i v e r s i t y o f the raw m a t e r i a l , some o f which cannot be p r o c e s s e d by c h a i n methods. Another i s t h a t the f a b r i c a t i o n p r o c e s s c o n s i s t s o f a number o f oper-a t i o n s , a l l o f which can be farmed out to s m a l l o u t f i t s work-i n g i n d e p e n d e n t l y . T h i s i s done most o f t e n by the s u b c o n t r a c t -i n g system, so t h a t f a c t o r i e s can be d i v i d e d i n t o two c l a s s e s : f i r s t , t he i n t e g r a t e d m a n u f a c t u r e r who p r o c u r e s rough diamonds, who employs c r a f t s m e n i n h i s own p l a n t t o saw, c u t , and p o l i s h them, and who s e l l s the f i n i s h e d p r o d u c t s . The second i s the s u b c o n t r a c t o r who produces goods to s p e c i f i c a t i o n , never owns the goods he i s p r o c e s s i n g , and i s not i n v o l v e d i n the mar-k e t i n g of the gems. (The s u b c o n t r a c t o r may, o f c o u r s e , be p r o d u c i n g goods f o r h i s own a c c o u n t ) . Some s u b c o n t r a c t o r s c a r r y out p r e p a r a t o r y s t e p s , l i k e c l e a v i n g ; o t h e r s engage i n sawing, c u t t i n g and p o l i s h i n g , and s t i l l o t h e r s complete the whole work from s t a r t to f i n i s h . I n 1961 i t was e s t i -mated t h a t o n e - t h i r d o f a l l f a c t o r i e s were d o i n g some measure o f s u b c o n t r a c t e d work. S u b c o n t r a c t o r s as a r u l e handle stones t h a t are e i t h e r too l a r g e o r too s m a l l o r too d i f f i c u l t f o r the l a r g e r f i r m s , and c u t s o t h e r than b r i l l i a n t ( i . e . , f a n c i e s 21 and e i g h t - c u t s ) . Szenberg, p. 82. 144 Szenberg estimates t h a t the optimum s i z e f o r a f a c t o r y h a n d l i n g melees, which can be most r e a d i l y done by c h a i n methods, would be from 50 to 100 employees, but f o r one t u r n i n g out fancy cuts i t may run as low as one 2 2 to nine workers. These f i g u r e s were obtained by s t u d y i n g the d i f f e r e n t r a t e s of f a c t o r y s u r v i v a l and r e l a t i n g pro-d u c t i v i t y to s i z e . There are f a c t o r s other than economic, a l s o , f o r the predominance of small firms ( i n 1974 about 75 per cent of the establishments had from one to 20 workers, a g a i n s t o n l y one per cent t h a t had over 120 workers), l i k e 23 the "Jewish craftsman's p r e f e r e n c e f o r independence." Even though the m o r t a l i t y r a t e of the small firms i s f r e -quent, some do become e s t a b l i s h e d and they can then compete s u c c e s s f u l l y with the l a r g e r f i r m s . Table IV.3 gives the d i s t r i b u t i o n of firms by s i z e (number o f employees) i n 1974, and shows the preponderance of the small f i r m s . Szenberg, p. 48. ibid., P; 7 5 > TABLE IV.3 ENTERPRISES ACCORDING TO NUMBER OF WORKERS OCTOBER 19 74 E-T'.lovees Percentage Uumber TOO 2 9 . 5 2 1 . 7 1 8 . 3 1 2 . 8 9 . 0 8 . 7 1 0 0 4 0 . 1 33.2 1 5 . 7 1 1 . 0 Enterprises 8^640 2,545 1,877 1,585 1,106 775 752 337 135 112 53 37 (x) "centage 100 75.7 13.3 • 6.2 2.7 1.3 0 . 8 100 74.4. 18.6 4.7 2.3 Number 667 505 89 41 18 9 5 86 64 16 4 2 Total Total A. P O L I S H E R S 1-15 16-30 31-50 51-75 76-JCO 100 "*>?a B. SAWING 1 - 5 6-10 11-15 16-20 ( *) Doe3 not include cleavors and dine tumors. (.** ) Does not include savers working in polishing' factories. (From Israel Diamond Department, Annual Report for- ID?4) .4^ f n 146 THE DIAMOND EXCHANGE Most o f the t r a n s a c t i o n s between I s r a e l i diamond whole-s a l e r s , I s r a e l i diamond brokers and f o r e i g n w h o l e s a l e r s , importers and brokers take p l a c e at the I s r a e l Diamond Exchange. The Diamond Exchange, st a n d i n g i n a suburb o f T e l A v i v c a l l e d Ramat Gan, i s a 28-storey tower where a l l non-production f a c i l i t i e s o f the i n d u s t r y are con c e n t r a t e d : a l a r g e t r a d i n g h a l l f o r the Bourse; o f f i c e s o f the Exchange; the Diamond C o n t r o l l e r (which depends on the M i n i s t r y of Com-merce and Industry and i s s u e s l i c e n s e s f o r t r a d i n g as w e l l as approving imports and e x p o r t s ) ; the Diamond I n s t i t u t e a l r e a d y mentioned; the Diamond Manufacturers A s s o c i a t i o n and other i n d u s t r y b o d i e s , the three banks s e r v i n g the indus-t r y -- Union, Discount and B a r c l a y ' s , import-export c o n t r o l ; customs and s p e c i a l p o s t a l s e r v i c e s f o r s h i p p i n g diamonds; and o f f i c e s o f 250 firms from I s r a e l and abroad. There i s an e f f i c i e n t s e c u r i t y system and a l a r g e s e c u r i t y s t a f f , p l u s v a u l t s i n the basement; a d d i t i o n a l s e c u r i t y a r i s e s from the f a c t t h a t a l l t r a n s a c t i o n s can be completed i n one b u i l d -i n g , i n c l u d i n g the s h i p p i n g . 2 ^ Another l a r g e r b u i l d i n g has been completed next to the 1968 Exchange. I t has 21 s t o r i e s (but i s t a l l e r than I s r a e l Diamond I n s t i t u t e , The Israel Diamond Industry, (n.p., n.d.). 147 the o l d e r b u i l d i n g ) and 800 rooms. Besides o f f i c e s and other f a c i l i t i e s f o r the diamond trade, i t w i l l c o n t a i n j e w e l l e r y workshops and showrooms, r e f l e c t i n g the i n c r e a s -ing development of I s r a e l ' s j e w e l l e r y i n d u s t r y . Most o f f i c e space i n t h i s b u i l d i n g was taken up long i n advance o f i t s completion, so i n t e n s e i s the demand. The f a c i l i -t i e s w i l l o f f i c i a l l y open on October 24, 1978, the 10th 2 5 a n n i v e r s a r y of the opening of the f i r s t tower. The I s r a e l Diamond Exchange L t d . i s a p u b l i c l i m i t e d 2 6 company wit h about 1,6 00 members; which i n c l u d e manufacturers, e x p o r t e r s , importers, d e a l e r s , c l e a v e r s and brokers. To be-come a member, the candidate has to be recommended by two members, be approved by the Diamond C o n t r o l Department, and pay an entry fee of about $5,000 that i n c l u d e s a c q u i s i t i o n of shares of the company; there i s a l s o an annual f e e . But f i r s t the candidate's p i c t u r e i s posted f o r some time i n the world's bourses, so t h a t anyone who may have ne g a t i v e i n f o r m a t i o n on him may r e p o r t i t . I t i s e s s e n t i a l f o r the f u n c t i o n i n g of the system that only men of u n t a r n i s h e d repu-t a t i o n s be allowed to p a r t i c i p a t e i n the t r a n s a c t i o n s . Israel Diamonds, 47:72. Interview w i t h Mr. G r a d s t e i n , Executive D i r e c t o r of the I s r a e l Gem I n s t i t u t e , 15 January 1978. 148 Only those foreign buyers who have established con-tacts within the Bourse are allowed in the Exchange, after a security check. There are two ways in which a v i s i t o r can buy: he can go to the polished dealers' o f f i c e s or he can trade in the Bourse (only i f two Bourse members of at least two year's standing are w i l l i n g to take f u l l r e s p o n s i b i l i t y for him in writing). The polished dealers are members of the Exchange who rent or buy an o f f i c e from the company. Values of o f f i c e s have gone up consider-ably since the building was completed; one o f f i c e costing $10,000 would now be 10 times that price, i f i t could be 27 found. In his o f f i c e , the polished dealer serves a num-ber of overseas c l i e n t s , some of whom may be established customers and others new c l i e n t s . The c l i e n t s state the quantities and q u a l i t i e s they require, and the polished dealer either takes the goods from his stock or uses the services of a broker to procure them for his c l i e n t s . The main advaantage of buying from a polished dealer i s that i t i s easier, especially for overseas buyers not used to the trading i n the Bourse. The o f f i c e s are quieter, more time is allowed for inspection of the merchandise, and there is less pressure; but the prices are higher, because the dealer has a higher overhead (and also has to pay broker's Interview with Mr. Gradstein, 15 January 1978. 149 f e e s . T h e r e f o r e some v i s i t i n g buyers p r e f e r to deal w i t h the brokers d i r e c t l y . Brokers are a l s o members of the Exchange. They g e n e r a l l y work on t h e i r own, and not as , members o f a l a r g e r f i r m . A broker does the a c t u a l pro-c u r i n g of the merchandise from the f a c t o r i e s or o t h e r w h o l e s a l e r s , and b r i n g s i t to h i s c l i e n t s . The b roker's commission i s one per cent of t h e . s a l e p r i c e , g e n e r a l l y p a i d by the owner o f the merchandise who i s c a l l e d the patron. The Diamond Exchange i s thus l a r g e l y a p e r s o n a l market, and t r a n s a c t i o n s are completed through v e r b a l c o n t r a c t s . Two reasons can be given f o r t h i s p r a c t i c e . In the f i r s t p l a c e , the g r a d i n g of p o l i s h e d diamonds i s not yet s t a n d a r d i z e d , and the merchandise must be i n s p e c t e d to determine q u a l i t y . (There i s a l s o t r a d i n g i n rough, and the p a r c e l s must a l s o be i n s p e c t e d , u n l e s s they come from the D.T.C. i n s e a l e d graded envelopes.) In the second p l a c e , p e r s o n a l r e l a t i o n s h i p s based i n mutual t r u s t and good f a i t h count f o r a g r e a t d e a l i n the i n d u s t r y . Each s a l e i n the Exchange i s the r e s u l t of i n d i v i d u a l n e g o t i a t i o n between buyer and s e l l e r . Such a n e g o t i a t i o n c o u l d run as f o l l o w s : the buyer may be s i t t i n g at a t a b l e i n the exchange h a l l , and a broker comes to o f f e r h i s s e r v i c e s . V e r b a l exchanges at the Bourse are q u i c k and 150 t o t h e p o i n t , a n d no t i m e i s w a s t e d i n u n n e c e s s a r y w o r d s ; so a b r o k e r may a d d r e s s a ' b u y e r by j u s t a s k i n g , " W h a t do y o u w a n t ? " The b u y e r s a y s , f o r e x a m p l e , • " M e l e e s , c l e a n i s h , c o m m e r c i a l w h i t e . " ( T h e i n f o r m a l gem g r a d e s f o r a c t u a l t r a d i n g i n t h e B o u r s e a r e s l i g h t l y d i f f e r e n t f r o m t h e more o f f i c i a l s c a l e s r e p r o d u c e d i n C h a p t e r 1; s e e b e l o w . ) The b r o k e r may o r may n o t h a v e b e e n e n t r u s t e d w i t h s u c h m e r c h a n d i s e b y some p a t r o n ; i f l i e h a s i t , l ie p r o c e e d s t o s h o w i t ; b u t i f n o t , he h a s t o d e c i d e w h e t h e r i t i s w o r t h h i s w h i l e t o t r y t o p r o c u r e i t . One r i s k i s t h a t he may w a s t e t i m e t r y i n g t o f i n d i t w h i l e some o t h e r b r o k e r t a k e s away t h e c l i e n t . A t b u s y t i m e s , i n d e e d , t h e b r o k e r s a c t u a l l y l i n e up t o s e e t h e p r o s p e c t i v e c l i e n t s , a n d a b r o k e r who s p e n t h i s t i m e s e a r c h i n g f o r t h e d e s i r e d m e r c h a n d i s e w o u l d n o t e v e n r a t e a n a p o l o g y i f t h e c l i e n t m e a n w h i l e g e t s i t f r o m s o m e b o d y e l s e t r a d i n g i s t o o b r i s k f o r t h a t . A s s u m i n g t h a t t h e b r o k e r p o s s e s s e s o r p r o c u r e s t h e d e s i r e d g o o d s , t h e n e x t s t e p i s f o r t h e c l i e n t t o e x a m i n e t h e p a c k a g e s . T h e s e p a c k e t s , n o t o n l y a t t h e B o u r s e b u t e v e r y w h e r e t h a t d i a m o n d s a r e t r a d e d w h o l e s a l e , a r e r e c t a n g l e s o f w h i t e p a p e r f o l d e d as an e n v e l o p e , w i t h a p a p e r l i n i n g i n s i d e , u s u a l l y l i g h t b l u e ( t o i m p r o v e c o l o r o f t h e s t o n e s ) . The a v e r a g e s i z e o f t h e s t o n e s c o n t a i n e d i n i t i s w r i t t e n i n p e n c i l on t h e u p p e r r i g h t c o r n e r , t h e 151 number of diamonds i n the packet on the lower l e f t corner, and the t o t a l weight in carats i n the lower right corner, so that i t may look l i k e t h i s : This does not mean that the packet contains 100 stones weighing 25 pt. apiece; 25 pt. is only an average. In fac t , there may be no stones weighing 25 pt., which would be to the detriment of the buyer. The reason is that round numbers: 1 c t . , 2 c t . , 3 c t . , and so on up, and % ct . , % c t . , 1/5 c t . , and so on, are more sought after than fractions l i k e 19 pt., 18 pt., 1.13 c t . and the l i k e . This i n turn i s based only on the mystique of owning a ring with a stone weighing a round number, and on no other reason. Since such a difference in marketability e x i s t s , the buyer must consider, when examining the packet, how (a s e r i a l number) 25 pt. 100 25 c t . 152 many 25-pt. stones are t h e r e . A method of d e c e i v i n g unwary buyers i s to take out most of the 25-pt. stones; then the buyer who d i d not check the weight of enough stones would make a poor purchase. I n c i d e n t a l l y , the weight of s m a l l diamonds i s checked, not by weighing, which would be h i g h l y i m p r a c t i c a l , but by p a s s i n g the stones through a s e t of s p e c i a l s i e v e s , one s i e v e at a time. Another f a c t o r c o n n e c t i n g weight and m a r k e t a b i l i t y which does not a f f e c t so much the d e a l s at the Exchange but has to be taken i n c o n s i d e r a t i o n by a w h o l e s a l e r s e l l i n g to j e w e l l e r s i s t h a t stones weighing s l i g h t l y l e s s than a round number are more r e a d i l y bought by many j e w e l l e r s than those weighing s l i g h t l y more. For i n s t a n c e , these j e w e l l e r s would a p p r e c i a t e a 2 6 - p o i n t e r l e s s than a 2 4 - p o i n t e r , and would buy a 1 9 - p o i n t e r sooner than a 21-pointer.' The reason i s that the 24-point diamond i s cheaper than the 2 6 - p o i n t e r of the same q u a l i t y , but i s almost i n d i s t i n g u i s h a b l e from a 25-point stone (the diameters b e i n g very c l o s e ) , so that a buyer at the j e w e l r y s t o r e i s apt to choose the cheaper stone. The w h o l e s a l e r , t h e r e f o r e , must be aware of such p r e f e r e n c e s among h i s j e w e l l e r customers. A f a c t t h at always holds true i s t h a t a package where a l l the stones weigh about the same would be welcome by the j e w e l r y manufacturers. T h i s circumstance was e x p l o i t e d by the Russians, who, when they f i r s t 153 s tar bu r t e d ' s e l l i n g p o l i s h e d stones abroad, concentrated on i l d i n g a r e p u t a t i o n as producers of stones uniform i n q u a l i t y and weight -- most o f t e n 25 and 20 p o i n t s . Not many makers can promise such u n i f o r m i t y , because o f the e x t r a wastage of rough and . the added l a b o u r . T h e r e f o r e , the buyer f i r s t checks the stones, e i t h e r a l l ( i f they are l a r g e ) or a sampling, u n t i l he has a good i d e a o f the merchandise. Then he s t a r t s n e g o t i a t i n g . P r i c e s are quoted a t so much per c a r a t : e.g., a c e r t a i n package o f h c a r a t stones would s e l l at $1,100 per c a r a t . Besides t r y i n g to lower the p r i c e s , the buyer can t r y to improve the deal i n s e v e r a l standard ways. One common p r o p o s i t i o n from a buyer would be "Ten per cent o u t . " This means that he wants to take out 10 per cent of the stones: those of i n f e r i o r q u a l i t y , p o o r l y f i n i s h e d , or of i n c o n v e n i e n t weight. Or e l s e he may propose: "Ten stones out," which i s a s i m i l a r arrangement. This s e l e c t i o n i s advantageous to the buyer because, even though he pays the same per c a r a t , he i s buying h i g h e r q u a l i t y . So the broker may make a c o u n t e r p r o p o s a l : " F i v e per cent o u t . " On the other hand, the buyer may decide that the q u a l i t y i s uniform enough that i t i s b e t t e r to ask fo r . a s t r a i g h t r e d u c t i o n i n p r i c e : "One thousand." Another v a r i a b l e to be n e g o t i a t e d i s the form o f payment: cash or 30 days. Paying cash earns a 1 per cent d i s c o u n t , but i t i s at the 154 present time a c t u a l l y worth more, because ,.given the q u i c k l y changing c o n d i t i o n s ' of the market, and the a c c e l e r a t e d r i s e i n p r i c e s , cash may be h i g h l y d e s i r a b l e to the p a t r o n . The broker, on h i s p a r t , may n e g o t i a t e on who pays the commission due to him: he may agree to the $1,000 per c a r a t , but only i f 'the buyer pays h i s 1 per cent commission. At the end of the f i r s t round of n e g o t i a t i o n s , the buyer and the broker agree on a p r i c e and s t i p u l a t i o n s , e.g., "One thousand and 5 per cent out and cash." Then they make a cachette, which i s a s e a l e d envelope c o n t a i n i n g the packet of stones, .that the buyer signs across the f l a p , a f t e r w r i t i n g the agreement on the o u t s i d e . The c a c h e t t e i s a b i n d i n g promise to buy at the s t a t e d p r i c e , and i t s breach may have v e r y s e r i o u s consequences to the c l i e n t . Armed wi t h the c a c h e t t e , the broker now goes to see the patr o n . It i s i n the broker's i n t e r e s t to make as many s a l e s i n a day as p o s s i b l e , w h i l e a small d i f f e r e n c e i n p r i c e doesn't a f f e c t h i s commission a p p r e c i a b l y ; t h e r e f o r e , he w i l l now t r y to persuade the pat r o n to accept the o f f e r . How much p r e s s u r e he w i l l b r i n g to bear on the patron w i l l depend on a v a r i e t y o f fact o r s , l i k e how much b u s i n e s s the patrdn channels h i s way. E v e n t u a l l y , the pat r o n w i l l p robably e i t h e r agree or make a c o u n t e r o f f e r ; meanwhile, the c a c h e t t e remains s e a l e d , and any evidence of tampering w i t h i t w i l l n u l l i f y the promise. Even though b a r g a i n i n g i s a c c e p t a b l e , and even the norm, i t i s not c o n s i d e r e d proper f o r a buyer to b a r g a i n over a d i f f e r e n c e of a few d o l l a r s per c a r a t (which may amount to hundreds of d o l l a r s f o r the t o t a l p u r c h a s e ) . The broker may walk out on such a customer, and the l a t t e r ' r e p u t a t i o n would be t a r n i s h e d a s e r i o u s disadvantage i n the Bourse. T r a d i t i o n a l l y , a d e a l i n the diamond trade i s concluded with.a handshake and the Y i d d i s h words "mazal brocha" ("good l u c k and b l e s s i n g " ) . In January, 1978, t r a d i n g at the Bourse was somewhat u n t y p i c a l , due to the s c a r c i t y of rough a v a i l a b l e i n the world's markets, and the r a p i d r _ s e i n p r i c e s . I t was a s e l l e r ' s market; those who c o u l d a f f o r d to ho l d onto t h e i r ' s tock d i d so, and the o t h e r s s o l d at a r e l a t i v e l o s s . I t was mainly the manufacturers t h a t had to s e l l , because paying wages and buying new rough c o u l d n ' t wait; but, even though they made a p r o f i t w i t h r e s p e c t to the o r i g i n a l c o s t of the rough, the new rough came c o s t i n g more than c o r r e s p o n d i n g amounts o f p o l i s h e d they were s e l l i n g , and a l s o there wasn't enough of i t . P a r a d o x i c a l l y , there was at that time an i n t e n s e s p e c u l a t i v e t r a d i n g i n rough at 156 the Bourse, which does not normally happen. Another unusual phenomenon was that often brokers came back to the buyers with the news that the patron wanted more than the o r i g i n a l asking p r i c e . Prices, indeed, were r i s i n g by the day. The terms used at the Exchange for c l a r i t y and colour grading are as follows: CLARITY COLOUR Pure Cleanish Eye-clean Light Pique Heavy Pique Re j ection Extra c o l l e c t i o n C o l l e c t i o n White Commercial White Off-Colour Rejection i s for sale too! ISRAEL'S EXPORTS In i t s Newsletter of February 1978, the Israel Diamond Institute announced that, as foreseen months before, the 1977 net export fi g u r e , i . e . , gross exports minus returns, had surpassed the $1 b i l l i o n mark, being in f a c t , $1,002 m i l l i o n . This represents an increase of 40 per cent over the $712 m i l l i o n figure of 1976. The main buyers were, in m i l l i o n s of U.S. dollars and gross figures (before returns) only: 157 1977 197 6 U.S.A. 320 217 Hong Kong 18 3 105 Belg ium • 113 57 H o l l a n d 9 5 SI Japan 8 6 62 S w i t z e r l a n d 75 . 