THE INTERNATIONAL DIAMOND TRADE AND THE VANCOUVER MARKET by ANDREW

285 Pages·2009·13.32 MB·English

THE INTERNATIONAL DIAMOND TRADE AND THE VANCOUVER MARKET
by
ANDREW JORDAN
B.A., Queens University, 1973
A THESIS SUBMITTED IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS
FOR THE DEGREE OF
Master of Science
in"the
Faculty of
Commerce and Business Administration
We accept this thesis as conforming
to the required standard
THE UNIVERSITY OF BRITISH COLUMBIA
April, 1978
/ TN Andrew Jordan, 1978
In presenting this thesis in partial fulfilment of the requirements for
an advanced degree at the University of British Columbia, I agree that
the Library shall make it freely available for reference and study.
I further agree that permission for extensive copying of this thesis
for scholarly purposes may be granted by the Head of my Department or
by his representatives. It is understood that copying or publication
of this thesis for financial gain shall not be allowed without my
written permission.
Cc
Department of LOfy W\ C fC<2
The University of British Columbia
2075 Wesbrook Place
Vancouver, Canada
V6T 1W5
Date
A B S T R A CT
The subject of this thesis is the structure of the
distribution channel of gem diamonds in the world market,
and certain vertical stages of the channel are singled out
for more detailed study. The main stages of the distribution
structure are: the mining of rough diamonds, the largely
centralized sorting and distribution of the rough, the manu
facture of polished diamonds in a number world centres, the
distribution of the polished gems at several bourses connected
with the manufacturing centres, and the operations of the
local wholesalers, jewellery manufacturers, and retailers.
Three areas are singled out for more detailed study: the
De Beers group, which, through the Central Selling Organi
sation (S.C.O.), dominates the distribution of rough; the
Israeli diamond industry, the largest manufacturing and dis
tributing centre of polished diamonds; and finally, the
Vancouver retail market for diamonds and diamond jewellery,
which is one of the many regional branches of the largely
unexplored retail end of the distribution channel.
Chapter II provides a base for a ll that follows by
describing in detail the four parameters that are basic for
the appraisal of a polished diamond: colour, clarity, cut
and weight. An Appendix studies the increment in the price
per carat of a polished diamond as the weight of the stone
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increases. It is found, for example, that the traditional
squaring rule gives results close to, but consistently higher
than, the actual prices. Chapter III studies the prevailing
modes of production in the diamond-producing countries, the
historical evolution and present activities of the diamond-
cutting centres, and the operations of the major trading
centres. It is found that certain characteristics of the
diamond-cutting industry make it an ideal field for cottage
industries and small firms, working in places situated far
from either the mining, the distribution, or the consumer
centres. Certain recurrent patterns in the creation and
development of local cutting industries are discussed.
Chapter IV focuses on the development of the Israeli
diamond industry. Since the first years of the State of
Israel, the exportation of polished diamonds was seen as one
of the main sources of foreign currency, and expansion of
the industry was energetically supported by the Israeli
government. The main factor limiting the growth of the i n
dustry, however, was the supply of rough diamonds. The chapter
studies the changing relations between the C.S.O. and the
Israeli industry, governmental protection of the industry,
and the export figures. The second half of the chapter is
devoted to a detailed description of the actual trading at the
Israel Diamond Exchange at Ramat Gan. Chapter V studies the
role of the C.S.O. in the world market, in the frame provided
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by the history of the De Beers group. The CS.O.'s avowed
policy of stabilizing prices for. the benefit of the industry
as a whole is measured against the recent and on-going deve
lopments in the world market, characterized by steeply rising
prices, speculative trading and relative shortages of rough,
and some tentative explanations are proposed. Chapter VI,
finally, describes the Vancouver wholesale and retail diamond
markets. Since diamonds are sold by retailers almost exclusive
ly as part of pieces of jewellery, a survey was made of Van
couver jewellery stores to find out the relative popularity
and average selling prices of the main types of diamond jewellery.
The method employed in this survey involved appraising and
coutning the jewellery pieces displayed, and direct enquiries
from the salesmen. The survey was complemented by sales
figures and other information on the buying preferences of
Vancouver jewellers, furnished by a local wholesaler. The
results were tabulated and compared with published Canadian
and American data, and explanations were proposed for the
differences found. The chapter concludes with a list of
questions for future research on the retail market for diamond
j ewellery.
TABLE OF CONTENTS
Page
ABSTRACT ii
LIST OF TABLES ix
LIST OF FIGURES . x ii
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 Alluvial 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 Efficient Forms of Cutting 40
Departures From the Ideal 46
Other Modern Cuts 48
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CHAPTER Page
GRADING POLISHED DIAMONDS 53
The Four C's 53
Grading Colour 53
Grading Clarity 57
Grading Cut 64
Weight 66
Valuations 67
Fancy Colours 73
CONCLUSION 74
III PRODUCTION, DISTRIBUTION AND MANUFACTURE
OF DIAMONDS 75
OUTLINE 75
THE DISTRIBUTION STRUCTURE . . . 75
THE PRODUCING COUNTRIES 7 8
U.S.S.R 81
South Africa 81
South West Africa (Namibia) 86
Angola 8 7
Liberia 88
Zaire 89
Sierra Leone 90
Ghana 91
Tanzania 93
Other African Producers 94
Venezuela 94
Brazil . . . .. 96
India 97
CUTTING AND TRADING CENTRES 9 7
Israel 98
Antwerp 98
Antwerp's Exchanges 102
India 104
U.S.S.R 107
South Africa 110
New York 112
Puerto Rico 114
Amsterdam 115
West Germany 116
France 117
Other Countries 118
CONCLUSION 120
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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
Supplies of Rough 130
Credit to the Industry 135
Manpower 137
Research, Innovation and Promotion 141
Manufacturing Practices:
Plant Size and Subcontracting 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 Consolidated Mines Ltd. 164
From the Syndicates to the Present 168
The More Recent Evolution of De Beers 174
THE CENTRAL SELLING ORGANISATION 176
The Sights 178
Sales and Prices 180
Purported Policies of the C.S.O.
and the Current Situation 184
ADVERTISING BY DE BEERS 191
CONCLUSION 198
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CHAPTER Page
VI THE VANCOUVER MARKET 199
OUTLINE 199
RESEARCH TECHNIQUES 201
Sources of Information 201
Techniques Used in Surveying Vancouver Stores. 201
The Survey Form 203
Data Gathered From A Vancouver Wholesaler. . . 207
RESULTS OF THE RESEARCH 209
Results From the Data of a Vancouver Wholesaler 224
CONCLUSION 233
SOME INTERESTING TOPICS FOR FUTURE RESEARCH . . 235
Sources of Diamonds for the Vancouver Market . 235
Influence of the Activities of the World
Trading Centres in the Price and Availability
of Diamonds in the Vancouver Market 236
Relation Between Store Sales and Display Space 236
The Preferences of the Vancouver Diamond-
Buying Public Compared to Those of Other
Sections of the North American Public . . .. 236
Whether the Quality (and size) of the Diamonds
Offered in the Retail Market Has Been Decreas
ing in 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
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