Dubai Challenge to Antwerp Diamond Trade Helped by BanksThomas Biesheuvel and Matthew Martin
Dubai’s banks are extending loans to the local diamond industry, boosting the emirate’s ambitions of becoming a top trading hub as funding to rival Antwerp dries up.
Emirates NBD PJSC., Mashreqbank PSC., and National Bank of Fujairah PJSC., are financing diamond cutters, polishers and traders operating on the Dubai Diamond Exchange for the first time, Peter Meeus, chairman of the exchange, said in an Oct. 12 interview. The extension of credit may be a “decisive factor” in Dubai’s future growth as a diamond-trade center, he said.
United Arab Emirates’s banks are backing the local diamond industry just as Antwerp faces a lending drought. KBC Groep NV said last month that it’s winding down its Antwerp Diamond Bank unit, a source of finance for 80 years to the network of companies that trade, cut and polish diamonds in the Belgian port city, after a sale to China’s Yinren Group fell through.
ADB accounted for more than 10 percent of the $15 billion diamond industry lending and financed about one third of the diamond merchants in the Belgian city, where 80 percent of the world’s gems are traded. Dubai and Mumbai are among lower-cost centres seeking to boost their share of the market.
Spokesmen for Emirates NBD, Mashreqbank and NBF did not respond to requests to comment.
“Lately we’ve seen a few Dubai banks coming into the market for the first time,” Dilip Mehta, chairman of diamond manufacturer Rosy Blue, which has offices in cities including Dubai, Antwerp, and Hong Kong, said in a Oct. 12 interview. “Which is the reverse of what has been happening in Europe.”
The move by Dubai-based banks comes as the emirate seeks to rival Antwerp as a global diamond hub. Trading in Dubai has expanded from less than $5 billion in 2003 to about $35 billion in 2013, according to Meeus. The value of diamonds traded through Antwerp last year was $55 billion, according to the Antwerp World Diamond Centre.
Diamond dealers and manufacturers depend heavily on credit and the winding down of ADB has sparked concerns that loans may be harder to come by. ADB and rival ABN Amro Group NV earlier this year cut the proportion of gems they’d finance, demanding that buyers of the stones front up more of their own cash.
Lending to the trade in rough diamonds by Dubai banks could total around $500 million by year’s-end, Mehta said.
“It has to be positive, liquidity is a deeply serious issue at the moment,” Charles Wyndham, a former sales director at diamond miner De Beers and founder of WWW International Diamond Consultants Ltd. said of the new lending. “It’s no secret that Dubai wants to rival Antwerp as a diamond hub.”