5 0 West Germany 59 3 5 France 38 24 U.K. 26 18 Canada 21 15 Singapore 14 11 I t a l y 9 2 To a p p r e c i a t e more f u l l y the meaning of these f i g u r e s , one should r e c a l l that Belgium, H o l l a n d , S w i t z e r l a n d , Singapore, and Hong Kong are t r a n s i t c o u n t r i e s , that i n t u r n s e l l t h e i r purchases to o t h e r s . The European t r a n s i t c o u n t r i e s s e l l to South American and Arab d e a l e r s and consumers, among o t h e r s . Even i n c o u n t r i e s that have a s i g n i f i c a n t diamond-buying p u b l i c , on the o t h e r hand, d e a l e r s f r e q u e n t l y trade back and f o r t h , thus b l u r r i n g the image. N e v e r t h e l e s s , i t i s c l e a r that the U.S.A. i s the main consumer of I s r a e l i diamonds by f a r ; the second p l a c e probably belongs to Japan. 158 The i n c r e a s e of 40 per cent over 1976 exports i s o n l y p a r t l y due to an i n c r e a s e i n cartage s o l d . By weight, 2 8 s a l e s i n c r e a s e d only about 15 per cent. P r i c e s per c a r a t i n c r e a s e d , however, w e l l over 25 per cent i n the f i r s t h a l f of 1977 as compared to the f i r s t h a l f of 1976, and a g r e a t e r percentage s t i l l , no doubt, i f the second h a l f of 1977 i s c o n s i d e r e d (data not a v a i l a b l e y e t ) . The net income from diamond exports, however, i s always r e l a t i v e l y low due to the h i g h cost of rough. The imports f o r 1977 were not a v a i l a b l e , but e x t r a p o l a t i n g from the data from 1966 to 1976 would g i v e 80 as the percentage of imports i n the t o t a l export f i g u r e ( t h i s agrees e x a c t l y 29 with Szenberg's estimate of 80 per cent, made i n 1969 ) showing that the l i k e l y net income was about $200 m i l l i o n , and the f o r e i g n - c u r r e n c y earning r a t e , d e f i n e d as Export Value - Value of Import -^QQ Export Value was about 20 per cent, a r a t h e r t y p i c a l f i g u r e i n the l i g h t o f past performances from 1949 to 1974. Table IV.4 shows exports, imports, currency earning r a t e , and percentage of imports i n t o e xports. Israel Diamonds, 46:32. Szenberg, p. 25. 159 TABLE IV.4 Imports, Exports, Net Earnings, and Currency Earning Rate (In Thousands of Dollars) Year Imports Exports Net Rate Imports as % of Exports 1949 4,225 5,118 893 17 .4 82 1951 9,769 11,652 1,883 16.2 83 1952 9,817 11,462 1,645 14.4 85 1953 11,794 12,712 918 7 . 2 92 1954 13,793 15,698 1,905 12.1 87 1955 20,616 --1956 21,588 25,982 4 , 3 9 4 1 6 .9 83 1957 28,811 35,221 6,410 18 . 2 81 1958* 25,165 32,959 7,794 23.6 76 1959 41,489 45,195 3, 706 8 . 2 91 1960 49,159 56,318 7,159 12 . 7 87 1961 54,394 65,284 10,890 16. 7 83 1962 67,976 82,339 14,363 17.5 82 1963 93,008 104,017 11,009 10.6 89 1964 102,246 118,205 15,959 13. 5 86 1965 96,655 131,760 35,105 26.6 73 1966 124,934 164,662 39,728 24.1 75 1967 125,480 157,922 35,442 22.4 79 1968 162,049 194,802 32,753 16.8 83 1969 192, 750 ' 215,907 23,157 10.7 89 1970 154,361 202,040 46,679 23.1 76 1971 224,065 265,269 41,2 04 15.5 84 1972 316,059 385,691 69,632 18 . 0 81 1973 448,020 556,754 108,734 19.5 80 1974 407,037 562,265 155,228 27.6 72 1975 449,829 548,573 98,744 18.0 82 1976 562,446 711,958 149,512 21.0 79 1977 (800,000) 1,002,450 (200,000) (20.0) (80) Sources: Annual Report for the Year 1974; Israel Diamonds (various issues) . *Figures up to 1957 inclusive represent gross imports and exports. Net imports and exports were only recorded after 1957. 160 Once again, c a u t i o n i s necessary i n the i n t e r p r e -t a t i o n of such data. In the words of Szenberg, "The export value of p o l i s h e d diamonds i s a minimum f i g u r e , s i n c e ex p o r t e r s (or importers) i n t h i s way reduce t h e i r payments of custom taxes, which i n the U n i t e d States amount from s i x to 10 per cent and i n I t a l y to 20 per cent of the t o t a l v alue added."30 To which i t must be added that some t r a n s a c t i o n s , the value of which would be hard to guess, are not r e p o r t e d at a l l . Tables IV.5 and IV.6 give the s t a t i s t i c s f o r imports and exports from 1949 to 1974 i n both c a r a t s and d o l l a r s . The f i g u r e s show how the a c t u a l caratage traded has i n c r e a s e d at a more modest r a t e than the d o l l a r v a l u e . CONCLUSION A f t e r many years of s t r u g g l e and much org a n i z e d e f f o r t on the p a r t of the government and the manufacturers a l i k e , the I s r a e l i diamond i n d u s t r y has become the major source of exports f o r the country and a mainstay of the economy. At the same time, the C.S.O. has become I s r a e l ' s major p r o v i d e r of rough, and i n t u r n I s r a e l i s C.S.O.'s main c l i e n t . T h i s s i t u a t i o n , however, c o u l d undergo some changes, as the rough shortage of 1977 may s i g n i f y . I t Szenberg, p. 29, n. 1 6 1 TABLE IV.5 IMPORT OF ROUGH GEM DIAMONDS AND EXPORT OF POLISHED DIAMONDS 1949-74 (From I s r a e l Diamond Department, Annual Report for 1974) Export of Poliahad Diarionda 5 ~ I ca r a t s _Import of Rou^h Gem Diamond ~ j c=rats 5,118,000 12,712,560 35,221,18c-75,670 146,890 341,070 4,225,000 11,794,000 28,811,800 -159,800 446,600 814,600 1949 1953 1957 32,959,384 330,607 25,165,798 750,000 (*) NET 1953 45,195,602 455,070 41,489,125 1,218,778 . . 1959 56,318,625 574,298 49,159,537 1,371 ,863 1960 65,284,637 669,073 54,394,590 1,544,615 1961 82,339,723 838,228 67,976,295 1,952,420 1962 104,017,315 1,047,293 93,008,357 . 2,681,047 1963 118,205,669 1,083,927 102,246,261 2,530,103 1964 ' 131 ,760,813 1,162,376 96,655,474 2,219,436 1965 164,662,745 • 1,281,163 124,934,750 2,708,906 1966 157,922;760 1,210,838 125,450,826 2,775,200 1967 194,802,125 1,471,375 162,049,733 3,482,015 1968 . 215,907,316 4,538,477 192,750,567 3,906,954 1969 202,040,738 1,501,265 154,361 ,873 3,624,027 1970 265,269,576 1,874,686 224,065,256 5,292,715 . 1971 385,691,783 2,296,829 316,059,884 6,176,605 1972 356,754,004 2,445,092 448,020,973 6,587,690 1973 562,265,995 2 ,-'-6 7, X b 407,037,949 5,568,191 1974 Het Inporfia "Met Exoort" ia import a f t e r deduc t ion of rovijrh gooda re turned abroad; export a f t e r deduc t ion of po l i shed fpods returned to I s r a e l , Returned cooda wore r e g i s t e r e d a inco 195U. TABLE IV.6 EXPORT OF POLISHED DIAMONDS 1951-74 (From I s r a e l Diamond Department, Annua I Report for 1 974) Net - i^ioort carats Returned Goods % of re turned export carats Cross Export S carats (*) REMARKS: Polished diamonds returned to Israel vera registered since 1958 only. 11,652,360 132,233 1951 11 ,462,260 134,570 1952 12,712,560 146,890 1953 15,698,780 183,810 1954 20,616,030 : 230,700 1955 25,982,960 262,350. 1956 35,221,180 341,070 1957 32,959,334 330,607 3.0 1,022,834 9,973 33,932,218 340,580 1958, 45,195,602 455,070 3.3 1,492,775 14,637 46,688,377 469,757 1959.-56,318,625 574,298 7.3 4,491,492 43,566 60,S10,117 617,864 1960 65,284,637 669,078 6.9 4,850,559 44,760 70,135,196 713,838 1961 82,339,723 838,228 7.5 6,670,542 60,103 89,010,265. 898,331 1962 104,017,315 1,047,293 10.3 11 ,961,189 ' ' 103,339 115,978,504 1,155,632 . 1963 118,205,669 1,033,927 14.1 19,443,756 156,742 137,649,425 1,240,669 1964 131,760,813 . 1,162,376 14.2 21,899,561 169,464 153,660,374 1,332,340 1965 164,662,745 1 ,281,168 . 13.1 24,873,616 168,807 189,536,361 1 ,449,975 1966 157,922,760 1,210,838 18.2 35,103,537 237,756 ' 193,026,297 1,448,594 1967 194,802,125 1,471,875 15.0 34,450,852 241,141 229,252,977 1,713,016 1968 215,907,316 1,538,477 14.3 37,635,719 233,107 253,543,035 . 1,776,584 1969 202,040,738 1,501,265 17.4 42,545,121 275,413 244,585,859 • 1,776,678 -1970 265,269,576 1,874,636 12.7 38,440,770 243,014 303,710,340 2,117,700 1971 333,691,733 2,296,329 9.6 41,174,310 • 234,583 426,866,093 . 2,531,412 . 1972 556,754,004 2,445,092 • 9.8 60,355,591 234,194 617,109,595 2,679,236 1973 562,265,996 2,467,008 12.3 •78,365,790 291,169 641,131,786 2,758,177 1V74. 163 i s yet too e a r l y to see what form these changes may take, but i t i s w e l l to"remember t h a t , while diamonds may be f o r e v e r , diamond i n d u s t r i e s come and go. CHAPTER V THE ROLE OF DE BEERS OUTLINE The f i r s t section recounts the history of the De Beers companies, the f i r s t Syndicates for the marketing of the rough diamonds, and the gradual evolution of the marketing system, that culminated in the creation of the De Beers mechanism in i t s present form: the Diamond Trading Company and the Central S e l l i n g Organisation. The next section studies the C.S.O.: i t s p o l i c i e s , d i s t r i b u t i o n procedures, and sales data. F i n a l l y , the new developments in the market, characterized by a shortage of rough and rapidly r i s i n g prices, are discussed in terms of the i r possible causes. The t h i r d section describes b r i e f l y the advertising campaigns launched by De Beers since 1936, that have succeeded in making diamonds part of the s o c i a l r i t u a l s of our society and helped to create a strong demand.. HISTORY OF DE BEERS Foundation of De Beers Consolidated Mines Ltd. The f i r s t diamonds'found in South A f r i c a were of a l l u v i a l o r i g i n . In 1870, however, two years after the great rush to 164 165 the a l l u v i a l d i g g i n g s , the f i r s t diamondiferous p i p e s were d i s c o v e r e d . By 1872 there were about 50,000 miners working on small claims i n the present-day Kimberley area, which en-compasses f i v e o f the most p r o d u c t i v e pipes i n h i s t o r y ( F i g . 46). E x p l o i t a t i o n of the i n d i v i d u a l c l aims became i n c r e a s i n g -l y d i f f i c u l t , however, as the depth of the d i g g i n g s i n c r e a s e d , and i n 1874 amalgamation of claims was o f f i c i a l l y allowed. One of the o p e r a t o r s that best succeeded i n expanding i t s oper-a t i o n s was C e c i l Rhodes, who i n 1878 announced h i s i n t e n t i o n to c o n t r o l the e n t i r e output o f the f i e l d , and i n 1880 founded, w i t h two other groups, De Beers Mining Company. Rhodes' p l a n s to g a i n c o n t r o l of Kimberley met with str o n g o p p o s i t i o n from Barney Barnato, the head of another new s u c c e s s f u l conglomerate, Kimberley C e n t r a l Mining Company. A f t e r a long f i n a n c i a l b a t t l e , Rhodes, with the help of the R o t h s c h i l d s i n London, f o r c e d Barnato to come to terms, and i n 1888 the De Beers and Kimberley mines were j o i n e d i n De Beers C o n s o l i d a t e d Mines L t d . The new company soon owned or c o n t r o l l e d each of the f i v e Kimberley p i p e s . In t h a t way, by 1899 De Beers c o n t r o l l e d most of the diamond p r o d u c t i o n i n South A f r i c a , which meant, i n the world. Meanwhile, the Syndicate, which i s d e s c r i b e d i n the the next s e c t i o n , was s a t i s f a c t o r i l y marketing De Beers stones, G.I.A., Diamonds, Ass. 12, p. 10. 166 Figure 46 The early mines of Kimberley (From Bruton, Fig. 3.3) 167 and p r i c e s were going up. Indeed, while i n i t s second year o f e x i s t e n c e , De Beers was s e l l i n g f o r an average of 18 s h i l l i n g s per c a r a t , i n the next year, 1890, the p r i c e was n e a r l y double. The Boer War, which broke out i n October 1899, i n t e r -r u pted the e x p l o i t a t i o n o f the mines. Rhodes was detained near Capetown, and d i e d i n 1902, s h o r t l y before the end of the h o s t i l i t i e s . But p r o d u c t i o n was soon resumed, and the p r i c e s continued r i s i n g . P r i c e s dropped again, however, as the r e s u l t of a combination of circumstances. In 1902, the great Premier mine near P r e t o r i a was d i s c o v e r e d . The owners engaged i n competitive s e l l i n g r a t h e r than j o i n t arrangements, and the p r o d u c t i o n was so c o n s i d e r a b l e that by 1907 the market again was becoming s a t u r a t e d . Diamonds were a l s o s t a r t i n g to come i n from German South West A f r i c a . Beginning i n 1909, the small but h i g h - q u a l i t y a l l u v i a l gems were marketed through a semi-government agency c a l l e d Diamond Regie. F i n a l l y , f i n a n -c i a l c r i s e s i n the U.S.A. and Europe were weakening the market s t i l l f u r t h e r . But De Beers s u r v i v e d , and an agreement was n e g o t i a t e d w i t h the owners of the Premier mine to help r e -e s t a b l i s h p r i c e s . De Beers bought the K o f f i e f o n t e i n pipe mine i n 1911, and a c q u i r e d c o n t r o l o f the Premier i n 1917. By t h a t time, however, World War I had changed the c o n d i t i o n s c o n s i d e r a b l y : mining almost stopped, while many employees 168 j o i n e d the armed f o r c e s , and the r e s t worked h a l f - t i m e . De Beers s u r v i v e d the war, too, as w e l l as the years of econo-mic u n c e r t a i n t y that f o l l o w e d , but meanwhile the marketing arrangements were undergoing important changes. From the Syndicates to the Present. As e a r l y as 1899, a group composed of Barnato, Dunkelsbuhler, and Mosenthal Sons § Co. o f f e r e d to purchase a l l of De Beers' diamonds. In 1890 a c o n t r a c t was signed with an o r g a n i z a t i o n composed of 10 f i r m s , of which the three j u s t mentioned owned 45 per cent, and Wernher, B e i t , and Company 23 per cent of the shares. T h i s was the b e g i n n i n g o f the famous Diamond Syndicate, that became so w e l l known as the p r i c e - f i x i n g and m a r k e t - c o n t r o l l i n g f a c t o r of the diamond i n d u s t r y . In v a r i o u s forms a diamond s y n d i c a t e of d i f f e r e n t persons or firms f u n c t i o n e d i n t h i s c a p a c i t y f o r the f o l l o w i n g 39 y e a r s , u n t i l a major c r i s i s brought about a r a d i c a l change. In the f i r s t years of the Syndicate there was no agreement by which the producers and the Syndicate f i x e d a percentage quota f o r each producer and s t a t e d that s a l e s c o u l d be made only through the Syndicate. Instead, there were s u c c e s s i v e c o n t r a c t s , by which the Syndicate purchased De Beers' p r o d u c t i o n at the v a l u a t i o n of De Beers' own e v a l u a t o r s , which, however, remained f i x e d f o r the d u r a t i o n of the c o n t r a c t . The Syndicate r e a s s o r t e d the diamonds pur-chased and s o l d them to the market at t h e i r own best advantage. 169 The Syndicate, o f course, had to take the r i s k of a f a l l i n r e t a i l p r i c e s , but p r o f i t t e d through any r i s e 2 i n p r i c e s during the p e r i o d of the c o n t r a c t . The f i r s t attempt at a more i n c l u s i v e and permanent arrangement took p l a c e i n 1914, when De Beers, Premier, J a g e r s f o n t e i n , and the German Diamond Regie met at a pro-ducers' conference i n London. Outbreak of the war pre-cluded any agreement with the Germans, but the three South A f r i c a n producers agreed to s e l l diamonds to the Syndicate as r e q u i r e d by the market s i t u a t i o n . Near the end of the war a former employee of a Syndicate f i r m entered the scene. Ernest Oppenheimer had come to Kimberley i n 1902 as a buyer f o r A. Dunkelsbuhler and Co. of London; i n 1917 he set up the Anglo-American C o r p o r a t i o n to e x p l o i t the gold f i e l d s i n the South A f r i c a n Rand. By 1919 the Anglo-American had a c q u i r e d c o n t r o l of the former German West A f r i c a n f i e l d s , and f o r the f i r s t time p r o d u c t i o n quotas were set up among De Beers (51 per c e n t ) , Premier (18 per c e n t ) , J a g e r s f o n t e i n (10 per cent) and C o n s o l i d a t e d Diamond Mines of South West A f r i c a (21 per c e n t ) . A l l s a l e s would be made through the Syndicate, which would bear a l l l o s s e s , although the producers would share i n the p r o f i t s . G.I.A., Diamonds, Ass. 13, p. 2. 170 * In 1925 the c u r r e n t S y n d i c a t e , l e d by Breitmcyer, b i d f o r renewal of i t s f i v e - y e a r c o n t r a c t , but i n s t e a d Oppenheimer's o f f e r was accepted, and the Qppenhc1mcr. Syndicate took over the stock, c o n t r a c t s , and l i a b i l i t i e s of the Breitmeyer S y n d i c a t e . By 1927 the new Syndicate had, however, run i n t o s e r i o u s d i f f i c u l t i e s . The o r i g i n of these was d i s c o v e r y of new a l l u v i a l diamond f i e l d s at L i c h t e n b u r g i n 1925 and Namaqualand i n 1926. The bulk of the c l a i m s i n L i c h t e n b u r g was in the hands of small workers, from whom the Syndicate purchased l a r g e r and l a r g e r amounds, i n order to c o n t r o l market p r i c e s , u n t i l i t had accumulated a s t o c k of 8 m i l l i o n pounds.. These purchases n o t w i t h s t a n d i n g , l a r g e q u a n t i t i e s of diamonds were r e l e a s e d on the market by the producers, without regard f o r p r i c e s t a b i l i t y . Small producers i n Namaqualand d i d the same, although the l o n g e r - l a s t i n g c l aims turned out to be those h e l d by the South A f r i c a n government.^ In 1929 the surge of Angola, B e l g i a n Congo, S i e r r a Leone, and Gold Coast as diamond producers p r e c i p i t a t e d a change i n the S y n d i c a t e ' s mode o f o p e r a t i o n . I t c o u l d not not keep buying from the producers and m a i n t a i n i t s enormous stock. So the Syndicate proposed to the f o u r members of the 1919 quota agreement, known as the "Conference G.I.A., Diamonds, Ass. 13, p. 3. 171 Producers," that they take a 50 per cent i n t e r e s t i n i t s o u t s i d e purchases, which i n c l u d e d Angola, B e l g i a n Congo, K o f f i e f o n t e i n and Namaqualand. Three of the Conference Producers agreed, and t h i s l e d to the formation i n 1930 of a new company i n i t i a l l y f i n a n c e d by De Beers, the Barnato companies, Anglo-American, Dunkelsbuhler and Co., C o n s o l i d a t e d West A f r i c a and J a g e r s f o n t e i n . T h i s was to become, with Oppenheimer as chairman, the Diamond Corpor-a t i o n , which was to be h e a v i l y c a p i t a l i z e d (12.5 m i l l i o n pounds). The Oppenheimer Syndicate owned 50 per cent o f i t , and the r e s t belonged to the three Conference Producers. However, very soon the world d e p r e s s i o n f o r c e d the c l o s u r e o f the South A f r i c a n mines and an agreement was made to h a l t diamond purchases from other producers. Meanwhile, Oppenheimer became chairman of De Beers, and the company s t a r t e d to buy c o n t r o l of other p r o d u c e r s . From Anglo-American i t bought the South West A f r i c a n mines and l a t e r , i n 1941, the Cape Coast E x p l o r a t i o n Co., that c o n t r o l l e d a l l p r i v a t e p r o d u c t i o n i n Namaqualand. From Barnato Brothers i t bought c o n t r o l of J a g e r s f o n t e i n , and l e a s e d the whole mine i n 1939. K o f f i e f o n t e i n was bought i n 1935. T h i s gave De Beers c o n t r o l of a l l South A f r i c a n p r o d u c t i o n except that i n the hands of the government i n Namaqualand, and some s m a l l e r a l l u v i a l d i g g i n g s . 1 7 2 .-In.1933, at the same time that these t r a n s a c t i o n s , were t a k i n g p l a c e , a new organism was c r e a t e d that u n i t e d governmental and p r i v a t e i n t e r e s t s : the Diamond Producers' A s s o c i a t i o n . It c o n s i s t e d of ' the Government o f South. A f r i c a , the A d m i n i s t r a t o r o f South West A f r i c a , Dc Beers, Premier, K o f f i e f o n t e i n , J a g e r s f o n t c i n , C o n s o l i d a t e d Mines of'South West A f r i c a , Cape Coast E x p l o r a t i o n , and the Diamond C o r p o r a t i o n i t s e l f . (The l a s t two were purchased and l i q u i d a t e d soon a f t e r , however.) The next year, the Producers' A s s o c i a t i o n entered i n t o an agreement with the newly formed Diamond T r a d i n g Company to purchase and market the diamonds produced by i t s members on a quota b a s i s . The agreement i n c l u d e d a quota to the Diamond C o r p o r a t i o n f o r i t s accumulated s t o c k s , the purpose of the quota being to market g r a d u a l l y these s t o c k s , bought from 1929 to 1934, so that the other mines co u l d resume o p e r a t i o n s . The p r o d u c t i o n of Angola, Gold Coast, S i e r r a Leone, and, l a t e r , Tanganyika, was shipped to the Diamond C o r p o r a t i o n i n London and then s o l d under the l a t t e r ' s quota to the D.T.C. Thus, the D.T.C. took over from the Diamond C o r p o r a t i o n the s e l l i n g of diamonds to the t r a d e . Each member of the Producers' A s s o c i a t i o n was to r e c e i v e a quota of the p r o f i t s of the D.T.C, a f t e r p r o v i d i n g f o r the purchase by the D.T.C. 173 of the output of non-member p r o d u c e r s . H As the world d e p r e s s i o n l i f t e d , s a l e s by the D.T.C. improved, and the Diamond Co r p o r a t i o n ' s stocks s t a r t e d d e c r e a s i n g . The f i g u r e s f o r the years f o l l o w i n g the formation of the D.T.C. are, i n m i l l i o n s of pounds: YEAR STOCKS SALES 1935 12.4 3.3 1936 11.3 8.6 1937 9.9 9.2 It i s worth n o t i n g that i n those years stocks exceeded one f u l l year's s a l e s ( i n 1935 the stocks were n e a r l y equal to f o u r times the s a l e s of the previous y e a r ) . Nowadays, f i g u r e s on the value of stocks h e l d are, as a matter of p o l i c y , not normally p u b l i c i z e d , but i t i s be-l i e v e d t h a t they do not exceed three or f o u r month's s u p p l i e s . ^ A f t e r the war, the agreement between the Diamond Producers' A s s o c i a t i o n and the D.T.C, was renewed f o r s i x y e a r s , and a new agency, I n d u s t r i a l D i s t r i b u t o r s L t d . , was e s t a b l i s h e d to take over the s a l e of i n d u s t r i a l d i a -monds, which f o r m e r l y had been done through the D.T.C. The market s i t u a t i o n a f t e r the war r e v e r s e d the trend of the e a r l y 1930's, and was c h a r a c t e r i z e d by a mounting 4 G.I.A., Diamonds, Ass. 13, p. 5. 