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The Diamond-Cutting Cluster in Antwerp, Belgium

The Diamond-Cutting Cluster in Antwerp, Belgium. Sofie Junger, Morgane Corbet, Claire Crausaz, Julia Simon, Holly Basile Tuesday, March 22nd MoC – Winter 2010 International University of Monaco. Outline. Introduction Overall economic performance and composition of the economy

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The Diamond-Cutting Cluster in Antwerp, Belgium

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  1. The Diamond-Cutting Cluster in Antwerp, Belgium Sofie Junger, Morgane Corbet, Claire Crausaz, Julia Simon, Holly Basile Tuesday, March 22nd MoC – Winter 2010 International University of Monaco

  2. Outline • Introduction • Overall economic performance and composition of the economy • Business environment • The diamond cluster • Legacy • Value Chain • Current Situation • Map and Diamond Model • Global Issues • Policy recommendations

  3. Introduction • Belgium: federation of 3 states • Hardly hit during WWI and WWII • Did not receive supposed funds from Germany after WWI • Flanders benefited from Marshall Plan => led economic growth • Founding member of European Union (1951) • Trade surplus led by diamond industry • Support from federal government Source: Google Maps

  4. Composition of Belgium’s Economy Sources: Févia (2010), Lagneaux and Vivet (2009), Institute for Strategy and Competitiveness (2007), Logistics of Wallonia (2010), Global Finance (2010), Index Mundi (2008)

  5. Demographic Indicators Sources: UNDP (2001), OECD (2009), The World Factbook (2010) Source: National Bank of Belgium, 2010

  6. Economic Performance Indicators Sources: The World Factbook (2010), World Economic Forum (2009), The World Bank (2009), Global Competitiveness Report (2010)

  7. Competitiveness Analysis +- Source: Global Competitiveness Report (2010)

  8. Productivity Source: OECD (2007) Source: GDDC (2008)

  9. National Diamond • Low government intervention • High concentration of corporate head offices (strong local rivalry) • Recognized for ease of doing business • Low corruption (CPI) - High labor costs • High levels of taxes, although improving • Sophisticated consumer demand • Strong support of local industries • Very high purchasing power (among the highest) • Large pool of international consumers (EU membership) - Small market potential locally • Highly educated / motivated / productive workforce • Strong innovative capabilities • Excellent infrastructure (land, sea, air) • Numerous educational institutions and research facilities • High wages attracting workers • - Economic slowdown due to global recession • Interrelations between all clusters (logistics, ICT, chemicals, food processing) • Strong IFC network (overall and for each cluster) - Heavy dependence on EU neighbors and associated clusters

  10. Sources: Diamonds.net, Henn, S., & Laureys, E. (2010). Bridging Ruptures.

  11. The Diamond Value Chain • Involves 8 steps; from exploration to retailing • Two types of stones; gem stone quality & industrial stones • In 2000 diamonds mined at a cost of $2 billion and sold at an expense of $7.8 billion. Out of these diamonds, jewelry worth $57billion was created

  12. Value Chain Actors Worldwide Source: Porter, Marciano, Wathurst (2009)

  13. Exploration & Mining Exploration • 300 exploration firms in year 2000 • When a mine is found; samples in order to test and produce a prediction of the reserve and the mine productivity Mining • Open pit mining, hard rock mining & Coastal mining • Progression time from exploration to mining: 12-15 years Source: Porter, Marciano, Wathurst (2009)

  14. Rough sorting Rough sorting • Stones are sorted based on several factors or characteristics: shape, size, clarity, color and ability to cut • In 2000, De Beers more than 50% of the world’s rough diamonds  Sold onto the secondary markets (Antwerp) Distribution • The Diamond Trading company is the main distributor on the market • As of 2000, 23 non-profit worldwide diamond bourses

  15. Processing, Grading, Jewelry Processing • Involves cleaving, cutting and polishing • The processing stage takes place in 30 countries around the world • 4 leading locations; Antwerp, Mumbai, Tel Aviv and New York • Antwerp has a work force of 2000 people and is considered as the leading cutting location in the world, measured in both value and volume • India is catching up Grading • Gemological Institute of America, grades finished stones before they are put into pieces of jewelry Jewelry Manufacturing • USA 40%, Japan 15% & India 5% Retailing • In 2000, 200,000 diamond jewelry retail outlets worldwide

  16. Current Situation Source: Antwerp World Diamond Centre, Federal Public Service. (2002, October 08). Minister Neyts : Keeping Antwerp at a Cutting Edge, Speech at the 2002 Antwerp Diamond Conference, 8th October 2002, Provinciehuis, Antwerp. • Diamond in 2007 • 8% of Flanders' exports and 5% of Belgium’s exports value • Antwerp accounted for 80% of worldwide trade of rough diamonds • Economic recession affected the cluster • Relocation to cheaper labour-costs markets (since 1970s lost of 25.000 jobs) • Decrease in Exports of polished and rough diamonds:

  17. Situation in 2009 Source: Antwerp World Diamond Centre, Certified Gems. The Antwerp Diamond Market, BMO Capital Market. Retail demand for diamond jewelry and forecast growth. • Fall in demand for uncut diamond of 50% • Reduction of stocks by wholesalers • Belgian government is very committed in regenerating the diamond industry • Flemish government might spend €200 million as a guarantee for banks • July 2009: trading volume had already recovered 50% of its value in rough and polished diamonds

