RAPAPORT... Israel’s diamond market has witnessed a marginal increase in demand from the United States in recent weeks; however, dealers do not anticipate a sudden upsurge in sales this preholiday season. Demand for larger diamonds, 2 carats and over, has increased and despite rough shortages, high prices and tight profit margins, Israeli dealers are focused on larger, better-quality goods. Fancy shapes are strong and rounds are holding steady. For the first time in months, Israel’s market recorded a significant jump in value in both rough imports, up by 78 percent, and exports, up by 36 percent.
Unimpressive SeasonThe market is quiet compared with a year ago and there has been a shift in demand, noted Simon Marber, manager of Marber Import Export Diamonds Ltd., dealer of rough and polished diamonds in 25 pointers to 10 carats plus. Goods larger than 5 carats are in solid demand, but demand and prices are soft for below 2 carats, he explained. Marber does not anticipate an increase in rough or polished trading activity prior to the holiday period. Yuval Ben Yona, managing director of Ben Yona Diamonds Ltd, manufacturer of 1 through 10 carats in all shapes and qualities, also observed a shift in demand toward larger goods — 3 carats plus — alongside a drop in demand for the smaller goods. However, according to Ben Yona, there is little difference in bottom-line sales between 2005 and 2006. “In 2006, the market experienced fluctuations in trading activity compared with steady sales in 2005; however, total sales are about the same,” he said.
Until recently, the U.S. market was quiet, causing wide concern among Israeli diamantaires that the season would be weak, said David Turgemon, partner in Taly Diamonds, manufacturers and dealers of 1 carat plus fancy shapes and rough goods. “Currently, the market appears to be returning and while the season will probably not turn out as strong as last year, at least it won’t be as soft as we feared,” said Turgemon. For larger goods and fancy colors, the market is solid, maintained Moshe Brenner, president of Aliya Diamonds Ltd., dealers of 3 carats plus and fancy colors. Brenner noted, however, that the costs of conducting business — high interest rates, traveling costs and diamond insurance, to name a few — are exorbitant, resulting in a serious reduction in profit margins. “The biggest challenge today is not creating sales volume, but the costs related to running a business,” he explained. Brenner acknowledged that preseason sales in the U.S. are weaker than last year.
The main challenge faced by Israel Atzmon, manager of Ajami Diamonds, dealer of larger goods 3 through 50 carats, is finding goods at the right price. “It is a sellers’ market,” he said. “Those with the rough can demand whatever price they wish.” While there is always demand for Atzmon’s goods, the challenge is sourcing and selling at a profitable margin. Atzmon anticipates wholesalers and the greater consumer public will return to the smaller goods as the larger goods are extremely expensive. The main destination markets for larger goods are the United Arab Emirates (UAE), India, Russia and China.
Fancy Shapes
Ben Yona noted a strong demand for large rounds, cushions and emerald cuts in 2.5 carats plus. “Everybody wants the same items in 2.5 to 5 carats, yet there are simply not enough goods to supply everyone,” he commented. Fancy shapes — emeralds, princesses and radiants — in low colors of J to L are in solid demand among dealers, as the price is attractive compared with rounds, he explained. There is enormous demand for fancy yellows, especially in VS+, 2 to 4 carats. Fancy shapes in all clarities and colors are strong this year in the United States, concurred Turgemon. Pear shapes and heart shapes are in demand for goods 1 to 2 carats, while Asschers in 1 to 2 carats are seeing an upturn in demand. According to Turgemon, emerald cuts are picking up in 5 carats plus and rounds are holding steady.
Fancy colors are always in demand, added Brenner, but intense and vivid colors are too expensive to become a viable commercial product. Fancy yellows are most in demand as blues and pinks are too costly for most consumers. According to Brenner, demand for browns remains strong. In fancy colors and larger-size goods, radiant cuts are extremely strong. Pear shapes are also strong both in the Far East and in the United States. According to Atzmon, demand for pear shapes, ovals and hearts remains strong while demand for marquise is soft. Princess cuts larger than 3 carats are weaker in recent weeks while 3 carats in D to F, VS+ are in very strong demand.
Large diamonds dominate the market this holiday season as Israeli dealers struggle to keep up, finding the goods at the right price and selling at a profit. For the smaller goods, supply is plentiful and rough prices have gone down, though demand is also weaker. The shift in trends from smaller to larger goods is cyclical and seasonal and, as the larger goods continue to be more expensive, buyers will undoubtedly return to the more affordable, smaller goods.
The Marketplace• Moderate trading conditions exist in the U.S and Far East.
• There is solid demand for 3 carats+, D-F/VS+.
• Prices of polished 1 to 2 carats are low and prices of 3 to 5 carats are holding steady.
• There is strong demand for fancy yellows, especially VS+ in 2 to 4 carats.
• Demand for rounds remains steady.
• There is strong demand for 2.5 carats+ in pear shapes, radiants, ovals, heart shapes, Asschers and cushions.
• Asscher cuts in 1 to 2 carats are picking up.
• Demand is soft for marquise and princess cuts 3 carats+; emeralds are picking up in 5 carats+.
• There are heavy shortages in 10 carats+ rough, accompanied by high prices.
Article from the Rapaport Magazine - December 2006. To subscribe click here.