5 J . Voet, "The C e n t r a l S e l l i n g O r g a n i z a t i o n , " Israel Diamonds, 44:26-27. 174 demand and the e f f o r t to f i n d s u f f i c i e n t s u p p l i e s to meet i t . T h i s s i t u a t i o n has l a r g e l y c o n t i n u e d to the presen t time. The marketing arm of the De Beers group i s the C e n t r a l S e l l i n g O r g a n i s a t i o n , which channels the diamonds purchased through the Diamond C o r p o r a t i o n i n t o the Diamond Tradi n g Company. The C.S.O. assumed i t s present form i n the e a r l y 1930's, under the d i r e c t i o n of Otto Oppenheimer, S i r E r n e s t ' s b r o t h e r . On the death of Otto Oppenheimer, i n 1948, the p o s i t i o n was i n h e r i t e d by P h i l i p Oppenheimer, now S i r P h i l i p . S i r P h i l i p i s a l s o one of about 15 d i r e c -t o r s of the De Beers C o n s o l i d a t e d Mines L t d . The a c t i v i t i e s and s t a t e d p o l i c i e s of the C.S.O. w i l l be d e s c r i b e d i n d e t a i l i n another s u b s e c t i o n . The More Recent E v o l u t i o n of De Beers. During the 1950's the De Beers group succeeded i n k e e p i n g " i t s c o n t r o l of the market by e n t e r i n g i n t o agreements w i t h the newly-formed A f r i c a n n a t i o n s , a process that i s s t i l l going on today. These agreements concerned the curbing o f i l l i c i t mining and smuggling o f rough, the c h a n n e l l i n g of the pro-d u c t i o n through the C.S.O., and s a t i s f a c t o r y ways of d i v i d i n g the revenue from the p r o d u c t i o n . ^ Voet, ci t. Repeating a p a t t e r n that De Beers had c o n f r o n t e d through a l l of i t s e x i s t e n c e , the d i s c o v e r y of l a r g e diamond pi p e s i n the S o v i e t Union again threatened the c a r e f u l l y - b u i l t marketing system. An agreement, however, was concluded i n 1959 with the U.S.S.R. to market Russian diamonds through the C.S.O. S h o r t l y afterwards, Russian support to c e r t a i n A f r i c a n n a t i o n s r e q u i r e d t h a t the S o v i e t Government d e c l a r e a boycott a g a i n s t South A f r i c a n t r a d e . A l t e r n a t i v e arrangements were made i n 1963, however, 7 that amounted to e s s e n t i a l l y the same. In that same year, the purchase of the l a r g e F i n s c h mine, d i s c o v e r e d i n 1960 one hundred m i l e s from Kimberley, allowed De Beers to keep i t s c o n t r o l over the South A f r i c a n p r o d u c t i o n . In 1957 S i r E r n e s t d i e d and h i s son, Harry Oppen-heimer took over the chairmanship of De Beers C o n s o l i d a t e d Mines, c o n t i n u i n g r a t h e r s u c c e s s f u l l y the p o l i c y s t a r t e d by C e c i l Rhodes and f o l l o w e d by S i r E r n e s t . The present a c t i v i t i e s of the De Beers companies show an expansion of the p r o d u c t i o n base i n A f r i c a and a d i v e r s i f i c a t i o n i n t o f i e l d s other than diamonds. One of the l a r g e s t new p r o d u c t i o n areas i s i n Botswana, where De Beers p r o s p e c t o r s d i s c o v e r e d the Orapa mine i n 1967. Brought i n t o p r o d u c t i o n i n 1971, i t i s operated by De Beers Botswana Mining Company, i n which the l o c a l government owns Bruton, p. 129. 176 a 15 per cent of the share c a p i t a l , while the p r o f i t s are divided i n equal halves between the government and De Beers. (Recently the government has been said to be nego-t i a t i n g a larger share). A new mine i n Lesotho, Letseng-l a - T e r a i , was also i n production, and the Lesotho government's 9 share of the p r o f i t s was about 70 per cent. Such arrange-ments r e f l e c t a changing relationship with the loca l govern-ments i n A f r i c a . Figure 47 shows a schematic diagram of the De Beers companies. THE CENTRAL SELLING ORGANISATION The C.S.O. i s the marketing arm of the De Beers system, charged with d i s t r i b u t i n g the rough purchased by the purchasing agencies in such a way that prices never f a l l . By st o c k p i l i n g i t s own rough i n times of recession, and purchasing both rough and polished in the open market whenever necessary, the C.S.O. ensures that the market i s never saturated. And even though the C.S.O. does not, s t r i c t l y speaking, monopolize rough sales i n the world market, by d i r e c t l y p r i c i n g some 80 per cent of the t o t a l production of rough, i t acts as the undisputed world price leader. 8 De Beers Consolidated Mines Ltd Annual Report 1974, P- 22 . 9Ibid • 3 p. 5 . Figure 47 THE DF BEERS COMPANIES De Beers Consolidated Mines Limited Marketing i v •: • .:> --lhs Ctoond Cofpwotwo:'.'J. ^< Production Investment The Diamond Purchasing and Trading Company . |j The Diamond Trading Company I^^r j Kimberley Dtvsion Mines 8ultion;etn De Beers Dutoitspan De Beers !ndus:r i3i Corporation Fmsch Koffiefoniein Wesselion • • p'.J i Namaqualand Division Mines i f'r Industrial Distributors (1946) .'i ! - V h r De Beers European H c ^ . n g Industrial Grit Distributors { (Shannon) I ' Consolidated Diamond Mines Premier Diamond Mine Abrasive Grit Sales De Seers Botswana Mining Orapa Mini} 1.1 !-y—- i I. m f. 1 r; l; i M P J ri Deohold (Canada) F" f' j i • I Non Group Ccmpsniitj f .v'-s-'fyV'lJ ;0e Beers ; " "v ^ h=/'-Indu'stiial'OIamond Division". r/rjrf .i^i , ' a i i - .. i ^ i i ',i —• . . - j Ultra High Pressure Units Rand Selection Corporation AE&CI V u. . :?-T''>^ '^''--'.-"r (From De Beers, Annual Report 1974, p. 42) 178 The Sights. The mechanism by which the C.S.O. channels the rough into the market is known as the sights. At the sights, which take place 10 times a year in the London o f f i c e s , a chosen group of buyers, known as c l i e n t s , i s offered c a r e f u l l y assorted packages of rough goods, c a l l e d boxes, that have been prepared to conform both with the c l i e n t s ' i n d i v i d u a l needs and the o v e r a l l p o l i c i e s of De Beers at the time. The boxes are prepared in the following way: some days i n advance of a sight, c l i e n t s are i n v i t e d to formulate t h e i r requirements, in terms of quantities, sizes and shapes; and also, to state t h e i r intended commit-ments. A l l the combined requests are considered then in the l i g h t of the best available information on the state of the industry and the market in each centre, painstakingly gathered by s p e c i a l i s t s , and f i n a l l y at the highest l e v e l decisions are reached as to general p o l i c y , and the i n d i v i d u a l demands of the c l i e n t s ; then the rough is allocated. The c l i e n t s can accept or reject the boxes, but not break them up. The practice, c a l l e d s e l l i n g in series, is meant to insure the sale of the t o t a l production of the rough. The box i s therefore l i k e l y to contain goods that the c l i e n t w i l l not p a r t i c u l a r l y want, although as a compensation i t may also contain special stones of high value. There may also be speculative goods, that present special d i f f i c u l t i e s to the cutter but also a high return. Every item in the box is priced; the prices of special stones can be negotiated, 179 but most goods bear non-negotiable l i s t p r i c e s . As a matter o f p o l i c y , the C.S.O. o n l y keeps c l i e n t s who can buy l a r g e boxes, of not l e s s than $50,000 ( i n 1970), although i n p a r t i c u l a r cases s m a l l e r boxes are given to favour c e r t a i n small buyers, as i n the case of the Indian i n d u s t r y d u r i n g i t s middle y e a r s . 1 ( ^ The C.S.O. has at present (1977) about 320 c l i e n t s , 1 1 up from 270 i n 1970. The p o s i t i o n of c l i e n t i s very much sought a f t e r , so that the O r g a n i s a t i o n i s able to p i c k those a p p l i c a n t s who best f i t i t s needs, and a l s o f i x some co n d i -t i o n s t h a t they must f u l f i l l . A c l i e n t should not buy from o u t s i d e sources, should buy most of the boxes a l l o c a t e d to him and should be f u l l y committed to the diamond trade. The C.S.O. p r e f e r s t h a t c l i e n t s possess f a c t o r i e s of t h e i r own, both to i n s u r e t h e i r commitment and to f a c i l i t a t e s a l e s of De Beers c u t t i n g equipment. A c l i e n t should be n e i t h e r too small nor too l a r g e , and so there are few b i g fi r m s among them. The c l i e n t s take some r i s k s , i n that they may have d i f f i c u l t i e s i n d i s p o s i n g o f t h e i r rough, or they may have to s e l l i t at a discount (since o f f i c i a l C.S.O. p r i c e s could be h i g h e r than market p r i c e s ) , but i n the l a s t years (at l e a s t ) the s i t u a t i o n has been q u i t e the o p p o s i t e : boxes were r e s o l d , i n whole or i n p a r t , at premiums (sometimes International Diamond Annual Cl.D.Al), pp. 22-23. Israel Diamonds, 44:27. 180 e x c e e d i n g l y high premiums), and the demand was h e c t i c . (At the time of w r i t i n g , indeed, t h i s s i t u a t i o n has assumed n e a r l y c r i t i c a l p r o p o r t i o n s , with s u p p l i e s being cut to a f r a c t i o n of requirements, and some s i z e s and q u a l i t i e s 12 d i s c o n t i n u e d e n t i r e l y ) . T h e r e f o r e there i s no dearth of a p p l i c a h t s . I t i s the broker that f i l l s the f u n c t i o n of c o n s i d e r -i n g the l i k e l y c a n d i d a t e s and b r i n g i n g them to the C.S.O.'s a t t e n t i o n . There are 10 b r o k e r s , ranging from i n d i v i d u a l s to l a r g e r f i r m s , who d e r i v e t h e i r incomes from a commission p a i d by the c l i e n t at the time o f purchase of a box. The b r o k e r s may screen p r o s p e c t i v e c l i e n t s and p r e s e n t t h e i r case to the C.S.O.; when the c l i e n t has been accepted, the broker forms the l i n k between him and the o r g a n i z a t i o n . ^ Sales and P r i c e s . C.S.O. s a l e s f o r the p e r i o d ex-tended from 1959 to the p r e s e n t are shown i n Table V . l . The f a c t t h a t the f i g u r e s show combined t o t a l s of i n d u s t r i a l and gem diamonds i s due to a p o l i c y adopted at the end of 1960. The company's e x p l a n a t i o n was t h a t , the d i s t i n c t i o n between the lower q u a l i t i e s of gemstones and the h i g h e s t q u a l i t i e s of i n d u s t r i a l 1 2 See Appendix 3. 1 3 J . n . / l . J p . 23. 181 diamonds was so narrow t h a t the d i f f e r e n t i a t i o n i n the s t a t i s t i c s was not j u s t i f i e d . Many diamonds of the "near-gem" q u a l i t y would be bought by c l i e n t s of the C e n t r a l S e l l i n g O r g a n i s a t i o n f o r use e i t h e r as gems or as the ^. b e t t e r type of i n d u s t r i a l diamonds. Be that as i t may, there i s no way to know what p o r t i o n o f the s a l e s comesrfrom gemstones. In years previous to 1961, the f i g u r e s had hovered around 70 per cent, but i t i s b e l i e v e d that f o r the l a s t few years the share f o r gems has been about 80 per cent. O b v i o u s l y , the impressive growth i n s a l e s does not r e f l e c t so much an i n c r e a s e i n caratage s o l d , as a s e r i e s of p r i c e i n c r e a s e s that have d r i v e n up, i n the average and acc o r d i n g to o f f i c i a l C.S.O. data, the cost of rough by about 750 per cent s i n c e 1949. Table V.2 shows the p r i c e i n c r e a s e s s i n c e 1949, dated as per the s i g h t at which they took p l a c e . The s e r i e s of i n c r e a s e s i n 1973 r e f l e c t the d e v a l u a t i o n of the d o l l a r that o c c u r r e d i n t h a t year, but the in c r e a s e s i n general keep w e l l above the l e v e l o f i n f l a t i o n , and thus, i n r e a l terms, p r i c e s of rough are s t e a d i l y going up. I.D.A.3 p . 17 . Computed from the data i n Table V . l . 182 TABLE V.1 C.S.O. Sales of Combined I n d u s t r i a l  and Gem Rough f o r 1959-197 7 (i n m i l l i o n s o f U.S. d o l l a r s ) 1959 2 5 5 1968 600 1960 251 1969 692 1961 268 197 0 528 1962 269 1971 625 1963 324 1972 848 1964 372 1973 1,332 1965 415 1974 1,2 54 1966 498 1975 1,066 1967 492 1976 1,554 197 7 2,070 Sources: I.D.A. (to 1969); I s r a e l Diamonds (to 1976); J e w e l l e r s ' C i r c u l a r / K e y s t o n e (197 ). TABLE V.2 C.S.O . Average P r i c e Increases i n Percentag es Since 1949 September 1949 25 November 1971 5 March 1951 15 January 1972 5. 4 September 19 5 2 2.5 February 1973 11 January 1954 2 March 1973 7 January 1955 2.5 May 1973 10 January 1957 5.7 August 19.7 3 10. 2 May 1960 2.5 December 1974 9 March 1963 5 January 1976 3 February 1964 10 September 1976 5 . 7 August 1966 7.5 March 1977 15 November 1967 16.6 December 1977 17 September 1968 2 . 5 February 1978 30? J u l y 1969 4 Source: I.D.A. (to 1969); J e w e l l e r ' s C i r c u l a r / K e y s t o n e (to 1977). 183 The student o f the diamond i n d u s t r y should beware of g i v i n g undue weight.to such data as make up Tables V . l and V.2, however. These are o f f i c i a l f i g u r e s , r e l e a s e d , perhaps, not so much to inform as to serve a p u b l i c r e l a t i o n s purpose ( i . e . , to m a i n t a i n f o r De Beers the image of a bene-f a c t o r o f the i n d u s t r y ) . For i n s t a n c e , the percentage i n -cr e a s e s are the r e s u l t of a C. S .0.-estimated average over the whole range of goods, i n c l u d i n g i n d u s t r i a l s , and there i s a widespread b e l i e f among w h o l e s a l e r s that i f the average was taken over the gem diamonds o n l y , i t would be much h i g h e r . 1 ^ A l s o , t h e r e are s e v e r a l other methods of i n c r e a s -ing p r i c e s apart from d i r e c t h i k e s ; f o r example, the q u a l i t y of the p a r c e l s may be lowered i n v a r i o u s ways th a t would be 17 hard to measure. Since i t i s not i n the c l i e n t s ' i n t e r e s t to complain, or even to d i v u l g e any i n f o r m a t i o n about t h e i r d e a l i n g s w i t h the C.S.O. because t h e i r p o s i t i o n i s indeed a p r i v i l e g e , i t f o l l o w s t h a t any i n f o r m a t i o n to check a g a i n s t De Beers' o f f i c i a l f i g u r e s would have to come from averages and t o t a l s i n the open market; w i t h the drawback t h a t at t h a t stage so many other f a c t o r s have i n t e r v e n e d t h a t the l a t t e r do not p r o v i d e an e f f e c t i v e check. In s h o r t , the a v a i l a b l e l b S e e , f o r example, Jewelers' Circular - Keystone, December 1977, p. C. 1 7 Even i f the t o t a l weight i n a p a r c e l i s kept the same, the average weight o f the stones maybe lower,, the rough may g i v e a h i g h e r percentage of waste, and the q u a l i t y may be i n f e r i o r . 184 data may have only a tenuous connection with r e a l i t y (Appen-d i x 3 d i s c u s s e s p r i c e i n c r e a s e s i n some more d e t a i l ) . Purported P o l i c i e s o f the C.S.O. and the Current  S i t u a t i o n . The j u s t i f i c a t i o n f o r the t i g h t c o n t r o l of the market e x e r c i s e d by the C.S.O. i s a p t l y given i n a s t a t e -ment by Harry Oppenheimer, chairman of De Beers, which has o f t e n been quoted or paraphrased i n company l i t e r a t u r e s i n c e i t was made i n 1964: A degree of c o n t r o l i s necessary f o r the w e l l - b e i n g of the i n d u s t r y , not because p r o d u c t i o n i s e x c e s s i v e o r demand i s f a l l i n g , but simply be-cause wide f l u c t u a t i o n s i n p r i c e s , which have, r i g h t l y or wrongly, been accepted as normal i n the case o f most raw m a t e r i a l s , would be destruc-t i v e of p u b l i c confidence i n the case of a pure l u x u r y item such as gem diamonds, of which l a r g e stocks are h e l d i n the form of j e w e l l e r y by the gene r a l p u b l i c . Whether t h i s measure of c o n t r o l amounts to a monopoly I do not know, but, i f i t does, i t i s c e r t a i n l y a monopoly of a most unusual k i n d . There i s no one concerned w i t h d i a -monds, whether as a producer, d e a l e r , c u t t e r , j e w e l l e r or customer, who does not b e n e f i t from i t . I t p r o t e c t s not only the shareholders i n the b i g diamond companies, but a l s o the miners they em-p l o y , and the communities that are de-pendent on t h e i r o p e r a t i o n s . The w e l l -being o f tens of thousands of i n d i v i d u a l diamond diggers o f a l l races i s dependent on i t s maintenance.18 I .D.A., p. 22. 185 Thus, the C.S.O. i s expected to reduce the supply i n times of r e c e s s i o n i n the diamond b u s i n e s s , while keeping the p r i c e s s t a b l e (the o f f i c a i l p r i c e s , t h a t i s ; the boxes then may be s o l d at a d i s c o u n t ) , and reverse the p o l i c y i n times of boom. For i n s t a n c e , a f t e r a h i g h l y prosperous h a l f -year, 1969'closed as a r e c e s s i o n year f o r the t r a d e , and t h i s s i t u a t i o n continued w e l l i n t o 1970. High r a t e s of i n t e r e s t and severe c r e d i t r e s t r i c t i o n s made diamonds a l e s s d e s i r a b l e investment than the money market, and a l s o r e s t r i c t e d normal trade i n the j e w e l l e r y i n d u s t r y . In those c o n d i t i o n s , the C.S.O. reduced i t s s i g h t s f o r 1970, and r e f r a i n e d from i n -c r e a s i n g p r i c e s -- f o r over two y e a r s , p r i c e s remained, s t a b l e . No d e t a i l s are known of how e x a c t l y the s i g h t s were reduced, because the C.S.O. does not d i v u l g e such d e t a i l s , but the f o l l o w i n g data i l l u s t r a t i n g the I s r a e l i imports o f rough may g i v e an i n d i c a t i o n : Imports C.S.O. from Imports from Other Sources Year Value 0 0 Weight Value % Weight 1968 93 52 1.9 87 48 1.9 1969 88 42 1 . 8 122 58 2.4 1970 58 33 1.3 116 67 2.7 1971 92 38 2 . 1 147 '62 3.5 I.D.A., p . 21. 186 (In m i l l i o n s of U.S. d o l l a r s and m i l l i o n s , of c a r a t s ) Source: I s r a e l Diamond Department, Annual Report for 1974, Table 4. That i s , the C.S.O.'s s a l e s to I s r a e l dropped from 1.9 m i l l i o n c a r a t s i n 1968 to 1.3 m i l l i o n c a r a t s i n 1970, f o r c i n g I s r a e l to o b t a i n i t s rough elsewhere; i n 1971, the c r i s i s past, the C.S.O. r e l e a s e d again 2.1 m i l l i o n c a r a t s to I s r a e l . The C.S.O. was able to keep goods away from the market, while p r o d u c t i o n went on normally, by reason of i t s enormous cash r e s e r v e s and other backing funds, t h a t allowed i t to purchase as usual and take the p r o d u c t i o n i n s t o c k . No f i g u r e s are r e l e a s e d on such s t o c k s , but those of 1970 were s a i d to have been very l a r g e . The C.S.O. has the r i g h t to ask producers to keep w i t h i n t h e i r quotas, but the company a s s e r t e d that no such r e s t r i c t i o n was demanded of the pro-ducers i n 1970; i . e . , that the C.S.O. absorbed a l l the nor-mal p r o d u c t i o n . ^ It would seem, t h e r e f o r e , that the C.S.O. has f u l f i l l e d w e l l i t s m i s s i o n of s t a b i l i z i n g the market and p r e v e n t i n g the f l u c t u a t i o n s t h a t used to plague the i n d u s t r y i n the e a r l y y e a r s , most p a r t i c u l a r l y the two decades f o l l o w i n g the f i r s t A f r i c a n d i s c o v e r i e s . The b e n e f o l e n t c h a r a c t e r of the C.S.O.'s monopoly, or p r i c e - l e a d e r s h i p , has been o f t e n s t r e s s e d by o u t s i d e sources, l i k e a w r i t e r from the I s r a e l i I.D.A., p. 22. 