I HAD A DREAM!

I had this strange dream recently about getting on a flight in Mumbai, flying to Tehran and then on to Tel Aviv and then back to London.

However, when I woke up I remembered that in February 1970 I did just exactly that. I took TWA Flight 001, the round the world service, from Bombay (as it was called then) and landed the next morning in Tehran. I still remember the luminescent blue haze around the mountains that encircle the city of Tehran as one landed. I enjoyed a very pleasant couple of days with my Iranian friends, the famous French singer Charles Aznavour was appearing in concert and I enjoyed a nice glass of chilled champagne in the bar of the Hilton hotel. I then flew on to Tel Aviv and proceeded to Jerusalem where I remember thinking it was distinctly cooler than Mumbai and Tehran and I wished I’d brought a pullover.

Would that that dream would come true, but then Martin Luther King also had a dream and if he hadn’t then Obama wouldn’t be the President of the United States. So let’s keep dreaming and hoping for a better future where men and women of good will dominate politics and international affairs instead of the Chavez’s and Ahmadinejad’s of this world.

MORE ON RESPECT

The tumultuous events in Iran come as no surprise to those who take an interest in this great country and culture and who can see beyond the nuclear issue, however important it undoubtedly is.

The dramatic and unpredictable events unfolding in Tehran and the other major Iranian cities on an almost hourly basis represent much more than just a struggle between the hard line faction of President Ahmadinejad and his power base and the more moderate leaders in the Islamic republic but have much more to do with a vision of the future of Iran based on respect. Respect for women, for culture, learning, modernity, progress and freedom of speech, all things that the majority of us (whether or not we have a religious persuasion) believe in.

It is fascinating watching the media coverage to see that the pro reformist demonstrators comprise not only young men and women but a whole cross section of Iranian society. It is also very apparent that whatever is happening and will happen is being hugely influenced by the media, but not official media more blogs, Facebook, Twitter and all the latest channels of communication which Iranian youth are quite as comfortable with as our own. So much so that the regime doesn’t know how to play its clumsy attempts to control and manipulate the media. On one hand it tries to use the media to project its own agenda on the other it tries to suppress international transmission and communication where Iranians are looking for support and the sympathy of other nations.

Given the history of the US and Britain in interfering in Iranian internal affairs, a lack of respect for Iranian sovereignty which led to the extremism, radicalism and anti-Americanism which has been so rampant in Iran for so long, the Americans and British have to be particularly careful not to be seen to be interfering once again in an Iranian process (however flawed it may appear to them and us). However, we know very well where our sympathies lie and any political leader who polarises his country to the extent that people feel they have no choice but to take to the streets is a disaster.

In Venezuela we have seen similar situations to that in Tehran when Chavez’s supporters fired on opposition rallies in Caracas and it is no wonder that President Chavez and President Ahmadinejad get on so well as they not only have oil in common but share the same political techniques and the same type of populist posturing which has done no favours to either their economies or their people.

The Iranian presidential challenger, Mir-Hossein Moussavi, was quoted in today’s FT “We are ready to have the election re-run,” he said, insisting that people had to be “convinced” of the results after being “insulted”.

Respect is due to him and the people who have so bravely taken to the streets to express their democratic rights.

RESPECT

I was very interested to hear of the DTC holding a ‘Town Hall’ meeting in Antwerp yesterday, which neatly illustrates a recurring theme of mine, how politics influence business, and vice versa.

Clearly the use of the term ‘Town Hall’ instead of the rather tedious ‘Road Show’, which to me has always implied some sort of circus event ,shows an ‘Obamaesque’ willingness to engage with stake holders and the wider public. Although I wasn’t present I understand the meeting was well attended and a lively debate ensued and there was a genuine effort to engage with the participants.

I have made no secret of my admiration for Obama, long before he was elected. If anything, I’m even more impressed (as I am sure most of my readers are) than I expected to be by his natural grace, assurance, intelligence and intuitive communication. If you read any paper in any language one of the recurring words that define his approach is ‘respect’. I have always believed that if you are respectful of other people, their points of view, their religious observances, their cultural differences and sensitivities you are much more likely to earn their respect. This is hardly a revolutionary concept but it is surprising how many people just don’t get it or can’t be bothered to make the effort.

