Sunday 14 March 2010

Guangdong’s diamond factories polish their act


The mainland is the world’s second-largest processor of small diamonds, after India, and is keen to establish an industry that encompasses not just manufacturing but trading, designing and retailing. This won’t happen until there is more interest by mainlanders in owning diamonds.

3 comments:

Guanyu said...

Guangdong’s diamond factories polish their act

Amanda Lee
13 March 2010

The old master diamond cutters in Antwerp and Tel Aviv - cities with rich histories in the trade - often dismiss the stones cut and polished in Guangdong as insignificant.

But such disparagement has not deterred China in its quest to be a major processor of diamonds for the mass market.

The mainland is the world’s second-largest processor of small diamonds, after India, and is keen to establish an industry that encompasses not just manufacturing but trading, designing and retailing. This won’t happen until there is more interest by mainlanders in owning diamonds.

So far the most popular use of diamonds is for bridal accessories such as wedding rings or earrings. Factories in China import small rough stones, typically below one carat - a unit of weight equal to 200 milligrams - and process them to decorate or embellish watches and jewellery. Many are then exported to the United States and Europe.

The mainland has about 100 diamond cutting and polishing factories, mostly in Guangdong, and the local government is pushing hard to lure more dealers and factories from Israel and Belgium to the province’s industrial district of Panyu, 120 kilometres northwest of Hong Kong.

Technology has pushed down the cost of cutting and polishing a small diamond to the equivalent of making a pair of chopsticks and the battle for processing small diamonds is tough.

Laser-guided computers determine how a rough stone will be cut to maximise its value, then slice it with a laser. The stones are then further cut and polished into pre-designed shapes, usually the round brilliant, the most common cut, which resembles that of a cone.

The diamond is graded and checked for clarity, colour, cut and weight. It can often take a week to turn around a large batch.

“There’s still room for growth in diamond cutting, but it’s difficult to run a factory now with fewer than 500 workers because you need the production scale,” said Willie Yiu Man-hung, director of the Hong Kong-based Brilliant Trading Company, which employers 1,000 workers in a diamond-cutting factory in Panyu.

Yiu’s factory, Helix (Panyu) Diamond and Jewellery, one of the biggest and oldest in Panyu, processes an average 300,000 carats of rough diamonds a year.

Next year, Panyu will open its third jewellery and diamond centre in addition to the Worldmart One-Stop International Fine Jewellery Trading Centre and Shawan Jewellery Industrial Park.

In the new Global Jewellery Operation Centre, diamond dealers will find storage, foreign exchange, logistics, customs clearing and insurance services, and a government gemological laboratory under one roof.

Increasingly, diamonds cut and polished in Panyu - often by the manufacturing arms of Hong Kong jewellers - are being sold back to mainland consumers.

Retailers such as Chow Sang Sang, the flagship retail jewellery business of Hong Kong-listed Chow Sang Sang Holdings International, have shifted their focus to the burgeoning middle class on the mainland.

A wedding ring that comes with a 10 to 30 pointer - a point is 1/100th of a carat - are sold from just 2,000 yuan (HK$2,270) to 5,000 yuan. The designs are very similar among jewellery stores, according to Victor Yiu, vice-chairman of the Diamond Federation of Hong Kong.

Creating a strong brand that appeals to mainland customers will be necessary before any retailer can break out of the pack, he said. And China has some way to go before its business can match India’s.

First of all, Panyu needs to attract more dealers. Dealers from Israel, one of the world’s biggest exporters of polished and rough diamonds, are seeing value in setting up businesses in Panyu, near Guangzhou, according to Orly Yaffe, Hong Kong-based managing director for Asia Pacific at the Israel Diamond Institute.

Some Israeli firms have contracts with local factories, but if these companies could expand their diamond businesses into China it could open more opportunities, he said.

Guanyu said...

“Israeli companies are just now learning about the opportunities and details of manufacturing in Panyu, and I guess in the future we will see more companies operating there.”

Although wealthy mainlanders have been stocking up on more luxury goods, including diamonds from large auctions held by Christie’s and Sotheby’s, the industry will only take off when there is demand from a wider demographic, experts say.

The mainland will also need more diamond workers with better expertise. Forty per cent of diamonds exported by value are still cut and polished in Tel Aviv, and these stones are much larger than those that are processed in China.

“This is because these stones require a higher level of expertise which we can find only within our local industry,” said Yaffe, “and because the cost of labour is a smaller component in the total cost of larger stones.”

Antwerp, another city that has a strong historical connection with diamonds, has about 1,500 diamond cutters, down from more than 20,000 a decade ago. Rene Obbels, chairman of one of the two polishing associations in the city, said the basic education for diamond cutting is taught in schools. The expert training and skills are taught at work, and it takes a diamond cutter five to eight years to be competent enough for high-standard cutting.

Factory owners in Panyu face a shortage of workers. During the global recession, hundreds of cutters left or were laid off in Guangdong, but business is picking up again. Factories are searching for young migrant workers, mostly school leavers who don’t have a higher education.

Yiu hopes to hire 100 workers but says there are so many career choices for young people now that being a diamond cutter is deemed “dull” and “inflexible”. Young apprentices are trained for three to six months. Sometimes it takes them well over a year before they are able to operate the machines without supervision.

That lengthy training can be a problem. Workers are trained and hired at a monthly salary starting at about 1,500 yuan, but there’s no guarantee they will stay with the factory.

“If I can find a job near home, of course I will go back - I can be with my family,” said 28-year-old Lu Jianguang from Jiangxi province, who grades polished diamonds.

After working as a diamond cutter for a few years, Lu can now afford to live outside the industrial estate where most migrant workers live.

To attract more migrant workers to stay with the factories, some managers are willing to pay workers up to 20 per cent more, and some even offer to take care of workers’ children.

Mickey Weinstock is a Belgian who runs a factory in Shawan Jewellery Industrial Park, built in 2002 with a 1 billion yuan investment from the government. He employs 300 workers and has set up a nursery for babies and children up to four years old.

Weinstock, who advises the Panyu government on creating more opportunities for its diamond industry, set up his factory about six years ago, supplying polished diamonds mainly for Chow Sang Sang.

His factory cuts and polishes about 5,000 carats of rough diamonds a month.

He believes there is a lot more Panyu can do to take the diamond business to another level, including getting more Belgian dealers to do business with China and offering better welfare for workers.

In other factories, workers have their own rooms but often have to pay for hot water in communal bathrooms. Weinstock, on the other hand, doesn’t charge extra for hot showers or 24-hour security guards, and he has hired teachers and dietitians to care for the children - all for a fee of 50 yuan a month.

“The reason why we have a nursery is that we believe in social benefits and taking care of our workers,” Weinstock said. “On top of that we want our female workers to relax during their work so that they can focus on doing their job without worrying about taking care of their children.”

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