187 industry, who, in a not-untypical statement, said, echoing Oppenheimer's words: Why does the world tole r a t e the p r a c t i c a l monopoly the Diamond Trading Company has established. . .? While there i s , and there has always been, some c r i t i c i s m of the C.S.O. by i n s i d e r s , this should astonish nobody, as the C.S.O. has set i t s e l f the task to reconcile often con-f l i c t i n g i n t e r e s t s . But in the long run a l l parties concerned agree that the C.S.O. has a b e n e f i c i a l e f f e c t on the industry as a whole. By s t a b i l i z e d (read: r i s i n g ) prices nearly every-one benefits in the lengthy chain of miners, traders, polishers and sales-men . The ultimate consumer. . .foots the b i l l . But because diamonds are a luxury item. . . the customers apparently s a t i s f i e d as well. In f a c t , they appear to be happy that the a c t i v i t i e s of the C.S.O. pro-vide some kind of guarantee that an i n -vestment in diamonds w i l l probably keep i t s value also i n the future, as i t did in the past.21 The l a t e s t developments, however, could well lead to situations that would shatter the confidence of the diamond industry i n the a b i l i t y of the C.S.O. to carry 22 out i t s s t a b i l i z i n g mission. It i s not a matter, as i n the past, of f a l l i n g demand, but, on the contrary, the demand i s strong, while the sights are being cut back and J. Voet, Israel Diamonds, 44:27. 2 2See Appendix 3 f o r a survey of the recent h i s t o r y of the sights. 188 the prices increased more than production costs and general i n f l a t i o n would warrant (at least, according to the general impression in the trade). And, since the cost of rough i s such a s i g n i f i c a n t part of the cost of polished, the l a t e s t 23 De Beers price increases are accompanied by impressive upsurges in the prices fetched by polished goods. It i s not only the actual increases by De Beers, and the r e l a t i v e shortages of rough, that are pushing prices up, but a specu-l a t i v e atmosphere that is f u e l l e d by guesses on.what De Beers w i l l do next, both i n terms of supplies and prices, and also on what the r e a l reasons for the l a t e s t developments are. One of the questions that are most often asked is why the supplies are being cut back. Opinions abound, but there are no data to judge, for instance, i f the South African mines are running out, or merely undergoing a change i n the mode of exploitation, or production is normal but De Beers i s s t o c k p i l i n g . [Another p o s s i b i l i t y , that pro-duction was cut back i n 1973 for fear of a slump that never 24 materialized, has also been voiced). Indeed, De Beers has always exercised as tight a control on information as i t has has on the market, releasing no more than suited i t s purposes, as one I s r a e l i source expresses: See Table Jewelers' C i r c u l a r - Keystone, November 1977, p. 74. 189 . . .diamantaires complain that d e s p i t e a l l the i n f o r m a t i o n now forthcoming, they are s t i l l l e f t uninformed about mining prospects and the supply out-look both from the De Beers own mines and the goods which are s o l d from other sources.25 Of a l l the above o p i n i o n s on the reasons f o r the shortage, the t h i r d p o s s i b i l i t y , that De Beers i s accumu-l a t i n g stock i t w i l l not r e l e a s e , i s the most i n t r i g u i n g , i n terms of i t s p o l i t i c a l m o t i v a t i o n s . One obvious explana-t i o n i s t h a t the C.S.O. i s e x p l o i t i n g the market i n a c l a s s i c m o n o p o l i t i c f a s h i o n , u s i n g i t s p r i c e - f i x i n g powers to maxi-mize i t s short-term b e n e f i t and l e t t i n g the long-term bene-f i t , which o b v i o u s l y depends on the w e l f a r e o f the trade at l a r g e , take care of i t s e l f . The problem with t h i s explana-t i o n i s that the management of De Beers, which has remained constant at the h i g h e s t l e v e l s , has f o r many yea r s , f o l l o w e d a t r u l y s t a b i l i z i n g p o l i c y , with due c o n s i d e r a t i o n to the avoidance of s p e c u l a t i o n and the w e l f a r e o f the i n d u s t r y . T h e r e f o r e , i f s t o c k p i l i n g i s r e a l l y t a k i n g p l a c e i n s i g n i f i -cant q u a n t i t i e s (which remains unproven) there must be some s o l i d j u s t i f i c a t i o n f o r such a break with t r a d i t i o n . And indeed, the e x p l a n a t i o n that has been v o i c e d q u i t e openly i n the trade f o r a number of years i s t h a t De Beers i s pre-p a r i n g f o r p o l i t i c a l changes i n South A f r i c a t h a t would deprive the company of i t s p r o d u c t i o n sources. Thus, i t has 2 5 Israel Diamonds, 47:45. 190 been deduced that De Beers i s now engaged i n reaping the greatest short-term benefits obtainable, because there is no long term for i t s existence i n South A f r i c a . One of the darkest unknowns i n the great diamond mystery i s the country that has become ( i f South West A f r i c a and South A f r i c a are taken as two) the single l a r -gest producer in the world, and perhaps the most promising in terms of long-term supplies. If De Beers is secretive, the Soviet Union is p o s i t i v e l y hermetic, and a l l the a v a i l -able information on i t s production c a p a b i l i t i e s i s the result of estimates and guesswork. It i s therefore even more impossible to guess what measures the Russian govern-ment w i l l take to make the most of the Western companies' d i f f i c u l t i e s . However, i t is f a i r l y evident that the Soviet Union, whose own production may be augmented by that of several diamond producers within the growing Russian sphere of influence i n A f r i c a ( l i k e Angola), w i l l i n the future play a most important role in the making of diamond po l i c y and diamond p r o f i t s . When the Russians f i r s t entered the market, i t was best for them to use the system that De Beers had b u i l t ; but since the late 1950's the Soviet position in the diamond trade has improved enormously. Due to the i r new expertise in a l l phases of the industry, from mining to cutting to s e l l i n g , they are now more capable than ever 191 to work independently of any orther organization, and even 2 6 defy the established system. If De Beers' p o l i t i c a l and production d i f f i c u l t i e s increase as the Soviets continue to develop t h e i r s k i l l s and reinforce s t i l l further t h e i r hold on the A f r i c a n countries, the long reign of the "Syndicate" may soon come to an end. Meanwhile, however, De Beers remains very much the unchallenged co n t r o l l e r of the market, and a power-f u l market of public opinion and taste. In the next section, the way in which De Beers i s helping to shape so c i a l customs a l l over the world w i l l be b r i e f l y d i s -cussed. ADVERTISING BY DE BEERS Although mass advertising through one medium or another has been used i n our society for quite some time, and c e r t a i n l y i t has been a common phenomenon since at least the beginning of the century, large-scale advertising campaigns for diamonds were unheard of, and probably incon-ceivable, before the end of the Depression years. Diamonds marketed themselves, and found th e i r way into the hands of the r i c h with l i t t l e help from paid advertising, just by t r a d i t i o n and peer example. When De Beers took over the 2 6 A Russian o f f i c i a l i n charge of the Soviet diamond-s e l l i n g o f f i c e i n Antwerp t o l d the author in 1977: "We needed1 them (De Beers) but now we can go on our own. There won't be a second ten-year contract." 192 c o n t r o l of the i n d u s t r y , i t saw no reason to change t h i s system, and perhaps i t would not even have been p r o f i t a b l e to do so. But i n 1935 De Beers found i t s e l f with an enor-mous accumulated s t o c k , and i t became c l e a r that the u s u a l marketing mechanisms were overloaded, so t h a t a new demand had to be c r e a t e d . Harry Oppenheimer, then working f o r h i s f a t h e r , S i r E r n e s t , i s c r e d i t e d with the idea of using the mass media to promote the s a l e of diamonds. Oppenheimer r e a l i z e d c l e a r l y t h a t diamonds r e q u i r e d a very s p e c i a l k i n d of promotion, and so much time was spent i n f i n d i n g a s u i t a b l e agent. A f t e r a d e t a i l e d i n v e s t i g a t i o n , the a d v e r t i s i n g agency of N. W. Ayer and Son, of P h i l a d e l p h i a and New York, was chosen to s t a r t a campaign i n the U n i t e d S t a t e s , which was regarded as the most promising market. Ge r a l d Lauck and then Warner S h e l l y were r e s p o n s i b l e f o r the development of the campaign. The company s t i l l r e -mains i n charge of De Beers' a d v e r t i s i n g i n the U.S.A., and i t s c a r e f u l l y thought-out s t y l e has become i n s e p a r a b l e 2 7 from De Beers' image. The Ayer planners were s u c c e s s f u l i n a s s o c i a t i n g diamonds wi t h the s o f t e s t and most tender m a n i f e s t a t i o n of love t h a t a man can o f f e r a woman. The hopefulness of engage ment, the joy at the b i r t h of the f i r s t c h i l d , the r e l a x e d love of the middle years, are a l l expressed i n t a s t e f u l 21I.D.A.} p. 192. 193 images and s o o t h i n g copy. The advertisements do not pro-mote diamonds; i n s t e a d , they evoke a f e e l i n g of which a diamond r i n g i s a n a t u r a l e x p r e s s i o n : "4 Diamond is A Gift of Love." The diamond captures t h a t loving, mood i n an un-2 8 a l t e r a b l e form: 'M Diamond is Forever." The Ayer s t y l e has not changed, but the emphasis and t i m i n g of the a d v e r t i s i n g campaigns have been d i c t a t e d more and more by c a r e f u l l y conducted market r e s e a r c h , and t h e r e i s a l s o a broader e f f o r t t o reach and educate the j e w e l l e r y r e t a i l e r . Nowadays marketing campaigns are conducted i n the f o l l o w i n g main areas: U.S.A., Canada, Japan, Germany, I t a l y , France, U.K., Spain, B r a z i l , A u s t r a l i a , South E a s t A s i a , Spanish South America and the Middle E a s t . Each campaign i s s e r v i c e d by a l e a d i n g a d v e r t i s i n g agency and c o - o r d i n a t e d by the agency account s u p e r v i s o r , who i s i n r e g u l a r c o n t a c t w i t h the De Beers market c o n t r o l l e r i n London, The campaigns c o n s i s t of a d v e r t i s i n g i n magazines and t e l e v i s i o n , t r a d e promotion through Diamond Promotion S e r v i c e s , p u b l i c i t y through Diamond Information Centres, and 29 r e s e a r c h and r e t a i l e r e d u c a t i o n c e n t r e s . The t o t a l budget f o r 1977 i s b e l i e v e d to have been around $25 m i l l i o n I.D.A., p. 193. 29 ""How De Beers' Marketing Helps You," Canadian Jeweller, November 1976, pp. 20-21. 194 30 (U.S.) In each country, the emphasis o f the a d v e r t i s i n g i s d i f f e r e n t . Research s t u d i e s are r o u t i n e l y conducted t o determine country p r i o r i t i e s , and these form the b a s i s f o r marketing s t r a t e g y . Research gives i n f o r m a t i o n on ownership l e v e l s and a c q u i s i t i o n r a t e s of diamond j e w e l l e r y . A t t i t u d e s towards diamond j e w e l l e r y and the t r a d i t i o n s i t symbolizes are a l s o monitored, while c u r r e n t campaigns are 31 t e s t e d f o r e f f i c i e n c y . The a d v e r t i s i n g campaigns are d i v i d e d i n t o four market segments: the diamond engagement r i n g market, the e t e r n i t y r i n g market, the diamond j e w e l l e r y market, and the market f o r l a r g e stones (over 2 c a r a t s ) . Although the form of the program v a r i e s to s u i t l o c a l market c o n d i t i o n s , the 32 b a s i c s t r a t e g i e s remain co n s t a n t . The diamond engatement r i n g market i s the l a r g e s t and most e a s i l y r e c o g n i z e d o f the f o u r . Engagement i s one of the f i r s t o p p o r t u n i t i e s f o r a young woman to own diamonds, and probably a l s o the l a s t time such a g i f t may be r e c e i v e d b e f o r e e n t e r i n g i n t o the heavy f i n a n c i a l commit-ments of the wedding and e a r l y m a r ried l i f e . The engagement r i n g campaign i s d i r e c t e d at s i n g l e young women and t h e i r 30 Israel Diamonds, 47:56. 31 Canadian Jeweller, November 1976, p. 21. 32 Ibid. 195 f a m i l i e s to i n c r e a s e the s o c i a l and emotional s i g n i f i c a n c e of the engagement t r a d i t i o n , and the g i v i n g of a diamond r i n g as a symbol of true and e v e r l a s t i n g l o v e . The diamond r i n g i s a l r e a d y f i r m l y e s t a b l i s h e d as the engagement symbol i n many c o u n t r i e s of the world and a d v e r t i s i n g there r e i n f o r c e s the t r a d i t i o n . In Canada, 74 per cent o f a l l newly-engaged young women r e c e i v e diamond r i n g s , and a s i m i l a r percentage i n the U.S.A., U.K. and 33 A u s t r a l i a . In other c o u n t r i e s , a d v e r t i s i n g has i n t r o -duced the g i v i n g of a diamond f o r t h i s o c c a s i o n as a new concept. In West Germany, u n t i l r e c e n t l y , an engagement was t r a d i t i o n a l l y market by the exchange of two p l a i n g o l d r i n g s , l a t e r used as wedding r i n g s . In 1967, De Be e r s ' i n t r o d u c e d the t r i s e t , a t h r e e - r i n g package c o n s i s t -i n g of two go l d r i n g s p l u s an a d d i t i o n a l diamond engagement r i n g . The campaign was enormously s u c c e s s f u l . Japan i s another country where the diamond engage-ment r i n g was s u c c e s s f u l l y i n t r o d u c e d . Japanese t r a d i t i o n d i d not i n c l u d e an engagement i n the Western sense. Instead, arranged marriage p r e v a i l e d . The couple f i r s t met i n a maia, which was a formal arranged i n t r o d u c t i o n ; t h i s was f o l l o w e d by the yuino, a formal exchange o f g i f t s between the two 33 Ray V i c k e r , "World Diamond Sales Head f o r A Record Year," The Wall Street Journal, 26 J u l y 1976, p. 6. 34 I.D.A., p. 206. 196 f a m i l i e s . The giving of a ring did not form part of the yuino. Eut at present marriages increasingly take place from casual meetings, and engagement is becoming part of the marriage process. In 1967 De Beers i n i t i a t e d a major advertising program that helped r a i s e the percentage of new Japanese brides receiving a diamond ring from f i v e per cent to 39 per cent. De Beers has often used to advantage the story of Archduke Maximilian of Austria, who ordered a diamond betrothal ring and a gold wedding ring for his bride, Mary of Burgundy. This gesture, which is supposed to have given the f i r s t impetus to the wedding ring t r a d i t i o n , was p u b l i c i z e d a l l over the world i n 1977, i t s 500th anniversary. The e t e r n i t y ring campaign, started i n 1974, i s a more recent addition to the advertising a d t i v i t i e s of De Beers. The e t e r n i t y ring i s a c i r c l e t of small diamonds in either a f u l l or a half-loop. This a r t i c l e was known in many markets, although in some countries i t was neces-sary to give i t a name and i d e n t i t y . The ring i s d e l i b e r -a t e l y positioned as an early post-marriage g i f t , to be given at an anniversary or b i r t h of a c h i l d within the f i r s t ten years of marriage. It f i l l s the gap between the engage-35 I.D.A.y p. 207. 19 7 ment diamond and a more expensive g i f t i n l a t e r l i f e . The diamond j e w e l l e r y campaign i s only run i n c o u n t r i e s where there are s u f f i c i e n t households with a h i g h enough income, l i k e the U.S.A. I t e s t a b l i s h e s d i a -mond j e w e l l e r y as the most e x c i t i n g and f a s h i o n a b l e g i f t a man may give h i s w i f e , and the best way to express deep love and a f f e c t i o n . One of the newest De Beers campaigns promotes the l a r g e r s i z e s of diamonds. A s p e c i a l adver-t i s i n g campaign i n North America promotes diamond j e w e l l e r y f o r men, f o l l o w i n g r e s e a r c h s t u d i e s that i n d i c a t e d many American men owned diamond j e w e l l e r y . The f i r s t survey, made i n 1974, i n d i c a t e d that 20 per cent o f a l l American men owned a diamond, and the f i g u r e rose to 22 per cent 37 i n a year's time. In the course of three or four decades, then, adver-t i s i n g from De Beers and other sources has succeeded i n making the masses diamond-conscious, while the manufacturers have brought, at l e a s t i n the developed n a t i o n s , diamond j e w e l l e r y w i t h i n the reach of a l l but the l e a s t a f f l u e n t . Diamond r i n g s are a l r e a d y a s t a p l e of Western s o c i e t y , and at the same time they have not l o s t any of t h e i r mystique 3 6 Canadian Jeweller, November 1976, p. 21. 3 7 ' i b i d . 198 and p r e s t i g e . Such a combination can only work f o r the bene-f i t , not j u s t of De Beers, but of the i n d u s t r y as a whole. CONCLUSION The company founded 90 years ago by C e c i l Rhodes has faced during i t s e x i s t e n c e innumerable t e s t s and c h a l l e n g e s , from depressions to wars to n a t i o n a l i s t movements, and always emerged with a renewed g r i p on the market. Adapting i t s p o l i c i e s to the changing times, i t has given diamonds a g r e a t e r s t a b i l i t y than any other commodity possesses, i t has helped make them i n t o a s o c i a l t r a d i t i o n and a u n i v e r -s a l l y d e s i r e d commodity, and i t has ensured the c o n t i n u i n g p r o s p e r i t y of a l a r g e i n d u s t r y . No one can guess how long De Beers' hegemony may l a s t , but the unprecedented s h o r t -ages and p r i c e i n c r e a s e s of recent months may w e l l be the f o r e r u n n e r s of deep changes to come. CHAPTER VI THE VANCOUVER MARKET OUTLINE This chapter researches the movement of diamonds i n the Vancouver market, from the wholesaler to the j e w e l l e r and from the j e w e l l e r y s t o r e to the p u b l i c . What i s being s t u d i e d i s a c t u a l l y the l a s t two stages of the world d i s -t r i b u t i o n channel f o r diamonds, as these stages are repre-sented i n Vancouver; and t h e r e f o r e the chapter can be con-s i d e r e d as a c u l m i n a t i o n and ex t e n s i o n of a l l that has been s a i d i n the f i r s t f i v e chapters. The d e t a i l e d d i s c u s s i o n i n Chapter I of the four parameters that determine the value of a diamond: c a r a t weight, cut ( i . e . , p r o p o r t i o n s and f i n i s h ) , c o l o u r grade and c l a r i t y grade, i s b a s i c to the a n a l y s i s of the buying p r e f e r e n c e s o f the Vancouver j e w e l l e r s and the p u b l i c at l a r g e . R e l a t i v e a v a i l a b i l i t y and p r i c e s o f the v a r i o u s kinds o f diamonds i n the Vancouver market respond to the c o n d i t i o n s i n the major t r a d i n g centres of the world, l i k e Antwerp (Chapter III) and I s r a e l (Chapter IV); and the a c t i v i t i e s of these centres are i n t u r n d i r e c t l y dependent on the c u r r e n t C.S.O. p o l i c i e s (Chapter V and Appen-d i x 3). There f o r e the study of the Vancouver market f o r diamonds c o u l d o n l y be undertaken a f t e r r e s e a r c h i n g the 199 200 s t r u c t u r e o f the whole d i s t r i b u t i o n channel (Chapters I I I to V) and, of course, the nature of the product i t s e l f (Chapter I ) . The v a r i a b l e s s t u d i e d i n the present r e s e a r c h of the Vancouver market were: a v a i l a b i l i t y and p r i c e s of d i a -monds at the r e t a i l l e v e l ; buying trends at the r e t a i l and consumer l e v e l s i n terms of the four parameters mentioned above; r e l a t i v e demand f o r the d i f f e r e n t s t y l e s of cut ( b r i l l i a n t , marquis, e t c . ) ; r e l a t i v e p o p u l a r i t y and average s e l l i n g p r i c e s o f the main types of diamond j e w e l l e r y ( j e w e l l e r y being by f a r the most common v e h i c l e i n which diamonds reach the p u b l i c ) : and r e l a t i v e importance of d i a -mond j e w e l l e r y i n the o v e r a l l o p e r a t i o n s o f the j e w e l l e r y s t o r e s . The f i r s t s e c t i o n d e s c r i b e s the sources of data: a survey of Vancouver j e w e l l e r y s t o r e s , the i n v o i c e s of a Vancouver diamond wholesaler and a d i r e c t survey o f the buying h a b i t s of the wholesaler's c l i e n t s . The techniques used i n c a r r y i n g out both surveys are then d e s c r i b e d i n d e t a i l . The second s e c t i o n analyzes the data so gathered, and compares them wi t h p u b l i s h e d sources, drawing c e r t a i n t e n t a t i v e c o n c l u s i o n s as to what may c o n s t i t u t e the d i s t i n c -t i v e p e r s o n a l i t y o f the Vancouver market i n the Canadian and American frame of r e f e r e n c e . At the end, f o r the intended convenience of f u t u r e r e s e a r c h e r s , there i s a l i s t o f t o p i c s on the Vancouver market that seem to the author to h o l d s p e c i a l i n t e r e s t f o r r e s e a r c h . 