Respect for other people’s ideas and culture does not demonstrate weak-will or diminish one’s own beliefs in any way. Neither does it demonstrate wishy-washy liberalism or political correctness if it is conducted with determination and integrity. Why shouldn’t Obama attempt to engage with Chavez of Venezuela? Or the Cubans? Or the Iranians? The previous US administration only managed to make a bad situation worse and were not conspicuously successful in dealing with the North Koreans either. At least by engaging with people you find out whether they are really dangerous, just upset or Mavericks who need to be understood. If you also respect your enemies it means that you are much less likely to under estimate them which, in the end, makes it far more likely that you will prevail over them.

Respect takes many forms and if the general public feel they are being treated in a cynical and disrespectful way, as Mr Brown is likely to find out tomorrow, they will express their displeasure at the voting booth.

Mr Obama is today addressing Cairo University, trying to improve understanding and assure the Arab world that the US has respect both for their religion and the region. The world will be listening and even more respect to him for confronting, in the early stages of his administration, issues which have not been properly addressed by his predecessors and never before in one of the most important cities of the Arab world.

Holding the ‘Town Hall’ meeting in Antwerp seems to recognise the continuing importance of this city to our industry and the significant attendance justifies the importance of this sort of engagement with the diamond community, particularly when it is based on a respectful dialogue and a preparedness to listen and engage with the industry’s concerns.

IN MEMORY OF VASANTBHAI SANGHAVI 1944 – 2009

I would like to pay my own personal tribute to one of the Indian diamond industry’s great characters of recent years but much more than that, a real pioneer who set a model for polished distribution and client service which many aspired to.

I chose this photograph of Vasantbhai for two reasons, one because I took it myself in 1994 and secondly because it shows him at the height of his powers and achievements with his son Kalpesh and nephew Sanjay in his Prasad Chambers offices. At this time Vasantbhai was almost certainly the most important polished dealer in the Mumbai market with substantial polished purchasing operations in both Mumbai and Surat supplying a network of polished sales offices throughout the globe.

Having achieved this pre-eminent position in polished distribution and sales, Vasantbhai decided that the next step was to become a volume manufacturer and vertically integrate upstream. When he then decided to apply for a Sight it was assumed by many that he was interested in rough for trading purposes, given their huge success in trading polished. However, it became quite apparent to us that Vasantbhai was entirely serious about manufacturing and, as if to prove the point, he built in Pandole one of the largest purpose built factories of its time.

He was one of the few potential Sightholders who the DTC had heard so much about that they actually sought him out and requested a meeting and in fact the first meeting with him and DTC executives was held in my room at the Taj in 1994 during the DTC review.

In 1997 the DTC recognised Sanghavi’s commitment to manufacturing and granted them a Sight.

I had the pleasure of meeting Vasantbhai 3 weeks ago in Mumbai when he told us with much pride that he was being honoured with a lifetime achievement award (with his brother Chandrakant) which was to be presented to him by The Indian Diamond & Colourstone Association – NY at the Venetian Hotel, Las Vegas during the JCK Show next month. Vasantbhai was extremely successful in the US and Sanghavi still have one of the highest sales profiles of any Indian company there. He also loved the US (I remember him telling me that Los Angeles was a favourite city of his) and so it is particularly sad that he was taken from us before he was able to enjoy what would have undoubtedly been one of the proudest days of his life.

Unfortunately he enjoyed visiting London a lot less than he did the US because he felt his efforts had been consistently under recognised, a source of great disappointment to him.

It was part of Vasantbhai’s routine to take an early morning walk in Mumbai’s hanging garden park, sadly this Saturday morning he took his final walk. However, he will live on fondly and respectfully in our memories and the industry has lost one of its great personalities.

If you would like to leave your own personal message and memories in the comments, we would like to encourage you to do so.

My colleagues and I would like to express our heartfelt condolences to the Sanghavi family.

GREEN SHOOTS

We are all well aware that the current revival in rough purchasing is largely driven by shortage of rough and also factory-led, rather than developments downstream. However, it is good news when a diamond fetches the highest price per carat for any gem stone ever sold and I think the industry should celebrate this for the good news that it is. It is also interesting to note that in the art world there are stirrings of demand for exceptional work and David Hockney's painting ``Beverly Hills Housewife'' sold for a record $7.9 million at Christie’s in New York yesterday.

Blue diamond = one big green shoot

DOING THE RIGHT THING

We are all, quite rightly, judged by our actions whether it be as individuals, governments, big corporations or small companies in the court of public opinion. Which means we are expected to do the right thing at the right time in terms of human intervention.