  18. Cluster Map 30.000 people are directly or indirectly employed in the Belgian diamond sector

  19. Antwerp’s Cluster Diamond

  20. Factor Conditions Strengths • Available infrastructure • Antwerp’s ports • Antwerp’s district • High-skilled workforce • 30 000 workers • Antwerp Diamond High Council • Education - Diamonds schools, training programs and workshops • Antwerp Diamond Bank • The Antwerp World Diamond Centre • Diamond Office • The Antwerp World Diamond Center - certificate body, most important grading laboratory • The Scientific Research Centre for Diamonds (WTCOD) • The Condiam – technologies supplier • The Institute of Gemology • Precious Stones Laboratory • Gem Defence Initiative Weaknesses • One of the highest labor costs per Carat • India undercutting labor cost advantage • Regular immigration leading to social and structural changes Labor cost (US$) per carat

  21. Related and Supporting Industries • Security cluster • Transportation cluster • The Port of Antwerp – 2nd largest in Europe and 7th largest in the World - permitting trade – freight volume: 157,8 million tones • Shipping: 200 forwarding companies • Tourism cluster • The Antwerp Diamond Museum • The Diamond Land – Diamond Showroom welcoming over 120 000 visitors each year – collaboration with the city of Antwerp, the Diamond High Council, the Belgian Tourist Federation, The Provincial authorities, the Chamber of Commerce • Specialized banks cluster

  22. Demand Strengths • Strong base • Sophisticated • Well informed • Experienced • Creation of a Marketing Department within the Diamond High Council to organize trade shows, biennial Diamond Award to push competition Weaknesses • Negative effects of the crisis leading to decrease of exports and imports of polished and uncut diamonds

  23. Context for Firm’s Strategy & Rivalry Strengths • Correspondence office for the diamond industry (COFDI) • Collaboration between COFDI and De Beers • The Belgian government has created incentives to attract new labor force • + Fiscal detraction and financial facilities • The Diamond Office implemented a nominal levy on imports and exports • The Antwerp Diamond Conference • The Antwerp Diamond Exchange – Center of the trade in diamond (Diamond Bourses) • World Diamond Congress – discussion about specific industries issues Weaknesses • Increasing worldwide and national competition • Emergence of new trading centers • Family businesses and close network

  24. Global Issues Supply-side • Cutters & Polishers issues • Low margins • Demand shift • Cash up front for rough gems • Blood Diamonds • Traffic inside the European Union • De Beers troubles • Negative cash flows for 3 years • Facing increasing competition Demand-side • US credit crisis • Most important market • Companies are applying hard discounts => change in customer behavior now looking for the lowest price • Indian power rising • Producing second category diamonds • But, mines are depleted so India is specializing in processing • Chinese Demand Rise • Follow the GDP per capita • Follow Chinese tastes for traditions

  25. National Recommendations

  26. National Recommendations

  27. Cluster Recommendations

  28. Thank Your for Your Attention ! Any Questions?

  29. Sources for Antwerp’s Diamond Cluster Antwerp Diamond Bank. (s.d.). History. February 12, 2010, on Antwerp Diamond Bank: https://www.antwerpdiamondbank.com/index.php/ADB_en/profile/ Antwerp World Diamond Centre. (s.d.). AWDC - Home Page. February 13, 2010, on Antwerp World Diamond Centre: http://www.awdc.be/ Antwerp World Diamond Centre. (s.d.). History. March 04, 2010, on Antwerp World Diamond Centre: http://www.awdc.be/history-awdc BMO Capital Market. Retail demand for diamond jewelry and forecast growth.http://www.diamondsnorthresources.com/i/misc/2008_DiamondValues.gif Beurs voor Diamanthandel. (s.d.). Home Page. February 18, 2010, on Beurs voor Diamanthandel: http://www.diamondbourseantwerp.com/ Certified Gems. (s.d.). The Antwerp Diamond Market. February 20, 2010, on Certified Gems: http://www.certified-gems.com/Antdiamondsmarket.htm City of Antwerp. (s.d.). Diamond Museum Province of Antwerp. February 23, 2010, on City of Antwerp: http://www.antwerpen.be/eCache/BEN/16/455.cmVjPTQzNDU.html Diamonds.net. (s.d.). Home Page. March 01, 2010, on Diamonds.net: http://www.diamonds.net/Default.aspx?LoginOutSet=LoginOutSet DiamantClub. (s.d.). Home Page. March 02, 2010, on DiamantClub: http://www.diamantclub.be/ Diamantkring. (s.d.). Home Page. March 01, 2010, on Diamantkring: http://www.diamantkring.org/ Diamond-key. (s.d.). Keyguide. February 13, 2010, on Diamond-key: http://www.diamond-key.com/ DiamondLand. (s.d.). Antwerp Diamonds. February 10, 2010, on DiamondLand: http://www.diamondland.be/ Henn, S. (2010). Indian Diamond Dealers in Antwerp. Henn, S., & Laureys, E. (2010). Bridging Ruptures. Port of Antwerp. (s.d.). Home Page. March 02, 2010, on Port of Antwerp: http://www.portofantwerp.com/#0

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