201 RESEARCH TECHNIQUES Sources o f Information. Since the o b j e c t o f the present r e s e a r c h was not only to gather r e s u l t s on the Vancouver mar-ket f o r diamond j e w e l l e r y but to compare those r e s u l t s to those of other surveys made i n Canada and the U.S.A., the author chose two p u b l i s h e d sources, "A Survey oh Diamond J e w e l l e r y , " conducted f o r Canadian Jeweller magazine by Maclean-Hunter Research Bureau, October 1975; and the Diamond s e c t i o n i n Jewelers1 Circular-Keystone, D i r e c t o r y Issue, June 21, 1977 and designed h i s survey so as to o b t a i n data comparable to those of the above p u b l i c a t i o n s . The sources of data were: 1. A survey of Vancouver j e w e l l e r y s t o r e s done i n person by the author d u r i n g the month o f August, 19 77. 2. A survey o f the diamond-buying p r e f e r e n c e s of Vancouver j e w e l l e r s , taken f o r the author by a Vancouver diamond wh o l e s a l e r . 3. The i n v o i c e s of the same whol e s a l e r , f o r diamond s a l e s made to Vancouver j e w e l l e r s d u r i n g November and December, 1977. 4. The author's own experience i n s e l l i n g d i a -monds to r e t a i l e r s and i n s p e c t i n g j e w e l l e r y s t o r e s i n Montreal and Vancouver s i n c e 1969. Techniques Used i n Surveying Vancouver S t o r e s . To ob-t a i n a sample of the Vancouver s t o r e s , at f i r s t the author attempted to f o l l o w the method used by the Maclean-Hunter re-se a r c h e r s , who s e l e c t e d "approximately every seventh name" i n the l i s t o f r e t a i l j e w e l l e r s found i n the Yellow Pages.^ Maclean-Hunter, A Survey on Diamond Jewellery (Toronto: Maclean-Hunter L t d . , 1975), p. 1. 202 T h i s p r o v e d i m p r a c t i c a l , b e c a u s e t h e a u t h o r s o o n r e a l i z e d t h a t many s t o r e s among t h e 182 l i s t e d ( c o u n t i n g b r a n c h e s ) d i d n o t s e l l d i a m o n d s o r a n y o t h e r c o s t l y j e w e l l e r y , a n d s e v e r a l h a d g o n e o u t o f b u s i n e s s . M o r e o v e r , f o u r d e p a r t -m e n t s t o r e s w i t h i m p o r t a n t j e w e l l e r y s e c t i o n s w e r e n o t i n t h e l i s t : E a t o n ' s , T h e B a y , S e a r s a n d W o o d w a r d s . So t h e a u t h o r d e c i d e d t o e l i m i n a t e t h e s t o r e s t h a t d i d n o t s t o c k d i a m o n d j e w e l l e r y , a d d t h e d e p a r t m e n t s t o r e s a n d f r o m t h e r e s u l t i n g 105 s t o r e s p i c k r a n d o m l y a s a m p l e o f 2 0 . The M a c l e a n - H u n t e r r e s e a r c h was c o n d u c t e d b y t e l e -p h o n e . The a u t h o r d i d n o t c o n s i d e r t h i s t o be a r e l i a b l e m e t h o d ; b e c a u s e e v e n i f a b u s y s t o r e o w n e r o r m a n a g e r c o n -2 s e n t e d t o s p e n d t e n m i n u t e s (a s e s t i m a t e d b y M a c l e a n - H u n t e r ) o f h i s v a l u a b l e t i m e a n s w e r i n g q u e s t i o n s on t h e t e l e p h o n e , h e w o u l d n o t n e c e s s a r i l y h a v e a l l t h e r e l e v a n t f a c t s i n h i s memory o r w i t h i n h i s r e a c h . T h i s l i m i t a t i o n o f t h e m e t h o d , i n c i d e n t a l l y , c a s t s some d o u b t s o n t h e M a c l e a n - H u n t e r r e s u l t s . I n a n y c a s e , t h e a u t h o r h a s f o u n d f r o m e x p e r i e n c e t h e a v e r a g e j e w e l l e r y s t o r e o w n e r i n V a n c o u v e r t o be r a t h e r r e l u c t a n t t o d i v u l g e i n f o r m a t i o n a b o u t h i s b u s i n e s s . I n t e r e s t i n g l y e n o u g h , t h e M a c l e a n - H u n t e r r e s e a r c h e r s r e p o r t e d 33 r e f u s a l s i n V a n -c o u v e r b e f o r e t h e y c o u l d c o m p l e t e 30 i n t e r v i e w s . P e r s o n a l M a c l e a n - H u n t e r , A Survey, p . 2 . ^Ibid. 203 i n t e r v i e w s and w r i t t e n q u e s t i o n n a i r e s were a l s o d i s c a r d e d as i m p r a c t i c a l ; i n the a u t h o r ' s o p i n i o n , few Vancouver j e w e l l e r s would spend any time answering such q u e s t i o n -n a i r e s . The method f i n a l l y adopted c o n s i s t e d o f two t e c h n i q u e s : p e r s o n a l e v a l u a t i o n by the a u t h o r o f the items on d i s p l a y , w i t h c e r t a i n assumptions and l i m i t a t i o n s t h a t w i l l be ex-p l a i n e d i n the s e q u e l ; and i n t e r r o g a t i o n o f the diamond salesman on d u t y , under p r e t e n s e of b e i n g a buyer. The a u t h o r p r e t e n d e d to be "shopping around f o r a $2,000 engage-ment r i n g " (the f i g u r e h a v i n g been chosen so as to be h i g h enough to arouse the salesman's i n t e r e s t , but not so h i g h as to make him s u s p i c i o u s ) , and to be q u i t e i n e x p e r i e n c e d on the s u b j e c t o f diamond q u a l i t y and p r i c e s , but i n the p r o c e s s o f " r e a d i n g up on i t . " Most salesmen c o - o p e r a t e d by p r o d u c i n g b r o c h u r e s , c h a r t s , and p r i c e l i s t s and d e m o n s t r a t i n g t h e i r knowledge (or l a c k o f i t ) . The Survey Form. Page 204 i s a copy o f the s u r v e y form employed. The d i v i s i o n o f the s t o r e s i n c a t e g o r i e s : B.C. c h a i n , n a t i o n a l c h a i n , department s t o r e and i n dependent, arose from the d e s i r e to i n v e s t i g a t e what d i f f e r e n c e s would be found between each c a t e g o r y . A c h a i n , a c c o r d i n g to 4 S t a t i s t i c s Canada, c o n s i s t s o f f o u r o r more s t o r e s , and such was the d e f i n i t i o n employed. Telephone e n q u i r y by the a u t h o r . Survey of Greater Vancouver Jewelry Stores 204 Store Name: Address: Category: Independ, B.C. Chain National Chain Department Store 1. Proportion of window area (or inside display area) allocated to diamond jewelry: 2. The average size of the diamond in engagement rings (solitaire or centrepiece): points 3. Percentage of the following items in the total display of diamond jewelry: E'R (Engagement Rings) % L R (Ladies' Rings) % M R (Men's Rings) E (Earrings) % P & N (Pendants and Necklaces) % 0 (Other) % 4. If the following items were available, the average selling price was: E R L R MR E P & N 0 5. The four best-selling items among a l l diamond jewelry, ranked 1 to 4: E R L R MR E P & N 0 6. Degree of training on diamonds of the staff: None Some Formal Training 7. Availability of WS, G color stones in sizes: 0.25 carats 0.50 carats 1.00 carats $ $ $ 81 Availability of loose stones: Yes No Survey Form 205 Item 1: The proportion of space allocated to diamonds in the window display of the store was estimated by eye. If there was no window display, the"inside display cases were measured in the same way. The crucial assumption is that in a well-managed and competitive store, the proportion of dis-play space allocated to diamond jewellery will be sufficient-ly close to the proportion of diamond jewellery sales in the total sales of the store, the latter figure being very hard to procure. Item 2 : The average size of the (main) diamond in engagement rings was calculated from inspection of those available for display either in the outside windows or, lacking these, in the inside cases. The size of the stones displayed was sometimes shown in a store label next to the stone; otherwise, it was estimated by visual inspection. Item 3: The pieces on display were counted to answer this question. The division of jewellery in six categories deserves some comment. An engagement ring was defined as a ladies' ring with a diamond centrepiece, either a solitaire or accom-panied by one (or two) smaller diamonds (or other gems) on each side. Such a definition was arrived at by the author's experience and examination of jewellery advertisements. Any other kind of ring meant for women went into the ladies ' ring category, although recognizedly there were some borderline 206 cases. Men's rings are q u i t e d i f f e r e n t from l a d i e s ' r i n g s , and so there was no d i f f i c u l t y i n s e p a r a t i n g them. Some names used i n the j e w e l l e r y t r a d e : dinner r i n g , c o c k t a i l r i n g , are not i n p r a c t i c e d i f f e r e n t i a b l e from other l a d i e s ' r i n g s (the s a l e s s t a f f , when questioned, gave c o n t r a d i c t o r y or confused answers), so the author could not i m i t a t e the Maclean-Hunter r e s e a r c h e r s i n s e p a r a t i n g those c a t e g o r i e s . Pendants and necklaces d i d not warrant' a s e p a r a t i o n i n two c a t e g o r i e s , being j u s t a small p o r t i o n of a l l j e w e l l e r y d i s p l a y e d . Other items were not present i n l a r g e enough propor-t i o n s to deserve a s p e c i a l category: diamond brooches, d i a -mond watches and so on, and they were lumped together under others. The e t e r n i t y r i n g , a q u i t e e a s i l y r e c o g n i z a b l e type of l a d i e s ' r i n g t h a t has been the s u b j e c t of a great deal o f a d v e r t i s i n g i n recent y e a r s , and i s q u i t e popular i n other c e n t r e s , i s very scarce i n Vancouver and d i d not r a t e a cate-gory. Item 4: As b e f o r e , only those p i e c e s on d i s p l a y i n the windows (or the i n s i d e cases) were considered. I f the pi e c e s d i d not show a p r i c e tag, the p r i c e s were estimated i n the f o l l o w i n g way: the diamonds were counted and appr a i s e d , the p r i c e o f the gold and a l l labour c o s t s were estimated and added, and markup and r e l e v a n t taxes were a l s o c o n s i d e r e d . The r e s u l t was l a t e r compared with the p r i c e s o f other p i e c e s 207 shown to the author by the sales s t a f f . The d i f f i c u l t y of a p p r a i s i n g a diamond mounted i n a s e t t i n g , i n poor l i g h t , was not found s i g n i f i c a n t , when checking the estimates, i n a number of cases, against p r i c e tags and d i r e c t enquiry from the sales s t a f f . Item 5: I t was assumed that the b e s t - s e l l i n g items were those which were dis p l a y e d i n l a r g e s t numbers. Item 6: By questioning the sales s t a f f on the sub-j e c t of diamond grading and a p p r a i s i n g , the author was able to determine the extent of t h e i r knowledge. No attempt was made to determine whether a salesman had formal t r a i n i n g or j u s t a very thorough grasp of the su b j e c t , but i t was assumed that such knowledge would not come from experience alone, e s p e c i a l l y i n the case of younger s t a f f . Item 7 § Item 8: The a v a i l a b i l i t y of WS, G-colour stones and of loose stones was determined by d i r e c t question-ing of the s t a f f . Data Gathered From A Vancouver Wholesaler. The author secured the co-operation of a Vancouver diamond merchant s e l l i n g to l o c a l j e w e l l e r y s t o r e s , and obtained c e r t a i n i n f o r -mation from h i s i n v o i c e s f o r November and December, 1977. The same wholesaler consented to carry out a simple d e s c r i p -t i o n of the customers' buying preferences, as f o l l o w s : When a c l i e n t needed loose diamonds from him, he u s u a l l y contacted the wholesaler on the phone and requested 208 stones of a certain weight and within a certain price range, and often mentioned also the minimum acceptable c l a r i t y and colour grades. Since the prices were usually higher than the c l i e n t anticipated, due to the quick succession of price increases that characterized the trading at a l l the world's bourses during those months (and s t i l l run unabated), the c l i e n t , unless w i l l i n g to spend more, had to compromise on one of the four categories:' colour, c l a r i t y , weight or cut. The wholesaler kept a t a l l y of how many compromised on colour, how many on c l a r i t y , and so on; and he would ask i f he was not sure. Also, he would note how many were primarily interested in weight, how many in colour, and so on. The results appear as Table VI.18. The wholesaler also computed d i r e c t l y from his November and December, 1977 invoices the data that appear as Tables VI.13, VI.14, VI.15 and VI.16. 209 RESULTS OF THE RESEARCH Re s u l t s o f the Survey o f Vancouver J e w e l l e r y S t o r e s . The sample of 20 Vancouver s t o r e s c o n s i s t e d of 12 independents, four B r i t i s h Columbia-chain members, three n a t i o n a l - c h a i n mem-bers and one department s t o r e . During the r e s e a r c h , the s t o r e s were gi v e n numbers 1 to 20, and these numbers w i l l be used here to r e f e r to them. The department s t o r e was No. 10; the n a t i o n a l chains Nos. 7, 8 and 9; the B.C. chains were Nos. 1, 4, 5 and 6; and the independents Nos. 2, 3 and 11 to 20. Table VI.1 shows the p r o p o r t i o n of window space (or i n s i d e d i s p l a y area, i f the s t o r e had no windows) a l l o c a t e d to diamond j e w e l l e r y of the t o t a l space. The average found, 31.7 per cent, corresponds w e l l to the percentage of diamond j e w e l l e r y s a l e s i n the t o t a l s t o r e s a l e s found i n the Maclean-Hunter r e s e a r c h , 27.8 per cent.^ This correspondence would support the v a l i d i t y of u s i n g the percentages of d i s p l a y space as an i n d i c a t o r of the percentage of s a l e s . F u r t h e r study would be necessary, however, to determine the accuracy of the correspondence i n g e n e r a l . The average s i z e of the c e n t r e p i e c e (or s o l i t a r y ) diamond i n engagement r i n g s appears i n Table VI.2. The o v e r a l l average o f 26.5 p o i n t s i s c o n s i d e r a b l y lower than Maclean-Hunter, A Survey, p. 20. 210 TABLE VI.1 P r o p o r t i o n of Window or Inside D i s p l a y Area A l l o c a t e d to Diamond Jewelry Percentage A l l Indep... . B.C. Nat. Dept. Comb. 0 to 9 1 - T- - 1 1 10 to 19 4 2 l 1 2 20 to 29 5 3 2 - 2 30 to 39 6 4 - 2 - 2 40 to 49 - - - - - -50 to 59 2 2 - - -60 and up 2 1 .1 . - - 1 Average Percentage 31 . 7% 33 .7% 2 8.71 TABLE VI.2 Average S i z e of the (Centrepiece o i S o l i t a i r e ) Diamond i n Engagement Rings S i z e A l l Indep. B.C. Nat. Dept, Comb. Less than 20 p t , 6 2 1 3 4 20 to 24 4 3 - 1 1 25 to 29 4 4 - - - -30 to 34 2 2 - - - -35 to 39 1 - 1 - - 1 40 and up 3 1 2 - - 2 Average S i z e 26.5 25.3 28 . 2 Combined = B.C. Chains + N a t i o n a l Chains + Department Stores 211 the size found by Maclean-Hunter, 30.1 points. One expla-nation for this difference i s undoubtedly that the sizes are diminishing with time, due to the increasing cost and s c a r c i t y of larger stones. The Maclean-Hunter study was done in 1975; at that time the American average was 30 points, down from 32 points i n 1973. (It may be worth mentioning that i n 1975 the Japanese average was 25 points, while the B r i t i s h were 7 content with seven points). The average s e l l i n g price of engagement rings is shown in Table VI.3. The o v e r a l l average found, $845, is l i k e l y to be higher than a broader sample of stores would have indicated. Stores Nos. 1 and 5, two prestigious B.C. chains, are responsible for creating an a r t i f i c i a l l y high average; without them the average i s $655. However, the difference between the l a t t e r figure and the corresponding average price, $325, reported by Maclean-Hunter, is s t i l l considerable. Much of i t can be attributed to the very con-siderable price increases of polished diamonds since 1975, but there are reasons to believe that the Maclean-Hunter Maclean-Hunter, A Survey, p. 5. 7 J e w e l e r s ' C i r c u l a r - K e y s t o n e , Directory Issue, 21 June 1977, p. 723. g Maclean-Hunter, A Survey, p. 16. TABLE VI.3 Average S e l l i n g P r i c e of Engagement Rings Price Range A l l Indep. B.C. Nat. Dept. Comb. Less than $250 0% - - - -$250 to $499 7 35% 4 2 1 3 $500 to $749 6 301 4 1 1 - 2 $750 to $999 2 10% 2 - - - -$1,000 to $1,999 3 15% 2 1 - - 1 $2,000 and up 2 10 % - 2 - - 2 Number of Stores Selling Eng. Rings 20 12 4 3 1 8 Percentage of Stores Selling Eng. Rings 100% Average Selling Price $845 $660 $1,735 . $1,072 .TABLE VI .4 Average S e l l i n g P r i c e of L a d i e s ' Rings Price Range A l l Indep. B.C. •Nat. Dept. Comb. Less than $500 1 - 1 - - 1 $500 to $749 5 3 - 1 1 2 $750 to $999 2 1 1 - 1 $1,000 to $1,499 5 4 1 ' - - 1 $1,500 to $1,999 2 1 - 1 - 1 $2,000 and up 3 1 2 - - 2 Number of Stores Selling Ladies' Rings 18 10 • 4 3 1 8 Percentage of Stores Selling Ladies' Rings Average .Selling Price $1,425 $1,115 $2,593 $1,812 Combined - B.C. Chains,;+,National Chains*4;. Department Stores 213 f i g u r e i s too low; f o r the Canadian market, even f o r 1975. Indeed, Jeweler 's Circular--Key stone r e p o r t e d an average of g $485 f o r the U.S.A. i n 1975, and Canadian p r i c e s tend to be h i g h e r . This i s by reason of the higher taxes on diamonds i n t h i s country, namely 12 per cent F e d e r a l s a l e s tax and 10 per cent e x c i s e tax, which amount to 22 per cent, a g a i n s t f i v e to seven per cent customs duty i n the U.S.A. F i n a l l y , the h i g h e r c o s t o f l i v i n g i n Vancouver c o u l d account f o r part of the d i f f e r e n c e . In Table VI.4, showing the average p r i c e s of l a d i e s ' r i n g s , again s t o r e s Nos. 1 and 5, with extremely expensive p i e c e s ($4,400 and $4,500 s t o r e average) are b i a s i n g the f i g u r e upwards. Without them the average i s $1,046. This i s approximately double the f i g u r e r e p o r t e d f o r " c o c k t a i l r i n g s " by Maclean-Hunter, $608. L a d i e s ' r i n g s are gener-a l l y more expensive than engagement r i n g s , because they are bought l a t e r i n l i f e by f i n a n c i a l l y more able customers. Table VI.5 i n d i c a t e s t hat the average f o r men's r i n g s i s $1,313. Store No. 5 s o l d s l i g h t l y above that average, while s t o r e No. 1 d i d not stock the item. The r e l e v a n t Maclean-Hunter average i s only $357 ,"'""'" much l e s s than h a l f . 9 Jeweler's Circular-Keystone, 21 June 1977, p. 723. "^Maclean-Hunter, A Survey, p. 13. ^Ibid., p. 17. /TABLE VI.5 Average S e l l i n g P r i c e of Men's Rings Price Range A l l Indep. B.C. Nat. Dept. Comb. Less Than $500 - - — $500 to $999 5 l 2 1 1 4 $1,000 to $1,999 3 2 1 - - 1 $2,000 and up 2 2 . .- - -Number of Stores Selling Men's Rings 10 5 . 3 . 1 1 5 Percentage of Stores Selling Men's Rings Average Selling Price $1,313 $1,750 $886 TABLE VI.6 Average S e l l i n g P r i c e of E a r r i n g s Price Range A l l Indep. B.C. Nat. Dept. Comb. Less than $250 4 1 1 2 — 3 $250 to $499 3 3 - - - -$500 to $999 2 2 - - - -$1,000 to $1,499 3 2 1 - - 1 $1,500 and up 1 - . 1 - - 1 Number of Stores Selling Earrings 13 8 3 2 - 5 Percentage of Stores Selling Earrings Average Selling Price $609 $585 $649 Combined = B.C. Chains-t- N a t i o n a l Chains 4- Department Stores 215 I t i s p o s s i b l e that the recent a d v e r t i s i n g campaigns of De Beers and others to p o p u l a r i z e men's diamond j e w e l l e r y may be f a c i l i t a t i n g the market f o r r i n g s p r o v i d e d with more and l a r g e r stones, and t h e r e f o r e c o s t l i e r . Commonly men's r i n g s have a heavy g o l d shank; and a frequent d e sign i s a 3 by 3 arr a y o f 5- to 10-point diamonds, or sometimes a diamond-studded horseshoe; a l s o there i s a t h r i v i n g market f o r l a r g e low q u a l i t y stones f o r the " p i n k i e s , " t h a t c e r t a i n businessmen wear as an i n d i c a t i o n of f i n a n c i a l success. Such r i n g s are not meant to be cheap, and i f they are be-coming more popular the average item p r i c e must s u r e l y go up. There i s a l s o the i n t r i g u i n g p o s s i b i l i t y t h a t Vancouver may be an e x c e p t i o n a l l y good market f o r such success p r o c l a i m -ing men's j e w e l l e r y . Table VI.6 shows the average p r i c e ($609) f o r e a r r i n g s . I f Store No. 4, another expensive B.C. c h a i n s t o r e , i s d e l e t e d , the average s i n k s down to $497, which i s not so f a r above 12 twice Maclean-Hunter's f i g u r e ($218). Table VI.7 shows the p r i c e s o f pendants and ne c k l a c e s , with an average of $1,169 which becomes $934 by d e l e t i n g the two h i g h - p r i c e d B.C. chai n s , Nos. 1 and 5. The Maclean f i g u r e s are $522 f o r n e c l a c e s ^ 3 and $282 f o r p e n d a n t s , ^ and t a k i n g , somewhat 12 Maclean-Hunter, A Survey, p. 10. 