In our own industry Gareth Penny is rightly keen to refer to the moral dimension and imperative of ‘living up to diamonds’ and naturally enough Sightholders expect the DTC to conduct its relationships with them accordingly.

Businesses and governments always have a choice to rise to the occasion and do the right thing or take refuge in the inertia of legalistic or bureaucratic obfuscation.

Governments, even democratic ones, often have a pretty poor record in doing the right thing. Take the British government’s shabby treatment of the courageous Gurkhas who have fought and died for the British and Indian Armies for the last two centuries.

It took a determined and popular British actress, Joanna Lumley (whose father, Major James Lumley, served in the 6th Gurkha Rifles), to front a highly effective media campaign to lobby the government for Gurkha families’ rights to domicility in the UK, an effort which succeeded in shaming and humiliating the UK government into ‘doing the right thing’. A government whose stock with the British public is now so low that they had almost no choice but to accede to the strength of public opinion in relation to the Gurkhas or risk sinking even further in the polls.

My father, a Lieutenant Colonel in the then 5th Royal Gurkha Rifles (Frontier Force) believed in doing the right thing and he, I know, would have been very happy with the result of the pressure brought to bear by this feisty and much admired actress on our mean spirited and miserable government.

The English father of a victim of the terrorist attack on the Taj recently wrote to me to enlist my support in the case of his son. He and his girlfriend were on the same floor (3rd) as Mily and I separated only by one room. In a desperate attempt to escape from the encroaching fire and the smoke entering the room they knotted together sheets, curtains and towels into an improvised rope to try and escape out of the window. Sadly the improvised rope gave way and Will fell to the ground sustaining major and life threatening injuries to his spine. Having undergone major operations in Mumbai by skilled Indian surgeons he was eventually repatriated to England where he remains undergoing treatment in hospital. His case has been almost completely ignored by the British government and he has so far received only a miserly £15,000 compensation. His father (his mother died of cancer) has dedicated himself to his son’s recovery (as far as it will ever be possible) and fair and appropriate compensation.

http://www.willpikemumbaiappeal.co.uk/

An article appeared in this Sunday’s Observer entitled ‘Terror Victim in Mumbai Now Abandoned in Britain’ and his father has a dedicated web site to help publicise not only his son’s very deserving cause but make the wider case for Britain to provide the same level of assistance to victims of terrorist attacks overseas as those that were put in place after the terrorist attack on the London underground system.

http://www.guardian.co.uk/world/2009/may/10/will-pike-taj-hotel-mumbai-terror-attacks

If any of my Indian, US or Belgian readers can draw this story to the attention of any press, perhaps you would be kind enough to do so as coverage in the Mumbai or indeed any other reputable press may be helpful in shaming and pressurising the British government into doing the right thing.

COMMENT ON GOLDIE SIGHT NEWSLETTER FROM CHAIM EVEN ZOHAR

Chaim Even Zohar has made the following comment on the Goldie Sight Newsletter which can be found on the H Goldie web site at http://www.hgoldie.com/ :

2009: Rough Supply will Still Exceed Demand

Dear Mark.

Your sight newsletter - as usual - represents a most insightful comment on market sentiment. You report of having seen “a genuine shift in mood apparently driven by a growing supply concern amongst manufacturers who are now seeing the effects of mine closures on rough supply.” You are absolutely right from your perspective as a DTC broker, as your clients face the consequences to almost unprecedented production cuts and mine closures by De Beers, which led to a Q1 2009 output decline (measured in carats) of some 91%. No wonder that, as you write, “it appears that the DTC is struggling itself to respond to this sudden surge in demand.” This is right – it had been my understanding that larger sights had not been planned before next month’s sight – and this strengthening demand will enable a return to larger sights maybe earlier than expected.

But, Mark, the behavior of De Beers is in stark contrast to the actions of other producers. Moreover, De Beers is now resuming most of its production and – at an average – will deliver in 2009 some 40% less carats than in 2008. Not a single other producer is paying “such a price” and global diamond-mining output will run at about 85% of the 2008 level and come to US$12.35 billion – at 2008 prices. Assuming that average 2009 rough diamond sales will be at market prices that are 35% below last year’s, the 2009 mining output at 2009 prices would come to US$8 billion. Let me elaborate on our calculations.

