By Rob Bates
A few weeks back, about 20 major Indian manufacturers listed their diamonds on RapNet priced at full “list” (Rapaport) price. The widespread thinking was that they were trying to influence the RapNet price index (RAPI)—and by association the widely watched Rapaport Diamond Report, aka, the Rap List.
This week, a release out of Israel said a group of leading traders and manufacturers were following suit:
[They] decided to post their diamond stocks at full prices on the RapNet Diamond Trading Network. The decision follows the publication of the latest Rapaport price list, which showed that Rapaport had reduced the prices of a wide range of diamond categories without any commercial justification. The group expressed not only its frustration and concern with the lack of transparency as to how the Rapaport price list is compiled, but also noted that the high frequency and the sharp changes in the price list are among the major causes of the volatility in polished diamond prices.
The release was not attributed to anyone, just “concerned Israeli diamond companies,” some of whom seem to be officials at the Israeli Diamond Exchange. And while the statement was not released under the IDE banner or seemingly endorsed by it, the bourse posted the release on its website.
All of the players here—including Rapaport—either did not want to or were not available to comment this week, citing the Passover holiday. But it does raise some questions.
First off, these attempts do not seem to have achieved much, aside from likely costing these dealers some sales. As the release notes, even after the Indian manufacturers listed their product at full price, the Rapaport price list showed strong declines on March 13, with some categories falling as much as 7 percent. The drops drew howls, as Rap’s price declines inevitably do, with many calling them too steep and arbitrary.
The Rap List is, as its namesake has said many times, one man’s opinion of prices. The trade, seemingly out of habit, employs it as a benchmark. Yes, the list is arguably non-transparent and out-of-date. That said, no one is forced to use it, although just about everyone in the trade does, even as they gripe about it.
However, the Israeli—and presumably the Indian—companies were targeting the RAPI Diamond Index, which is transparent, in that it’s derived by (a now-adjusted) algorithm. The RAPI is not as influential as the list, but it is prominently featured on the Rapaport site and emails. And it might look odd if the list went down at the same time the RAPI stayed steady or headed up.
In the end, it didn’t matter. In response to the Indian move, the RAPI adjusted its criteria. While it’s still based on the average price of the top 25 diamonds in the specified range (1 ct. D-H, IF-VS2, Rap-spec 2 with GIA reports), the average price of all diamonds in each category is no longer used to establish the index. It now computes the average of the ten “best priced” (meaning lowest priced) diamonds in each of the 25 categories. As a result, the index also declined in March.
In any event, the Israeli traders aren’t done, suggesting in their statement…
…that the diamond industry would be much better served by a long-term price list that would advance price stability, significantly increase customer confidence, and, last but not least, prevent unnecessary commercial damages to diamond manufacturers.
Here, a contradiction arises. The traders who put out this notice can’t complain about the Rap List’s lack of transparency, and then hope for—and maybe even try to create—their own list dedicated to “price stability.” Those goals are at odds. Diamond prices are volatile, and a list that doesn’t reflect that is basically fiction. In fact, a truly transparent price list would show even more up-and-down swings than the generally stagnant Rap List. (Rap’s changes may on occasion be sharp, but they are not frequent.) Both the IDEX and Polished Prices lists, which use averages, have jumped up and down all year.
Once upon a time, former De Beers chairman Nicky Oppenheimer said, “We are flexible on prices, [as long as they go] upward.” We do not live in that world anymore. Nor do we live in a time where it’s easy to keep things hidden. These manufacturers are not the first ones to complain about the idiosyncratic nature of the standard Rapaport list; that debate has been going on for decades. But to replace that list with one dedicated to “price stability”—instead of painting a true picture of what’s happening out there—may only muddy the waters further.