13 Ibid., p. 11. Ibid., p. 12. 216 TABLE VI.7 Average S e l l i n g P r i c e of Pendants and Necklaces Price Range A l l Indep. B.C. Nat. Dept. Comb. Less than $500 5 2 1 2 3 $500 to $999 1 1 - 1 $1,000 to $1,999 1 1 - - -$2,000 and up 4 . . .2 . . . .2 2 Number of Stores Selling P & N 11 . . 5 . . .4 . . - .2 6 Percentage of Stores Selling P & N Average Selling Price $1,169 $1,426 $955 TABLE VI.8 Average S e l l i n g P r i c e of a l l Diamond Jewelry Price Range A l l Indep. B.C. Nat. Dept. Comb. Less than $250 - _ _ _ $250 to $499 5 1 1 2 1 4 $500 to $749 2 2 - - - -$750 to $999 4 4 - - - -$1,000 to $1,499 4 2 1 1 - 2 $1,500 to $1,999 1 1 - - - -$2,000 and up 4 2 . 2 - - 2 Average Selling Price $1,155 $1,148 $1,742 $633 $452' $1,164 Combined = B.C. Chains -f N a t i o n a l Chains +- Department Stores 217 a r b i t r a r i l y , the s t r a i g h t mean value , we o b t a i n $402, again q u i t e c l o s e to h a l f of our Vancouver average. Table VI. 8' combines the average s e l l i n g p r i c e s of each item i n each s t o r e and the p r o p o r t i o n of s a l e s of each item i n the t o t a l s a l e s of diamond j e w e l l e r y to f u r n i s h the average s e l l i n g p r i c e o f a l l diamond j e w e l l e r y . There i s no corresponding f i g u r e i n the Maclean study or e l s e -where to compare i t w i t h . The c h a i n s t o r e s appear r a t h e r n e a t l y d i v i d e d i n t o c a t e g o r i e s : "cheap" (average under $500) and "expensive" (average over $1,000); the l a t t e r are Nos. 1 , 5 , 4 and 8. The independent s t o r e s are more evenly spread, although only two s e l l i n the middle range of $500 to $749. To study the demand f o r each type of diamond j e w e l l e r y , i t was assumed that the r e l a t i v e demand f o r a given item was given by the p r o p o r t i o n of that item i n the t o t a l number of p i e c e s d i s p l a y e d . Thus, i f 33 per cent of the diamond p i e c e s were engagement r i n g s , i t was assumed th a t about 33 per cent of the items s o l d were engagement r i n g s ; r e s u l t s appear i n Tables VI.9 and VI.10. .Table VI.9 shows'that 62.5 per cent of the s t o r e s had engagement r i n g s as the main item, and the r e s t l a d i e s ' r i n g s ; no other item was predominant i n any s t o r e . The average s t o r e , b e s i d e s , d i s p l a y e d 45 per cent engagement r i n g s ; t h i s i s higher than the American percentage of 36, r e p o r t e d by Jewelers' C i r c u l a r • TABLE .VI/'. 9 B e s t - s e l l i n g Diamond Jewelry Item 218 Number & Percentage of Stores for Which Best-Selling Item i s L A l l . Indep. B.C. Nat. Dept. Comb. Engagement Rings 121 8 2 11 1 M 62.51 Ladies' Rings 71 4 2 U - 31 37.5% The f r a c t i o n comes from a s p l i t f i r s t p l a c e . TABLE VI.10 The Four Largest Items of Diamond Jewelry Sold, i n Order of Importance Note: The t a b l e was obtained by a l l o c a t i n g 4 p o i n t s to the most important item s o l d (rank i i n Question 5), 3 to the second most important (rank 2), and so on. Item A l l Indep, B.C. Nat. Dept. Comb. Engagement Rings 73 37.41 44 37.9% 14 35% 11 37.9% 4 40% 29 36.7% Ladies' Rings 58 29.7% 39 . 33.6% 11 27.5% 7 24.1% 1 10% 19 24.0% Men's Rings 19 9.71 10 8.6% 4 10% 2 6.9% 3 30% 9 11.4% Earrings 20 10.2% 15 12.9% 4 10% 1 3.5% 0% 5 6.3% Pendands & Necklaces 11 5.7% 3 2.5% 4 10% 4 13.7% 0% 8 10.1% Other 14 7.2% 5 4.5% 3 . 7.5% 4 13.7% 2 20% 9 11.4% Total Points 195 1001 116 100% 40 100% 29 100% 10 100% 79 100% Combined = B.C. Chains 4- N a t i o n a l Chains-h Department Stores 219 Keystone, f o r 1976. X J The d i f f e r e n c e may perhaps be due to the f a c t that Vancouver i s r e l a t i v e l y f a r from the f a s h i o n centres and t h e r e f o r e the l o c a l consumer pays l e s s a t t e n t i o n to other forms of j e w e l l e r y . Table VI.10 was computed i n the same way as a c o r r e s -ponding t a b l e i n the Maclean r e p o r t , and some of the r e s u l t s are indeed s u r p r i s i n g l y c l o s e : VANCOUVER MACLEAN-HUNTER I T E M SURVEY SURVEY* Engagement Rings 37.4% 35.1% '0 L a d i e s ' Rings 29.7% 26.8% Men's Rings 9.7% 13.9% E a r r i n g s 10.2% 10.5% Pendants § Necklaces 5.7% 8.4% * Maclean-Hunter, A Survey, p. 19. The f a c t that the 37.4 percentage value f o r engage-ment r i n g s i s so c l o s e to the American percentage of 36 f o r s a l e s of the same r i n g s i s probably j u s t a c o i n c i d e n c e . It should be noted that the 36 per cent f i g u r e was only obtained by computing the "10 most recent c o n s e c u t i v e diamond j e w e l l e r y Jeweler's Circular-Keystone, 21 June 1977, p. 723 220 sales," according to the Jewelers1 Circular-Key stone.^^: Rarely, i t seems, are any figures obtainable on the actual percentages of sales over a period of time; this is most l i k e l y due to the fact that jewellers seldom bother to report such data. Table VI. 11 shows the degree of t r a i n i n g of the s t a f f , including the owner of small independent jewellery stores, who generally attends personally to the prospective purchasers of diamond jewellery. Those stores having no trained personnel were 60 per cent of the t o t a l ; but the independents fared somewhat better, with 50 per cent having someone trained in diamonds, whereas 75 per cent of the chains did not. This r e s u l t is not surprising; the inde-pendent stores do their own purchasing, and somebody (gener-a l l y the owner) i s obliged to know something about the merchandise -- i t can be noticed that only one of the inde-pendents to t a l l y : l a c k e d trained personnel -- whereas purchas-ing for the chains i s done c e n t r a l l y , and even though the merchandise may be of high q u a l i t y , i t already comes cata-logued and priced, so that there i s less need of s k i l l e d s t a f f . (Even so, two of the better chains, Nos. 5 and 8, had trained personnel). The figures from the Maclean report show, on the other hand, 77.7 per cent of the stores having Jeweler's Circular-Keystone, 21 June 1977 , p. 724. TABLE VI.11 Degree of T r a i n i n g on Diamonds of the S t a f f Degree A l l Indep. B.C. Nat. Dept. Comb. None 5 1 1 2 1 4 Some 7 5 2 - 2. None 4- Some 12 601 6 50% 3 75% 2 66.6% 1 100% 6 75% Formal Training 8 40% 6 50% 1 1 - 2 25% TABLE VI.12 A v a i l a b i l i t y o f Loose Stones f o r Sale Availability A l l Indep. B.C. Nat. Dept. Comb. Not Available 7 4 _ 2 1 3 35% 33% 37% Available 13 8 4 1 5 65% 67% 63% Combined - B.C. Chains -f N a t i o n a l Chains + Department Store 222 17 t r a i n e d p e r s o n n e l . The d i f f e r e n c e may be e x p l a i n e d i n s e v e r a l ways: r e l u c t a n c e on the p a r t of the owner or man-ager to admit the c o n t r a r y , a degree of u n c e r t a i n t y as to what e x a c t l y c o n s t i t u t e s t r a i n i n g ( i n the present survey, t r a i n i n g was i n f e r r e d from the salesman's knowledge), and the p o s s i b i l i t y t h a t s i n c e 1975, they f o r g o t a l l they knew about diamonds. Table VI.12 shows a v a i l a b i l i t y of loose stones f o r s a l e . I t should be n o t i c e d , however, that the answer to an enquiry about l o s s e stones i s seldom an u n q u a l i f i e d yes or no. In p r i n c i p l e , anything would be a v a i l a b l e (at l e a s t , from an independent s t o r e ) f o r the r i g h t p r i c e , but the c l i e n t would sometimes have to wait f o r the s t o r e to order or purchase the merchandise. T h e r e f o r e , such answers as "Yes, but takes a day," or, "No, but we can get them" (both of which were recorded by the author) mean e s s e n t i a l l y the same t h i n g . With t h i s c a u t i o n , there was a c l e a r p o s i t i v e c o r r e l a t i o n between t r a i n i n g and a v a i l a b i l i t y o f loose stones, as f o l l o w s : NO SOME FORMAL TRAINING TRAINING TRAINING Not A v a i l a b l e 4 3 A v a i l a b l e 1 4 8 17 Maclean-Hunter, A Survey, p. 6 223 Question number 7 of the Survey Form i n v e s t i g a t e d the a v a i l a b i l i t y o f WS, G-colour stones, whether mounted or unmounted, i n three s p e c i f i e d s i z e s : . 25 p o i n t s , 50 p o i n t s and 1 c a r a t . Here, a v a i l a b i l i t y was taken to mean tha t the stone c o u l d be ordered, i f necessary. One d i f f i -c u l t y t h at arose during the survey was the wide divergences of i n t e r p r e t a t i o n of the G.I.A. terms by the s t o r e s . Per-haps the most amusing v a r i a t i o n on the theme was Store No. 4's ren d e r i n g of WS as "Very, very s e l e c t . " A ccording to the company catalogue (Store No. 4 i s a p r e s t i g i o u s B.C. chain s e l l i n g expensive goods), diamonds were c l a s s i f i e d as "Very, very s e l e c t , " " S e l e c t , " and " I n d u s t r i a l " (which the s t o r e d i d not c a r r y ) . The author i d e n t i f i e d WS as no b e t t e r than VS^ or V S 2 and " S e l e c t " as 1^ to 1^, two low grades. In a l l , 25-point stones assumed to be WS, G-colour, were a v a i l a b l e at 16 s t o r e s , f o r a p r i c e averaging at $427 per stone. The v a r i a t i o n was wide, ranging from $320 to $680. I t i s most l i k e l y t h a t such d i s c r e p a n c i e s are due p r i n c i p a l l y to the d i f f e r e n t i n t e r p r e t a t i o n of the grading terms by the chains and the s u p p l i e r s . In a few cases, however, i t was p o s s i b l e to a c t u a l l y check the stones i n q u e s t i o n . I t may be of i n t e r e s t to note that the independ-ent s t o r e s averaged a r e l a t i v e l y low $392, against the chains* $485. 224 Larger stones presented the same grading problems and u n c e r t a i n t i e s . The \ c a r a t stones were a v a i l a b l e at 13 s t o r e s , averaging $1,552 with no marked d i f f e r e n c e be-tween chains and independents. One-carat stones were a v a i l a b l e at 13 st o r e s too, averaging $6,467. These f i g u r e s should not be given undue weight, as they are averages o f p r i c e s charged f o r goods of d i s s i m i l a r q u a l i t y . R e s u l t s From the Data of A Vancouver Wholesaler. The data concern e x c l u s i v e l y purchases made by Vancouver r e t a i l e r s , and do not i n c l u d e t h e r e f o r e any d i r e c t s a l e s to the p u b l i c , but i t i s l a r g e l y safe to assume, i n the author's o p i n i o n , that the purchases made by the j e w e l l e r s r e f l e c t i n the long run the p r e f e r e n c e s . o f the p u b l i c at l a r g e . Table VI.13, which i s giv e n p r i n c i p a l l y as a r e f e r -ence a g a i n s t the next two t a b l e s , shows t h a t , not s u r p r i s i n g l y , the overwhelming m a j o r i t y (78.7 per cent i n number) of the stones s o l d to j e w e l l e r s are s m a l l , up to % c a r a t . Table VI.14 shows the percentages of i n d i v i d u a l stones s o l d d i v i d e d i n weight and c l a r i t y c a t e g o r i e s . Look-ing f i r s t at the second c l a r i t y b r a c k e t , VS-^  to V ^ , there i s a steady decrease i n the p o p u l a r i t y of such stones as s i z e goes up. Conversely, there i s a steady i n c r e a s e o f p r e f e r e n c e towards the lower grades of c l a r i t y , Imp-^  to Imp^, as s i z e goes up. The f i r s t column, on the other hand, remains ( TABLE VI. 13" Weight o£ Stones Sold to Vancouver J e w e l l e r s During November and December, 1977 (In Percentage of Number of Stones) Weight % Up to I c t . 78 . 7 1 c t . to I c t . 15. 3 1 c t . to 1 c t . 3 . 7 1 c t . and up 2.3 A l l S i z e s 100.0 TABLE VI. 14. C l a r i t y of Loose Stones Sold to Vancouver J e w e l l e r s During November and December, 1977 (In Percentage of Number of Stones) ^ " ^ ^ . C l a r i t y Weight ^ ^ " ^ - ^ F to WS 2 % VSj^ to SI 2 0. 0 Imp^  to Imp^  % T o t a l 0 Up to I ct. 18.5 52.7 28.8 100.0 1 ct. to 1 ct. 19.3 31.1 49.6 100.0 1 ct. to 1 ct. 20.4 21.3 58.3 100.0 1 ct. and up 18.5 19.1 62.4 100.0 A l l Sizes 18.7 47.5 33.8 100.0 TABLE VI.15 . Color of Loose Stones Sold to Vancouver J e w e l l e r s During November and December, 1977 (In Percentage of Number of Stones) ~ ~ ~ ^ ~ ^ ^ C o l o r Weight D E F Q, 0 G H I % J K L % M N 0 % T o t a l % Up to I ct. 10.3 74.6 11.2 3.9 100.0 1 ct. to 1 ct. 17.1 69.2 9.7 4,0 100.0 \ ct. to 1 ct. 24.4 57.3 t 14.5 3.8 100.0 1 ct. and up 31.3 40.4 ^ 19*. 2 9.1 100.0 A l l Sizes 12.4 72.3 11.3 4.0 100.0 226 constant. Such tendencies become more e a s i l y e x p l a i n a b l e i f i t i s taken i n t o c o n s i d e r a t i o n t h a t , as s i z e i n c r e a s e s , p r i c e s a l s o i n c r e a s e s t e e p l y . T h e r e f o r e , a l a r g e r stone of medium c l a r i t y becomes too expensive f o r the average diamond buyer, who, i f i n t e r e s t e d i n the l a r g e r sizes,, switches to a lower c l a r i t y grade i n s t e a d . Or, l o o k i n g at i t from another angle, s m a l l e r stones of higher c l a r i t y are more a f f o r d a b l e . The i n v a r i a b l e c h a r a c t e r of the f i r s t c l a r i t y grade can be e x p l a i n e d also by the f a c t that c e r t a i n buyers are i n t e r e s t e d i n h i g h q u a l i t y , r e g a r d l e s s of p r i c e , so t h a t they do not switch to the lower grades. Since the d i f f e r e n c e between the f i r s t and second c l a r i t y b r a c k e t s i s h a r d l y v i s i b l e at a l l by an i n e x p e r i e n c e d eye, and much l e s s so when the stone i s mounted on a r i n g , con-sumers who buy l a r g e r s i z e s i n the higher q u a l i t y do not do i t f o r show so much as f o r other reasons, l i k e h i g h standards and investment v a l u e . Those consumers would not be tempted to save by going one c l a r i t y b racket lower. The author has not been able to f i n d i n the l i t e r -a t ure data comparable to those of Tables VI.13 to VI.15. There i s i n f o r m a t i o n , however, on the o v e r a l l c l a r i t y pre-f e r e n c e s , with no s e p a r a t i o n by weight. The Jewelers ' Circular-Key stone p r e s e n t s the percentage of engagement r i n g diamonds (weighing, as s t a t e d b e f o r e , an average of 30 p o i n t s i n 1975) i n the d i f f e r e n t c l a r i t y grades; the 227 percentages corresponding to our brackets are 30.7, 60.4 and 18 8.9, r e s p e c t i v e l y , a g a i n s t 18.7, 47.5 and 33.8 of our data. The s h i f t towards hi g h e r c l a r i t y o f the American data may be accounted f o r i n s e v e r a l ways: f i r s t , the Vancouver mar-ket probably does consume lower grades of goods; second, the o v e r a l l a v a i l a b i l i t y of the higher grades has decreased i n two y e a r s ; t h i r d , the American data may be b i a s e d by the understandable tendency of j e w e l l e r s to grade t h e i r mer-chandise higher than i s the case, which, as we a l r e a d y saw, i s compounded by c o n f l i c t i n g i n t e r p r e t a t i o n s by the companies and the d i s t r i b u t o r s of the standard terms; f o u r t h , engage-ment r i n g s are l e s s l i k e l y to c o n t a i n low q u a l i t y stones than other r i n g s , e s p e c i a l l y men's r i n g s . Passing now to c o l o u r , Table VI.15 i l l u s t r a t e s the c o l o u r p r e f e r e n c e of Vancouver j e w e l l e r s v i s - a - v i s s i z e . . The most n o t i c e a b l e s h i f t s as s i z e goes up are one towards i n c r e a s i n g p o p u l a r i t y of the higher c o l o u r grades, and another away from the second-best grade (G, H, I) and i n t o the t h i r d and f o u r t h grades ( J , K, L and M, N, 0, r e s p e c t i v e -l y ) . Such f a c t s can be accounted f o r i n a s i m i l a r way as those of Table VI.14, by d i f f e r e n t i a t i n g between two c l a s s e s o f u l t i m a t e consumers, those with high regard f o r q u a l i t y and those p r i m a r i l y i n t e r e s t e d i n s i z e and show. The t r e n d t o -wards the higher c o l o u r grades, which was not present i n Jewelers' Circular-Keystone, 21 June 1977, p. 724. 2 28 Table VI.14, i s most l i k e l y due to the f a c t t h a t the l a r g e r the stone, the more n o t i c e a b l e the c o l o u r ; a 1 c a r a t stone of grade I, f o r i n s t a n c e , looks more y e l l o w than an I-colour % c a r a t stone, and that f a c t prompts a seeker of q u a l i t y to switch to the higher grades. The other buyers of the second c o l o u r grade are, i n s t e a d , d e t e r r e d by the h i g h p r i c e s and switch to the t h i r d grade. The f o u r t h grade, i n t e r e s t i n g l y enough, o n l y becomes popular i n the s i z e s over 1 c a r a t , where the c o l o u r i s f a i r l y n o t i c e a b l e by the u n t r a i n e d eye. Such stones are mostly bought f o r men's r i n g s . Again, the author c o u l d not f i n d i n the l i t e r a t u r e data comparable to those of Table VI.15. The o v e r a l l per-centages of c o l o u r c a t e g o r i e s f o r engagement r i n g s i n the 1 9 U.S.A. were i n 1976 29.6, 58.3, 10.7 and 1.4, a g a i n s t the f i g u r e s of Table VI.15: 12.4, 72.3, 11.3 and 4.0. The d i s c r e p a n c i e s can be accounted f o r i n the same way as b e f o r e . Table VI.16 shows the Vancouver p r e f e r e n c e f o r cer-t a i n s t y l e s of cut, and Table VI.17 i s the c o u n t e r p a r t f o r 2 0 engagement r i n g s i n the U.S.A. In both c o u n t r i e s the b r i l l i a n t dominates the scene; and, i f the d i f f e r e n c e be-tween the 89.3 per cent b r i l l i a n t s i n Vancouver and the 85.6 per cent i n the U.S.A. means anything, i t i s probably due Jewelers1 Circular-Keystone, 21 June 1977, p. 724. Ibid., p . 725 . 229 TABLE VI.16 S t y l e of Stones Weighing Over 15 P o i n t s Sold to Vancouver J e w e l l e r s During November and December, 1977 ( i n percentage of number of stones) Type of Cut Percentage B r i l l i a n t 89.3% Marquise 1. 2 Pear 3 . 2 Oval 0.0 t Emerald 3 . 5 Heart 2 . 3 Other 0 . 5 T o t a l 10 0 . 0 % TABLE VI.17 S t y l e of Engagement Ring Stones Sold i n U.S.A. During 1976 Type of Cut Percentage of Rings Sold by R e t a i l e r s i n 1976 B r i 1 1 i ant 8 5 . 6 % Marquise 5 . 1 Pear 5 . 0 Oval 3 . 1 Emerald • • 1 . 2 T o t a l . .-. 1 0 0 . 0 % (From Jewelers' Circular-Keystone, D i r e c t o r y Issue, 21 June 1977) 23 to the fact that Vancouver, as we mentioned, i s too far from the cutting centres, and, more importantly, the fashion centres, to allow enough exposure of the customers to styles other than the popular b r i l l i a n t . Purchasing a diamond (unless i t is a c o l l e c t o r ' s item at a very high price) inevitably entails a compromise, and the parameters of the compromise are well defined: weight, colour, c l a r i t y and cut. Table VI.18 shows the parametres that Vancouver r e t a i l e r s and, i t i s assumed, Vancouver customers, are most ready to compromise on, and those that they are more interested i n . Carat weight i s , from both sides of the question, the most important point for Vancouver buyers. Colour comes next, then c l a r i t y a close t h i r d ; then, last of a l l , cut. Cut here means the degree to which the stone i s well proportioned and well f i n i s h e d rather than the style of cut. The American results (Table VI.19) also show that weight i s the main in t e r e s t , and colour the second; but cut, not c l a r i t y , i s the t h i r d and c l a r i t y comes l a s t . On the other side, they are more ready to s a c r i f i c e cut, then c l a r i t y , l i k e i n the Vancouver r e s u l t s , but carat weight comes t h i r d , and colour l a s t . Besdies, in terms of percentage figures there is a somewhat smaller interest in weight than in Vancouver, larger interest in colour and cut, and less interest in c l a r i t y , whereas the willingness to s a c r i f i c e cut i s less TABLE VI.18 Preferences of Vancouver J e w e l l e r s i n Terms of the Four m o s t . i n t e r e s t e d i n : more ready to s a c r i f i c e : Carat Weight Color Cut C l a r i t y 5 5.3 % 19.7 9.2 15.8 6.2 % 9.5 70.3 14 .0 T o t a l 100.0 % 100.0 % TABLE VI.19 Preferences of the American Diamond-Purchasing P u b l i c i n Terms of the Four Parameters most i n t e r e s t e d i n : more ready to s a c r i f i c e : Carat Weight 42.8 % 11.4 % Color 31. 0 2 . 3 Cut 16 . 7 61. 3 C l a r i t y 9 . 5 25 . 