According to the economic demand-supply forecast model developed together with Pranay Narvekar, a brilliant Indian diamond industry economist, we believe that cutting-centre demand for rough will come to US$7.4 billion – so the supply and demand will only be slightly out of balance, with a production excess of US$0.6 billion. However, the sharp fall in rough sales in the last quarter of 2008 has added some US$1.6 billion to producers’ stock. We should not forget that although the diamond downstream business was hit already in the 4th quarter in of 2008; mines took the hit mostly in 2009.

Looking at the full 2008 year, we see that rough diamond mining output actually increased by 4.9% to $14.5 billion (from $13.82 billion in 2007). The impact of mining closures and retrenchments are not yet visible in 2008 figures. Mining sales to the downstream market were a tiny 1.8% higher in 2008 from $13.95 billion in 2007 to $14.2 billion to 2008. Manufacturing output, however, fell ever so slightly by 0.8%, from $19.86 billion down to $19.7 billion, showing that industry naturally reacted faster and before the mining response to the economic crisis.

Mark, we calculated the economics of the first 12 months into the crisis, and, later, based on more information, we made projections for 2009. Because of the 33% decline in polished demand, diamond manufacturing output will fall in the first 12 “crisis” months by a hefty $6.5 billion to only $13.2 billion. This explains why in India some 400,000 workers have been made redundant, representing some 35% of the labor force.

As I mentioned above, looking at the full calendar 2009 year, global rough demand will decline from $14.2 billion to merely $7.4 billion, as also on the cutting level phase of the pipeline inventory reduction must take place before returning to a replenishment mood. We expect that in the final quarter of 2009 the global manufacturing sector will be able to purchase some $800-$900 million worth of rough per month. Though when replenishment will commence, this will be at a lower level, as with lower sales, the required working stick levels will fall as well. Consumer demand may not pick up before the 4th quarter of 2010. This year’s Christmas season is expected to be similar to last year’s.

But whether this scenario will work out or not depends on the producers – not just on De Beers, but also on the others. And there we see different strategies. Except for a technical-driven and scheduled 4% decline in output, the Russian will not reduce mining activity. It now tries to lure clients by offering long-term supply contracts which initially will sell at a premium (!) to market price – promising better deals later. [Some of the goods go for 20% above market price.] The fact that the government is doing some of the stocking (Gokhran), should not give much comfort. The mid 1990’s are not so long ago to simply ignore the lessons from the past.

BHP-Billiton’s diamond production in Q1 2009 was 53% above the comparable quarter last year, and 60% over Q4 2008. BHP-Billiton has specifically informed us that no diamond mine closures whatsoever are planned or contemplated for 2009. Rio Tinto’s Argyle and Diavik Q1 2009 productions were up dramatically, though they announced a 3 months closure.

Angola’s production fell away for a few months due to the financial trouble of the marketing agents; not because of any government policy to reduce output.

Our forecast is thus purely based on the announced mining plans of the main suppliers and it is on that basis that we have concluded that on the supply side in 2009, the global mining output will run at about 85% of the 2008 level and come to $12.35 billion – at 2008 prices! Assuming that the average 2009 sales will be at market prices that are 35% below last year’s, the 2009 mining output at 2009 prices would come to $8 billion.

As said above, cutting center demand for rough will, in our scenario, come to $7.4 billion – of which De Beers (DTC) will supply about $3 billion, which would be about 45% of total supply. This is in line with, or slightly above, the DTC’s market share. However, the dramatic fall in rough sales in the last quarter of 2008, has added some $1.6 billion to producers stock. So if, hypothetically, producers had no stocks at the onset of the crisis, they will accumulate through the end of 2009 some $2.2 billion of new stocks – partly held by the Gokhran. This is equal to almost 30% of the 2009 demand for rough.

So, Mark, I would hesitate to join those who are interpreting the current sporadic shortages of rough (and these shortages are real), as representing a trend. There is an element of wishful think – for which, at the end, someone will pay.

The current DTC shortages are a result of De Beers policy. The total 2009 diamond production should not give us “comfort”. At the end of the day, it is the overall world economic situation that will set the pace of recovery. As the bullwhip metaphor (ripple effect theory) implies, the upswing could be as rapid as the downturn.

Gareth Penny reminded me recently that diamond demand and prices have historically always peaked after a recession. What is needed is a combination of increased consumer demand and positive trade sentiments throughout the value chain.

Mark, as I said at the AGC Conclave in Chicago, where I had privilege of having you in the audience, in the long term, the dwindling mining reserves will lead to a situation in which demand will definitely exceed supply. But we aren’t there yet.