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Bloomberg Interview (January)
Written transcript of Bloomberg’s interview with DODAQ’s CFO Alex Fray
Appeared on the Bloomberg UK channel (23/01/2009)
Nina de Roy:
Hello and welcome back to today’s show. DODAQ is the world’s first online certified diamond exchange. It offers electronic two-way auctions for buyers and sellers to trade individual diamonds based on real time tradable spot prices, and it’s transformed the market by allowing diamonds now to be traded just like any other commodity. For more on DODAQ and its relevance to the emerging markets, let’s go over to Brussels now where I’m delighted to say I’m joined by the Chief Finance Officer, his name is Alex Fray. Thank you very much for joining us today, Alex. Let’s start out by talking about the relevance to all of this. You’re launching this this week, what’s the significance of DODAQ here for the market?
Alex Fray:
Okay, I think it’s important to say that what we’re doing is creating a real time cash market, and the diamond industry is obviously linked to the global economy and is facing problems from the recession, and in particular a lack of credit. Now there’s a lot of companies that are over-reliant on credit and we believe that now is the time when actually the establishment of a properly functioning cash market is more relevant than ever to bring in new revenue streams and cash transactions to the industry.
Nina de Roy:
Is that because of the role of credit, which is obviously now difficult to get hold of, is going to be meaning that this market could shrink if we don’t have somebody like in the market?
Alex Fray:
I think arguably the time has been coming for a long time for the need for a cash market for polished diamonds, and I think the long term outlook for the diamond industry is strong.
Clearly in the short term there’s a period of consolidation and the lack of available credit is causing a lot of problems, particularly in a country like India which manufactures in excess of 80% of the world’s polished diamonds where a lot of these companies, they have long product life cycles and they operate on credit and they can’t get it any more. So the availability of a cash market which will bring in new revenue streams from the existing industry participants, but also from investors, is actually critical for the future of the diamond industry.
Nina de Roy:
Yeah, India as you were just saying, 60% of market sort of share for the world’s diamonds, the world’s biggest jewellery market as well, talk to me about the relevance of these emerging markets to a company like yours, how is all this going to play in with the emerging market space?
Alex Fray:
Okay, I think the diamond industry has a strong base in emerging markets, from mining in Africa and Russia through the cutting and polishing, manufacturing and trading in India, China, South East Asia, Israel and Dubai, and I think that the point is DODAQ is a global electronic market, it’s accessible online, so we’re actually allowing significant efficiency benefits to all the participants irrespective of their geographic location. And we can bring efficiency gains through lower cost of sales because we have an integrated logistics solution as well where we have all of the goods vaulted in a free economic zone as well, overcoming some of the traditional barriers to entry for new participants, namely investors.
Nina de Roy:
Are you expecting the emerging market demand for some of these polished diamonds that you trade to remain strong? Are you expecting demand to remain strong?
Alex Fray:
I think the long term outlook for demand by both city analysts and mining companies is strong.
There’s been a well known continuous demand for diamonds, and that’s not going to go away. Clearly faced with a global recession, in the short term there’s a period of consolidation but we don’t see any problem in the long term. Additionally, diamonds are rare and getting rarer and most analysts predict that demand will outstrip supply in the medium term to long term future.
Nina de Roy:
Would you stick your neck out for us and tell us what your price predictions would be then for diamonds? 2009, would it be a year of gains on the price side?
Alex Fray:
Okay, well DODAQ, we see our role as a facilitator of trade in diamonds, and therefore we do not appine on prices. Having said that, we will be bringing further price transparency and more efficiency to create an efficient market price, and we strongly believe in the fundamentals of the diamond industry, namely long term demand growth.
Nina de Roy:
So broadly speaking, if you can’t give us a prediction for sort of percentage gains for diamonds, up will they go, or down in 2009, given the fact that we do have a recession in some of the world’s big economies?
Alex Fray:
I think it’s generally accepted that in the short term, in the immediate focus in 2009, times are tough for all industries. Over the course of the year we expect that to turn round, and we certainly hope that the diamond industry will be in a strong position come the end of 2009.
Nina de Roy:
Thank you very much for joining us there, that’s Alex Fray, the Chief Financial Officer of DODAQ which has just launched today, or this week I should say, that diamond exchange platform based in Antwerp. He was just talking to us about them from Brussels.
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