0 T o t a l 100.0 % 10 0.0 % (From Jewelers' Circular-Keystone3 D i r e c t o r y Issue, 21 June 1977) 232 overriding, and they are more w i l l i n g to s a c r i f i c e weight and c l a r i t y , and less colour. These differences can be explained by remarking that the most noticeable charac-t e r i s t i c of a polished diamond i s i t s s i z e , or, more pre-c i s e l y , i t s diameter and table size. The parameter that l a r g e l y determines diameter and table size i s the weight, followed by poor ( i . e . , not i d e a l l y proportioned) cut, which produces spread tables and large diameters. The second most noticeable c h a r a c t e r i s t i c , following by a long distance, i s c l a r i t y ; then colour and cut. Therefore, the Vancouver market would tend to stress the most noticeable characteris-t i c s at the expense of the subtler ones. This p r e f e r e n t i a l stress could be c a l l e d , somewhat derogatorily, a lack of sop h i s t i c a t i o n . But, on the other hand, the American figures may not be s t r i c t l y comparable, because they were o r i g i n a l l y predicated on the preference of buyers of expensive engage-ment rings, where such sophistication as the American public possesses would be most in evidence; whereas the Vancouver figures apply to a l l buyers. Furthermore, the American data were obtained as the composite opinion of a group of J e w e l e r s ' C i r c u l a r - K e y s t o n e p a n e l i s t s , whereas the Vancouver data are actual sales figures. For that reason, i t would be unfair to accuse the Vancouver public of r e l a t i v e lack of sophistication without a much more careful research. 233 CONCLUSION J e w e l l e r s as a r u l e are more i n t e r e s t e d i n running a s u c c e s s f u l o p e r a t i o n than i n conducting or f a c i l i t a t i n g s c h o l a r l y r e s e a r c h on the j e w e l l e r y b u s i n e s s . Many j u s t do not have the data that a r e s e a r c h e r would need; a good number are p o s i t i v e l y s e c r e t i v e about t h e i r o p e r a t i o n s , and most have n e i t h e r the time nor the i n c l i n a t i o n to s i t f o r a lengthy i n t e r v i e w or f i l l endless blanks i n a ques-t i o n n a i r e . T h e r e f o r e , the g a t h e r i n g of data f o r a study of the j e w e l l e r y b u s i n e s s , and i n p a r t i c u l a r the r e t a i l t rade i n diamonds, can be a f r u s t r a t i n g o p e r a t i o n . Besides, the inherent d i f f i c u l t y of grading diamonds in a c o n s i s t e n t way, and the wide divergence of i n t e r p r e t a t i o n of the grading terminology by the wholesalers and d i s t r i b u t o r s , make most a v a i l a b l e data i n v o l v i n g the q u a l i t y parameters, c o l o u r and c l a r i t y , r a t h e r suspect. A l l these f a c t o r s help e x p l a i n the dearth of s e r i o u s s t u d i e s on the r e t a i l end of the diamond d i s t r i b u t i o n channels. In t h i s study, an attempt was made to circumvent such d i f f i c u l t i e s . F i r s t of a l l , the data on the r e t a i l s a l e s of jewelry were c o l l e c t e d by c a r e f u l i n s p e c t i o n of the merchandise on d i s p l a y r a t h e r than e n q u i r i e s from the owner or manager. It was then assumed that the p r i c e s , r e l a t i v e f r e q u e n c i e s , and r e l a t i v e space allotment of the v a r i o u s items d i s p l a y e d were s u f f i c i e n t l y r e p r e s e n t a t i v e 234 of the t o t a l s t o r e o p e r a t i o n to be used as i n d i c e s of the l a t t e r . To what extent t h i s equation i s v a l i d remains to be researched f u r t h e r , although then the same d i f f i c u l t y w i l l a r i s e . Second, the i n f o r m a t i o n from a Vancouver wh o l e s a l e r provided data on the diamond-purchasing h a b i t s of the r e t a i l e r s themselves, and a l s o an i n v a l u a b l e check f o r the f i g u r e s obtained by d i r e c t i n s p e c t i o n . These methods, then, allowed the author to bypass the d i r e c t q u e s t i o n i n g of the management, with i t s accompanying u n c e r t a i n t i e s , and a l s o provided a homogeneous i n t e r p r e t a t i o n of the q u a l i t y parameters. The Vancouver market does r e f l e c t the f l u c t u a t i o n s at the world's wholesale exchanges, but i t does so out of phase and i n a r a t h e r d i s t o r t e d manner. By the time the e f f e c t of the s e l e c t i v e p r i c e i n c r e a s e s and the r e l a t i v e s c a r c i t i e s of the d i f f e r e n t types of diamonds a r r i v e i n Vancouver, they have alr e a d y averaged out to a l a r g e extent. Thus, even i f the p r i c e s dropped at the exchanges f o r some time, the Vancouver r e t a i l p r i c e s , b u f f e r e d by a standard 100 per cent markup over the wholesale p r i c e plus 22 per cent tax (so that a diamond s o l d at $1,000 by the w h o l e s a l e r r e t a i l s at about $2,500, without counting the cost of the r i n g ) would pr o b a b l y ' not come down. It would be a f a s c i n a t i n g study to r e s e a r c h f u r t h e r the r e l a t i o n between the world market and 235 Vancouver, and c e r t a i n l y such study would b e n e f i t the l o c a l j e w e l l e r s . For i n s t a n c e , i t has been the author's experience that some Vancouver j e w e l l e r s , at the s t a r t of the recent wave of p r i c e i n c r e a s e s , rushed to buy very low q u a l i t y but r e l a t i v e l y l a r g e goods, b e l i e v i n g that such goods would disappear from the market or e l s e be p r i c e d out of reach; but i n f a c t those q u a l i t i e s were, q u i t e f o r e s e e a b l y , the ones l e a s t a f f e c t e d e i t h e r by the new demand or by the i n c r e a s e s . A study of the market would perhaps have helped them d i r e c t t h e i r purchases b e t t e r . As George Holmes, the E d i t o r of Jewelers' C i r c u l a r -Keystone, wrote: For the jeweler w e l l set i n h i s ways, the prospect of r e s t a r t i n g the l e a r n i n g process may not be a p p e a l i n g . But once the f i r s t step i s taken, jewelers d i s -cover i t i s not a p a i n f u l process. One good t h i n g about the jew e l r y i n d u s t r y : i t s business l e a d e r s are proof that the person who i s w i l l i n g to keep on l e a r n i n g and i n n o v a t i n g i s u s u a l l y the one who's als o the most s u c c e s s f u l . 2 1 SOME INTERESTING TOPICS FOR FUTURE RESEARCH Sources o f Diamonds f o r the Vancouver Market. Most diamonds come to the Vancouver market from the t r a d i n g c e n t r e s of Antwerp and I s r a e l , e i t h e r d i r e c t l y or through M o n t r e a l , Toronto and New York. D e t a i l e d i n f o r m a t i o n , however, i s not 2 1 G e o r g e Holmes, "Theory vs. R e a l i t y " ( E d i t o r i a l ) , Jewelers' Circular-Keystone, J u l y 1977, p. 45. 2 36 readily available. In p a r t i c u l a r , i t would be useful to dis-tinguish between the independent stores, which purchase t h e i r diamonds from wholesalers, and the chain stores, which have central purchasing. A related question i s what proportion of diamonds reach the Vancouver market as jewellery, and what proportion i s set into jewellery pieces by Vancouver craftsmen. Influence of the A c t i v i t i e s of the World Trading  Centres in the Price and A v a i l a b i l i t y of Diamonds in the  Vancouver Market. This i s a complex but fascinating topic for research. One aspect of the question i s the exact r e l a t i o n be-tween price increases in the trading centres and related increases in the prices paid by r e t a i l e r s and consumers, including a study of the time lag. Relation Between Store Sales and Display Space. This question has been alluded to several times in the course of the chapter. It i s quite clear that the correspondence be-tween sales and display space would be found to vary with the individual store. Presumably stores whose managers are more aware of the market's nature would show a better correspondence. This i s , of course, a very broad question, not r e s t r i c t e d to jewellery stores. The Preferences of the Vancouver Diamond-Buying  Public Compared to Those of Other Sections of the North American  Publie. The c h a r a c t e r i s t i c s of the Vancouver r e t a i l market for diamonds should be investigated to determine, among other things, 237 i f there is any evidence of r e l a t i v e lack of sophistication, as referred to before. For the question to make sense, however, a working d e f i n i t i o n of " s o p h i s t i c a t i o n " should be produced, perhaps elaborating on the one proposed e a r l i e r by the author. Whether the Quality (and size) of the Diamonds  Offered in the Retail Market Has Been Decreasing i n Recent  Years. It would be a rewarding undertaking to substantiate or disprove the claim often made by industry sources, that the diamonds offered in the market have been of decreasing quality. The question i s complicated by the fact that dia-monds of lower quality or smaller size than those commonly offered in years past have indeed found a place in the mar-ket; but i t remains to see whether these products have displaced the higher quality diamonds to any s i g n i f i c a n t degree. Reliable s t a t i s t i c s on this subject are very scarce. 258 A P P E N D I C E S APPENDIX 1 THE GEMOLOGICAL INSTITUTE OF AMERICA The Gemological I n s t i t u t e of America (G.I.A.), founded by Robert M. S h i p l e y i n Los Angeles i n 1931, i s a n o n - p r o f i t o r g a n i z a t i o n founded and operated f o r the b e n e f i t o f j e w e l l e r s i n North America and abroad. The I n s t i t u t e o f f e r s a number of thorough correspondence and r e s i d e n c e courses on diamonds and other gems, p u b l i s h e s books and magazines, and c a r r i e s out t e s t i n g and grading of gems i n i t s Los Angeles and New York l a b o r a t o r i e s . 1 Another a c t i v i t y of the G.I.A. i s the manufacture and d i s t r i b u t i o n of diamond-grading and gem-testing equipment, l i k e the Diamondlite ( f o r c o l o u r g r a d i n g ) , the Gemolite (a s p e c i a l m icroscope), the P r o p o r t i o n s c o p e , a gem spectograph, and so on. I t i s one of the I n s t i t u t e ' s aims to induce the diamond trade to u n i v e r s a l l y adopt i t s standards of c o l o u r , c l a r i t y and p r o p o r t i o n g r a d i n g . Broad use of the G.I.A.'s grading system i s encouraged by teaching i t i n the I n s t i t u t e ' s c o u r s e s , and by a p p l y i n g i t i n the c e r t i f i c a t e s i s s u e d at the Gemological I n s t i t u t e of America (G.I.A.), Diamonds, I n t r o d u c t i o n , p. 2. 239 24 two gem trade l a b o r a t o r i e s . ' ' CERTIFICATES A c e r t i f i c a t e i s a r e p o r t accompanying a diamond a t t e s t i n g to i t s q u a l i t y : c a r a t weight, c l a r i t y grade, c o l o u r grade and c u t t i n g . A number of p r i v a t e and p u b l i c i n s t i t u t i o n s throughout the world i s s u e c e r t i f i c a t e s ; among the p u b l i c ones, the G.I.A. i s one of the most respec-t e d , and many others have accepted i t s standards, l i k e the new I s r a e l Gemmological I n s t i t u t e . C e r t i f i c a t e s are i s s u e d f o r a f e e , which i s lower f o r members of the I n s t i t u t e and diamond students. While i n t r a n s a c t i o n s among the trade i t s e l f a c e r t i f i c a t e has not yet r e p l a c e d p e r s o n a l inspec-t i o n and judgement, c e r t i f i c a t e s are becoming g r a d u a l l y more important f o r l a r g e r stones. For the diamond-buying p u b l i c at l a r g e , on the other hand, a c e r t i f i c a t e from a r e s p e c t e d i n s t i t u t e may seem the only way of checking on the pronouncements of the j e w e l l e r s or the diamond br o k i n g companies. T h e r e f o r e , both kinds of r e t a i l e r s o f t e n make a p o i n t of o f f e r i n g a c e r t i f i c a t e f o r each of t h e i r l a r g e r stones. The i n e x p e r i e n c e d buyer, however, should f i r s t check Bruton, p. 214. Israel Diamonds 3 47:20 . 241 c a r e f u l l y exactly who is issuing the c e r t i f i c a t e . One of perhaps many cases of c e r t i f i e d deception came to the author's notice recently when perusing the Better Business Bureau N e w s l e t t e r for the Mainland of B r i t i s h Columbia, 4 July 12, 1977. Two companies specialized in s e l l i n g dia-monds by telephone had been charged with fraud following investigation by the R.C.M.P. Turning to the promotion booklet of one of the companies (London House, Toronto), the author discovered that the promised c e r t i f i c a t e was indeed issued by "a member of the Gemological Institute of America," not by the Institute i t s e l f . Such unscrupulous operators often manage to convince the g u l l i b l e that t h e i r c e r t i f i c a t e s are backed by the prestigious I n s t i t u t e . THE GEMPRINT The Gemprint i s an invention of the Weizman Institute in I s r a e l , manufactured by Kolso Ltd., of Haifa. It i s a device that produces a laser photograph of a diamond, also c a l l e d Gemprint, which is used for i d e n t i f i c a t i o n purposes. The p r i n c i p l e is to pass a narrow beam of l i g h t from a low-powered helium-neon laser, through lenses and a pinhole in the middle of an adjustable holder, and onto the table of a London House and Merchants Diamond Group. 242 diamond, that r e f l e c t s the beam back through the pinhole and onto a f i l m . Any scattered beams caused by r e f l e c t i o n from the surface or re f r a c t i o n inside the stone are picked up and recorded as spots on the f i l m when the stone i s rotated during exposure. The re s u l t i s a pattern of l i g h t spots. There i s only one position of the pinhole where the diamond w i l l r e f l e c t l i g h t back through i t , so the sub-sequent) Gemprints of the same stone w i l l be i d e n t i c a l . The Gemprint is thus useful for i d e n t i f i c a t i o n , inasmuch as i t w i l l produce pri n t s that are unique for each b r i l l i a n t cut diamond [unless i t i s repolished). It i s , therefore, becoming popular i n the larger American jewellery stores as a s e l l i n g aid; and the U.S.A. dis t r i b u t o r s keep a central r e g i s t r y of Gemprints that might a s s i s t i n the i d e n t i f i c a t i o n of stolen goods. Another use of the Gemprint is to i d e n t i f y diamond simulants.. A diamond produces a certain type of print characterized by randomness of the spots, whereas the pri n t s obtained from s p i n e l , strontium titanate, YAG and most other simulants, have more d e f i n i t e patterns and at the same time the spots are blurred. Furthermore, doubly re-f r a c t i v e stones, l i k e zircon, white sapphire, and r u t i l e , show a number of double spots, whereas diamond, being singly r e f r a c t i v e , produces almost exclusively single spots. F i n a l l y , almost a l l simulants produce a central halo in 243 t h e i r p r i n t s . Rutile shows a very f a i n t halo, but smudged spots. The experienced gemologist, nevertheless, can usually i d e n t i f y diamond simulants by using less expensive tools. Israel Diamonds, 4 6 : 5 0 . APPENDIX 2 RELATIONSHIP BETWEEN PRICE AND WEIGHT FOR DIAMONDS To study the relationship between price and weight, i t is best to assume that the qu a l i t y , the colour and other variables are kept constant, and to examine the v a r i a t i o n i n price as weight varies. In Chapter II, Table II. 2, we show the G.I.A. 1975 base price chart, where the stones are assumed to be flawless, well proportioned, and of the highest colour category, so that the only variations are size and styl e of cut. Considering just b r i l l i a n t cuts, the price variations are shown i n Figure 48 (for small stones) and Figure 49. It w i l l be noticed that the price per carat remains constant throughout well-defined i n t e r v a l s , due to the i m p o s s i b i l i t y of having a continuously varying price scale. For instance, between 0.90 and 0.96 carats the price per carat w i l l be the same, and s i m i l a r l y between 0.96 and 1.05 carats. (The price of the stone, of course, w i l l increase proportionately to the weight). The most ob-vious feature of the graph is that the li n e ascends rather rapidly, i ndicating the sharp increase in per carat price as weight increases. Another noticeable phenomenon i s that price jumps tend to be much steeper just before a carat weight expressed in a round number or f r a c t i o n : one quarter, one h a l f , three quarters and most noticeable of a l l , one 244 Z.5 cb. 247 carat: then two, three and so on. This has nothing to do with any property of diamond, but with the mystique of owing a stone of a round weight; an explanation for i t s o r i g i n is that advertising often shows, or refers to, stones of such weights, whereas ir r e g u l a r weights are never mentioned. It can also be seen that (in F i g . 48) for small stones, weighing 1/6 carat and less, the price per carat tends to remain stable; this i s due to the r e l a t i v e l y high labour cost of processing small stones. As mentioned in Chapter I I , a t r a d i t i o n a l rule to determine the price of a stone was to multiply the price of a one-carat stone of the same quality by the square of the carat weight of the stone i n question: P c = P x x c 2 Equivalently, the price per carat of a stone weighing c carats would be obtained as P^ x c. Table 2.1, obtained from the G.I.A. 1975 price chart, shows a comparison be-tween the actual figures and the estimates, using P^ x c. The actual price i s consistently lower than the estimate, but the two never stray too far apart; the approximation i s p a r t i c u l a r l y close beyond one carat. To see this more c l e a r l y , i t i s best to examine Figure 49 where the straight l i n e i s the price given by P^ x c. The l i n e intersects the actual graph at the one carat value, which i s the base p r i c e . TABLE 2.1 The actual figures are from the G.I.A.'s 1975 Base Price Chart, and apply to FL (flawless), D-color (colorless) b r i l l i a n t - c u t diamonds. Weight in Carats Rounds Marquise Ovals, Pears, and Hearts Emeralds Actual Estim. Actual Estim. Actual Estim. Actual Estim. $ $ $ $ $ $ $ $ 3.00 11,500 14,850 10,200 12,540 9,200 11,400 8,500 10,800 2.75 10,300 13,612 9,100 11,495 8,240 10,450 7,630 9,900 2.50 9,700 12,375 8,550 10,450 7,760 9,500 7,190 9,000 2.25 9,000 11,137 7,920 9,405 7,200 8,550 6,680 8,100 2.00 8,750 9,900 7,700 8,360 7,000 7,600 6,500 7,200 1.75 6,850 8,662 6,030 7,315 5,480 6,650 5,120 6,300 1.50 5,900 7,425 5,200 6,270 4,720 5,700 4,430 5,400 1.25 4,980 6,187 4,250 5,225 3,880 4,750 3,670 4,500 1.00 4,950 4,950 4,180 4,180 3,800 3,800 3,600 3,600 Base 0.75 2,100 3,713 1,980 3,135 1,800 2,850 1,600 2,700 0.50 1,360 2,475 1,430 2,090 1,300 1,900 1,040 1,800 0.25 760 1,237 775 1,045 700 950 550 900 0.20 575 990 640 836 580 760 440 720 0.10 400 495 460 418 420 380 320 360 248 249 Therefore, this formula, which i s sometimes c a l l e d the squaring rule, does give a rough approximation for the price of larger stones. Unfortunately, since stones over three carats and much more so flawless, colourless ones, are so extremely rare, the graph could not be extended beyond three carats without losing i t s s t a t i s t i c a l v a l i d i t y . But i t i s in t e r e s t -ing to note that the squaring rule, applied to exceptionally large stones that appear from time to time in the market, would give impossibly high prices, beyond the reach of any private buyer. For instance, in 1976, Cartier of New York offered for sale the largest D-colour (colourless) flawless diamond ever cut, weighing 10 7 carats. The asking price was $5 m i l l i o n . However, at the then prevalent price of $13,000 for a 1-carat D FL stone, the squaring rule would have given about $149 m i l l i o n as a reasonable price for the Cartier diamond. APPENDIX 3 THE SHORTAGE OF ROUGH AS REFLECTED IN THE TRADE'S COMMENTS It i s d i f f i c u l t to analyze a h i s t o r i c a l movement that has not yet r e s o l v e d i t s e l f . What f o l l o w s are pro-- g r e s s i v e r e p o r t s of the rough shortage as seen by whole-s a l e r s . The m a t e r i a l has been gathered from i s s u e s o f Jewelers' Circular-Keystone from 1977 to 1978. March 1977. "The l a s t three sights have been s m a l l , with rough assortments g e n e r a l l y mediocre. This has tended to dry up s u p p l i e s and f i r e up demand f o r goods. In f a c t , q u a r t e r c a r a t stones have j u s t about disappeared." "World-wide demand f o r diamonds i s very great now. Dealers i n Antwerp, T e l A v i v , Bombay, are buying anything they can l a y t h e i r hands on. Even unopened boxes of rough are c a p t u r i n g a 10 per cent premium." In l a t e March, De Beers r a i s e d p r i c e s on small goods by 30 per cent, even though the o v e r a l l i n c r e a s e was only 15 per cent, as o f f i c i a l l y announced. 250 251 June 1977. "We d i d r e c o r d business . . . Most of the heavy buying was done i n .fear of another p r i c e i n c r e a s e . . . Many (de a l e r s ) were worried about dwindling s u p p l i e s of medium- to l a r g e r - s i z e d stones. Such shortages meant that e i t h e r De Beers was h o l d i n g back c e r t a i n s i z e s of rough -- or that d e a l e r s who cut that rough were hoarding the f i n i s h e d stones." September 1977. "The stage i s set f o r another diamond p r i c e i n c r e a s e . . . . De Beers' J u l y s i g h t s were very s m a l l , c o n t i n u i n g the trend noted a f t e r the p r e v i o u s three s i g h t s . Boxes of unopened rough were f e t c h i n g premiums of 25 to 30 per cent i n the open market . . . The Syndicate was buying p o l i s h e d goods i n Europe to f u r t h e r c r e a t e s c a r c i t i e s and shore up p r i c e s . " October 1977. "De Beers moved to squelch rumors of an imminent p r i c e hike s h o r t l y before Labor Day. In a t y p i c a l l y t e r s e announcement, i t s a i d there would be no f u r t h e r i n c r e a s e s t h i s year. But other - Syndicate a c t i o n s seemed to speak louder than words. For the f i f t h time i n a row, De Beers' s i g h t s , held August 22, were very s m a l l . . . . Dealers are f o r c e d to scramble f o r goods i n the open market. . . . Boxes of unopened melee rough were s e l l i n g i n I s r a e l f o r as much as 40 per cent . / over De Beers' l i s t p r i c e . " 2 52 November 1977. " P r i c e s f o r melee w i l l have shot up 50 to 60 per cent f o r 1977 o v e r a l l (because) the Syndicate cannot keep up with demand for small rough. Consequently, dealers are b i d d i n g up against each other i n the open market. . . . Since the March 2 7 s i g h t , the C.S.O. has been r e l e a s i n g only about 25 per cent of the goods people have a p p l i e d f o r . . . . The demand f o r melee i s so great because the' p r i c e s f o r l a r g e r engagement r i n g stones are becoming more and more p r o h i b i t i v e . . . . I s r a e l i dealers make 43 per cent on boxes of unopened small roughs." December 1977. "The Syndicate shrank i t s already meager si g h t s d r a s t i c a l l y on October 31. De Beers i s ( s a i d to be) i n t e n t upon holding p r i c e s at current record highs." (A special release.) "In an unexpected move, De Beers announced a 17 per cent average increase e f f e c t i v e December 6, 60 days a f t e r the Syndicate pledged not to hike i t s p r i c e s f o r the remainder of 1977. . . . I n d u s t r i a l , rough, which makes up the large m a j o r i t y of Syndicate goods, w i l l increase maybe 2 to 3 per cent; on the other hand gem rough w i l l soar 30 to 40 per cent higher Yet i t w i l l a l l come out to 17 p e r c e n t . . . . The market i s completely turned upside down." 253 January 1978. "Diamond p r i c e s head f o r the sky. . . . The mere f a c t that a 17 per cent De Beers p r i c e hike f o r diamond rough was to take e f f e c t on December 6th launched diamond p r i c e s upward n e a r l y 10 per cent i n November. But that was only the f i r s t stage. . . . Smaller s i z e s w i l l be hardest h i t , s i n c e world-wide demand i s g r e a t e s t f o r them. . . . Rumor has i t that i n December the Syndicate would r e l e a s e only one t h i r d of the amount of rough s o l d i n October. . . . Larger stones a l s o w i l l take sharp upward p r i c e climbs. Such jumps w i l l be f u e l e d by a recent avalanche of investment buying. . . . De Beers c a n c e l l e d i t s s i g h t s of l a r g e r rough (5 c a r a t s and over) to U.S. d e a l e r s , a s i g n , perhaps, such goods are very s c a r c e . " At t h i s time, unopened boxes were making a 60 per cent premium and more. February 1978. " P r i c e s f o r 1 c a r a t , D f l a w l e s s stones c a t a p u l t e d out of s i g h t . " (See Fig u r e 50). "By t h i s time next year a l o t of engage-ment r i n g s may c o n t a i n diamonds that always were c o n s i d e r e d i n d u s t r i a l q u a l i t y . . . As gem diamond rough p r i c e s climbed and the supply made a v a i l a b l e at the London s i g h t s grew s m a l l e r , some gem c u t t e r s --e s p e c i a l l y i n I s r a e l and India -- began to buy up the i n d u s t r i a l diamonds a v a i l a b l e on the world market." 4.10,000 45,ooo $l,ooo U F H A M 0 J A S 0 N t> 0 P H A M vj sj A S o ^ j J. F j F i g u r e 50 Median P r i c e f o r 1 c a r a t , D FL Diamonds i (Data from Jewelers' Circular-Keystone) ~ 254 255 EVOLUTION OF THE PRICES PAID BY RETAILERS F i g u r e s 50, 51 and 52 r e c o r d the changes i n median p r i c e s of three s p e c i f i c types of diamond as r e p o r t e d monthly i n the Jewelers' Circular-Keystone's Diamond Index., F i g u r e 50, the median p r i c e f o r 1-carat D-colour f l a w l e s s diamonds and i l l u s t r a t e s how the p r i c e s have, as the Jewelers' C i r c u l a r -Keystone f o r February put i t , " c a t a p u l t e d out of s i g h t . " F i g u r e 51 shows the i n c r e a s e s f o r % c a r a t VS^ G- to J - c o l o u r diamonds, and F i g u r e 52 f o r % c a r a t S n G- to J - c o l o u r stones. 256 $ 1,160 0 F M f \ M J J A S O N D J F rl A ^ J J A S O H D J F - . W\ A°<\1 Figure 51 I Median Price for 0.'50 carat, VS^ G-J Diamonds '(Data from Jewelers' Circular-Keystone') < 4 loo A S O N TJ> J m A<\U Figure 52 Median Price for 0.25 carat S.^  G-J Diamonds (Data from Jewelers '.Circular-Key stone) B I B L I O G R A P H Y , A. BOOKS Bruton, E r i c . Diamonds. London: N.A.G. Press L t d . , 1970. Gemological I n s t i t u t e o f America. Diamonds: Production, Marketing, Buying, Grading, Appraising. Los Angeles: Gemological I n s t i t u t e of America, 1976. Lenzen, G. The History of Diamond Production and the Diamond Trade. London: B a r r i e § Jenkins L t d . , 1970. Szenberg, M i c h a e l . The Economics of the Israel Diamond Industry. New York: B a s i c Books Inc., 1973. Van Der Laan. The Sierra Leone Diamonds. London: Oxford U n i v e r s i t y Press, 1965. Wilson, A. N. (Ed.). International Diamond Annual, Vol. I. Johannesburg: Diamond Annual (Pty) L t d . , 1971. Wilson, A. N. (Ed.). International Diamonds, Number Two. Johannesburg: Diamond Annual (Pty) L t d . , 1972. Zucker, Benjamin. How to Invest in Gems. New York: Quad-rangle/The New York Times Book Co., 1976. B. REPORTS AND BROCHURES De Beers C o n s o l i d a t e d Mines L t d . Annual Report 1974. Kimberley: South A f r i c a : De Beers C o n s o l i d a t e d Mines L t d . , 1975. De Beers C o n s o l i d a t e d Mines L t d . The Kimberley Diamonds. Johannesburg: De Beers C o n s o l i d a t e d Mines L t d . , n.d. 257 258 Economist I n t e l l i g e n c e U n i t L t d . , The. I n f l a t i o n Shelters: Precious Materials as Investments. London: The Econo-mist I n t e l l i g e n c e U n i t L t d . , 1976. I s r a e l Diamond I n s t i t u t e , The. The Israel Diamond Industry. T e l AViv: The I s r a e l Diamond I n s t i t u t e , n.d. Maclean-Hunter Research Bureau. A Survey on Diamond Jewellery. Toronto: Maclean-Hunter L t d . , 1975. State of I s r a e l , M i n i s t r y of Commerce and Industry, Diamond Department. Annual Report for the Year 1974. n.p., 1975. C. PERIODICALS "Ah, the Wonderful World of Diamonds." Vancouver Sun, J u l y 22, 1974, p. 27. "Another Diamond P r i c e Hike i n the Works?" Jewelers' C i r c u l a r -Keystone, J u l y 1976, p. 114. "Antwerp's Proud Diamond H i s t o r y . " Diamond World Review, May 1975, p. 23. ( A r t i f i c i a l Diamonds). Chemistry, June 1969, p. 20. Australian Financial Review, March 17, 1971, p. 8. "Bear Market i n Diamonds." Business Week, May 23, 1970, p. 55. Beatty, A. C. ( C o n s o l i d a t e d A f r i c a n S e l e c t i o n T r u s t Company Statement). The Economist, December 14, 1971, p. 82.* Beatty, A. C. ( C o n s o l i d a t e d A f r i c a n S e l e c t i o n T r u s t Company Statement). The Economist, December 18, 1971, p. 84.* E n t r i e s appearing w i t h t h i s s t y l e (. . .) i n t h i s B i b l i o -graphy r e f e r to u n t i t l e d a r t i c l e s . The t i t l e s i n the parenthes i n d i c a t e the t o p i c . 259 ( B e l g i a n Diamond E x p o r t s ) . Belgium Review, December 1969, p. 14.* "The B e l g i a n Diamond In d u s t r y . " Diamond World Review, May 1975, p. 24. "Biggest Diamond: Star of S i e r r a Leone." L i f e , November 10, 1972, p. 48. "Buy Diamonds: P r o f i t s Guaranteed!" Jewelers' Circular-Keystone, November 19 76, p. 13. Carstarphen, G a i l . "TV i s for-Diamonds." Jewelers' C i r c u l a r -Keystone, November 1976, p. 69. "The C e n t r a l S e l l i n g O r g a n i z a t i o n i n London." Diamond World Review, May 1975, p. 19. "A Curious "'Monopoly'." Canadian Jeweller, February 19 76, p. 54. D a n i e l i , Haim. " I s r a e l ' s Diamond Economy." Israel Diamonds, 44 (January/February 197 7):12. "De Beers Breaks Word; Rough up 17%." Jewelers' C i r c u l a r -Keystone, December 1977, p. 70. "De Beers Claims: No P r i c e Hike Soon." Jewelers' C i r c u l a r -Keystone, October 1977, p. 77. "De Beers: D u l l e d S p a r k l e . " The Economist, March 20, 1971, p. 93. "De Beers Goes f o r Increased Diamond P r o d u c t i o n . " Mining Magazine, January 1978, p. 7. "De Beers Hikes P r i c e s of Rough 5.7%." Jeweler's C i r c u l a r -Keystone, October 1976, p. 42. "De Beers: P r e s c r i p t i o n f o r I n f l a t i o n . " The Economist, March 14, 1970, p. 86. 260 "De Beers P r o f i t s Almost Double." Jewelers ' Circular-Keystone, November 1977, p. H. "De Beers Sales Up." Jewelers' Circular-Keystone, February 1978, p. G. "De Beers Sets F i r s t T.V. Test f o r Jewelry." Advertising Age, August 1971, p. 43. "De Beers to Increase Diamond P r o d u c t i o n . " Jewelers' C i r c u l a r -Keystone, February 1978, p. 89. "Diamond Automation." Jewelers ' Circular-Keystone, November 1976, p. E. (The Diamond Bought by R i c h a r d Burton). Newsweek, November 10, 1969, p. 104.* (Diamond C u t t i n g i n I s r a e l ) . Time, August 17, 1970, p. 62. "Diamond Cut War S t i l l Thunders On." Jewelers' C i r c u l a r -Keystone, March 1977, p. 71. (Diamond D e a l e r s ' Club i n New Y o r k ) . Forbes, February 1, 1970, p. 20.* (Diamond D e a l e r s ' Club i n New York). Newsweek, May 8, 1972, p. 96.* (Diamond Exports Between the U.S.S.R, and the U.K.). The Financial Times, November 11, 1969, p. 17.*' "Diamond Market Pays O f f . " Vancouver Province, March 31, 1976, p. 32 . (Diamond Mines i n T r a n s v a a l ) . Newsweek, November 23, 1970, p. 107.* (Diamond P i p e s ) . Chemistry, May 1973, p. 23.* "Diamond P r i c e s Increase with Demand." A i r l i n e , February 1970, p. 20. 261 (Diamond P r i c e s Up). Journal of Commerce, December 23, 1968, p. 1.* "Diamonds." Jewelers1 Circular-Keystone 1976 Directory, June 21, 1976, pp. 668-673. "Diamonds." Jewelers1 Circular-Keystone 1977 Directory, June 21, 1977, pp. 683-708. "Diamond Sales Up." Jewelers1 Circular-Keystone, October 1976, p. F. "Diamond Sales Up 15%." News of South A f r i c a , January 14, 1970, p. 3 . "Diamonds and Gold: No S n i p s . " The Economist, March 17, 1973, p. 106. '"Diamonds: An Investor's Best F r i e n d . " The Financial World, May 30, 1973, p. 9. "Diamonds, De Beers' Best F r i e n d . " .Holiday, J u l y 1972, p. 42. "Diamonds: F i c k l e F r i e n d s . " The Economist, January 16, 1971, p. 84. "Diamonds For Your G i r l . " Consumer B u l l e t i n , June 1972, p. 23. "Diamonds From India H i t New Export Highs." Jewelers1 C i r c u l a r -Keystone, February 1978, p. 89. "Diamonds From R u s s i a With Love." Dun's Review, September 1973, p. 82 . "Diamonds From the Earth's Depths." Popular Science, September 1973, p. 60. "Diamonds: G i r l s ' Best F r i e n d s . " The Economist, August 4, 1973, p. 71. "Diamonds: Hedging A g a i n s t I n f l a t i o n . " New York Times, September. 21, 1971, p. 53. 262 "Diamonds i n B r a z i l . " Newsweek, August 29, 1966, p. 36. "Diamonds i n B r a z i l : W i l l I t Pay?" Business Week, January 20, 1968, p. 112. (Diamond S i t u a t i o n i n Venezuela). A t l a n t i c , A p r i l 1971, p. 56.* (Diamond Smuggling From Congo). Time, November 25, 1966, p. 42.* "Diamonds: S i b e r i a n Gravy T r a i n . " The Economist, October 20, 1973, p. 121. "Diamonds Up; Emeralds Down." Jewelers' Circular-Keystone, September 1977, p. A. (Diamonds Up In V a l u e ) . Vancouver Province, J u l y 6, 1973, p. 12.* " D o u b l e - B a r r e l l e d Diamond Promotions." Jewelers' C i r c u l a r -Keystone, August 1977, p. 88. ( E d i t o r i a l ) . Israel Diamonds, 47(August/October, 1977):5. "The F a s c i n a t i n g World of Diamonds." Reader's Digest, October 1973, p. 237. Federman, David. "Dealers F i g h t Gold and Cos t s . " Jewelers' Circular-Keystone, March 1977, p. 70. „ ' • " D e B e e r s Stays Stingy With Rough." Jewelers ' Circular-Keystone, December 1977 , p. 30. ' ' . "Diamond Melee Up 55% i n 12 Months." Jewelers' C i r c u l a r Keystone, February 1978, p. 94. . "Diamond P r i c e s Head f o r the Sky." Jewelers' Circular-Keystone, January 1978, p. 141. . "Diamond P r i c e s Up; Sales O f f . " Jewelers' Circular-Key stone, June 1977 , p. 56. 263 Federman, David. "The Gem Investment Game." Jewelers' Circular-Key stone3 November 1976 , p. 123. . " I n d u s t r i a l Diamond Engagement Rings." Jewelers' Circular-Keystone, February 1978, p. 86. _ _ _ _ _ _ _ _ _ _ _ . "Market Changes Prompt New Diamond P r i c e Index." Jewelers' Circular-Keystone, August 1977 , p. 92. ' . "Melee P r i c e s Firm; Larges Stones Up." Jewelers' Circular-Keystone, March 1978, p. 72. . "Melee P r i c e s Head f o r New Highs." Jewelers' Circular-Key stone, November 1977 , p. 74. . "New Diamond P r i c e s Phased i n Slowly." Jewelers' Circular-Keystone, November 1976, p. 42. ' . "Signs Say De Beers W i l l Raise P r i c e s Soon." Jewelers' Circular-Keystone, September 1977, p. 60. (Future i n the West Coast Diamond Trade). Newsweek, February 14, 1972, p. 75.* (Future Strengthening of I s r a e l ' s P o s i t i o n ) . Israel Diamonds, 47(August/October, 1977):30.* F u z a i l o f f , Ben-Zion (The Shortage of Rough). Israel Diamonds, 47(August/October, 1977):19.* Gem Over I.B.M.?" Forbes, J u l y 15, 1973, p. 58. G i l b e r t , M i t c h e l l . "Put Your Diamond Promotions i n O r b i t . " Jewelers' Circular-Keystone, November 1976, p. 49. G i l b e r t , M i t c h e l l . "Young America Loves Those Under $100 Diamonds." Jewelers' Circular-Keystone, March 1978 , p. 46. G o l d f i n g e r , J . "The Syndicate's Sales P o l i c y Guarantees S t a b i l i t y of Diamond Market." Diamond World Review, May 1975, p. 18. 264 "Here's How One Expert Reacts to Diamond P r i c e s . " Canadian Jeweller, May 1977, p. 22. "The High L i f e Interview: Harry F. Oppenheimer." High L i f e , January 19 78, p. 17. (Holding Back Mining i n South West A f r i c a ) . Sea Front,. November 1972, p. 329.* Holmes, George. "Diamond Investments: What Should A Jeweler Do?" Jewelers' Circular-Keystone, August 1977, p. 84. Holmes, George. "Theory v s. R e a l i t y . " Jewelers' C i r c u l a r -Keystone, J u l y 1977, p. 45. "How De Beers' Marketing Helps You." Canadian Jeweller, November 1976, p. 20. "How to Buy a Diamond." Reader's Digest, May 1970, p. 90. " I f You Want to S e l l a Diamond." Good Housekeeping, March 1965, p. 179. ( I l l e g a l Mining i n S i e r r a Leone). Newsweek, February 7, 1972, p. 64.* "Ind i a n Diamond Corp. Enter U.S. Gem F i e l d . " Jewelers' C i r c u l a r -Keystone, J u l y 1976, p. 250. " I n d i a P e t i t i o n s f o r Duty-free Diamonds." Jewelers' C i r c u l a r -Keystone, December 1977, p. G. " I n d u s t r i a l Diamonds: Some C a l l Them Gems." Jewelers' C i r c u l a r -Keystone, February 1978, p. A. ( I s r a e l i Diamond E x p o r t s ) . Barclay, November 1968, p. 1.* ( I s r a e l i Diamond E x p o r t s ) . The Financial Times, May 20, 1968, ' p. 19.* ( I s r a e l i Diamond E x p o r t s ) . The Financial Times, October 23, 1968, p. 2 . '* 265 ( I s r a e l i Diamond E x p o r t s ) . The Financial Times, May 2, 1969, p. 16.* ( I s r a e l i Diamond Exports) 1970, p. 4.* ( I s r a e l i Diamond Exports) November, 1976):12.* ( I s r a e l i Diamond Exports) 12.* ( I s r a e l i Diamond Exports) ( I s r a e l i Diamond Exports) p. 261.* The Financial Times, January 14, Israel Diamonds, 42(September-Israel Diamonds, 46(June-July, 1977): Israel Economist, August 1969, p. 235 Israel Economist, December 1967, ( I s r a e l i Diamond Exports) p. 110.* ( I s r a e l i Diamond Exports) Israel Economist, March 1968, Israel Economist, J u l y 1968, p. 266.* ( I s r a e l i Diamond E x p o r t s ) . Israel Economist, J u l y 1969, p. 211.* Journal of Commerce, January 15, ( I s r a e l i Diamond Exports) 1970, p. 11.* ( I s r a e l i Diamond Exports) p. F 18.* New York Times, November 24, 1968, ' I s r a e l i Diamond Exports Down i n Value December 1970, p. 251. Israel Economist, ( I s r a e l i Diamond I n d u s t r y ) . Israel Diamonds, 44(January^, February, 1977):17.* " I s r a e l i Diamond Industry Shows Record Export High." Canadian Jeweller, November 1976, p. 19. " I s r a e l i Diamond Industry Threatened by In d i a and Russia, Israel Economist, November 1971, p. 11. 266 " I s r a e l Pushes Ahead i n Gem Technology." Jewelers' C i r c u l a r -Keystone, August 1977, p. 98. ( I s r a e l Ranks F i r s t Among S u p p l i e r s of Japan). Israel Diamonds, 47(August-October, 1977):31.* (Lesotho, Diamond F i n d i n g and S e l l i n g ) . Newsweek, October 30, 1967, p. 45.* "More to Diamonds Than Meets the Eye." Montreal Star, November 25, 1976, p. 7. (The N a t i o n a l I s r a e l Gemmological I n s t i t u t e ) . Israel Diamonds, 47(August-October, 1977):20.* (On Diamond S a l e s , by the Manager o f B i r k s ) . Vancouver Sun, May 20, 1970, p. 5.* Oppenheimer, H. F. (Company Statement). The Economist, May 16, 1970, p. 67. . (Company Statement). The Economist, May 15, 1971, p. 93. _ _ _ _ _ _ _ _ _ _ _ _ _ . (Company Statement) . The Economist, May 13, 1972, p. 117. • . (Company Statement) . The Economist, May 5, 1973, p. 28. ' ' . (The C.S.O.) Israel Diamonds, 43(December, 1976):46. " P o l i c e Clamp Down on Diamond D e a l e r s . " Canadian Jeweller, J u l y 1977, p. 20. " P r i c e of P r o s p e r i t y . " Newsweek, August 16, 1965, p. 45. P r i n s , V. G. and I. B a l f o u r . "Some Thoughts on the Syndicate Broker." Diamond World Review, May 1975, p. 15. Quig, James. " D a l l y i n g Over Diamonds." Weekend Magazine, June 1 , 1 9 7 7 , p . 7 . 267 "Record P r o f i t s Achieved by De Beers i n 1977." Mining Journal, 7438(March 10, 1978):181. (Record Volume i n Gem S a l e s ) . U.S. News, March 12, 1973, p. 41.* S c h n i t z e r , Moshe. ( P r e s i d e n t i a l A d d r e s s ) . Israel Diamonds, 43(December, 1976):12 . Schonkopf, Asher. ( I s r a e l i Diamond E x p o r t s ) . Israel Diamonds, 47(August-October, 1977):12. (The Shortage of Rough). Israel Diamonds, 47(August-October, 1977):14.* (Shortages of Rough Only Temporary). Israel Diamonds, 47 (August-October, 1977);24.* "Should Jewelers S e l l Investment Gems?" Jewelers ' C i r c u l a r -Keystone, September 1977, p. D. (Submarine Diamond M i n i n g ) . Science Digest, October 1970, p. 68.* "Tip s on Diamond Colour Grading." Canadian Jeweller, November, 1976, p. 35. " U n i v e r s a l Mines: Up From S i e r r a Leone." Jewelers' C i r c u l a r -Keystone, February 1978, p. 206. "U.S.S.R. Enters the Diamond S e l l i n g Market." Wall Street Journal, June 25, 1971, p. 18. (U.S.S.R. Second L a r g e s t Gem Diamond Producer). New York T i m e S j December 10, 1967, p. F 1.* Voet, J . "De Beers Sales Reach New Record." Israel Diamonds, 46(June-July, 1977) :34. . " I s r a e l ' s Share of World Diamond S a l e s . " Israel Diamonds, 45(March-May, 197 7):16. "Veteran Diamond C a p i t a l . " Diamond World Review, May 1975, p. 30. 268 Voet, J . "Worldwide Diamond S t a t i s t i c s . " Israel Diamonds, 43(December, 1976):50. "What I t Takes to Make Diamonds S p a r k l e . " Good Housekeeping, January 1971, p. 128. "Whose Best F r i e n d ? " The Economist, September 14, 196'8, p. 78. "Why De Beers Raised P r i c e s . " Jewelers' Circular-Keystone, November 1976, p. 46. "Why the Fake Diamond Market I n c r e a s e s . " Business Week, February 14, 1970, p. 116. W i l l a t , N. "Rough on Diamonds: De Beers W i l l Drink to the End o f the U.S. Recession." Barfou's, A p r i l 19, 1971, p. 9. (World Diamond B u s i n e s s ) . U.S. News, March 18, 1974, p. 66.* "You're Not Buying A Cig a r and Smoking I t . " Forbes, J u l y 15, 1973, p. 58. (Zale C o r p o r a t i o n ) . Newsweek, January 26, 1970, p. 67. 

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