Israel Market Report

RAPAPORT... There was a sense of stability in the Ramat Gan bourse in September as Israel’s diamond industry expressed some confidence that 2010 would present better prospects for the market. However, having returned to work after the summer vacations, industry professionals who spoke to RDR did not expect too much change in the market in the fourth Christmas quarter.

“The market is stable and has been since June,” said Moshe Bronner, managing director of Aliya Diamonds, a polished dealership specializing in sizes above 1 carat, rounds and fancy shapes and natural fancy colors. “I don’t see that Christmas is going to be that much better in the U.S. and Chinese demand will remain the same. So I think the market will remain stable.”
 
Rami Birenbaum, a wholesaler and manufacturer of rounds and fancies up to 5 carats, agreed that the remainder of 2009 would not yield too much change and that he expects 2010 to be much better.

Still, others noted some positive trends in the market. Leibish Polnauer, president of Leibish & Co., which deals in natural fancy color diamonds, melees in calibrated sizes and large stones, 3 carats and above, noted that business in Israel has gained some momentum. “In general, business in Israel is firm, while Europe remains weak, Asia is livelier and we have started to see some rise in activity in the U.S.,” he reported. Polnauer stressed that the market’s performance in November and December should be viewed in context. “It’s all relative and you can’t compare to Christmas 2007,” he said. “But when you compare to the rest of 2009, we can expect the fourth quarter to show some improvement.”

Polnauer noted that consumer sentiment remains weak and estimated it would take about another six months before the market starts to see a proper recovery. “Much depends on whether the financial markets can sustain the growth they have displayed in the past few months,” he said. Bronner agreed that the polished market would show some growth only when there is an improvement in the world economy, dispelling the perception that recent increases in rough prices would push polished higher. Bronner reported strong resistance in the polished market to push through the 25 percent discount barrier.

Low Profitability
Diamond manufacturers expressed concern that while rough prices increased in the past few months, polished remained stable, eating into their profits. “Either rough is too high or polished is too low, so profit margins are small,” Birenbaum said. “We feel that prices on 1 to 3 carats, G to J should be about 5 percent higher.” Most agreed that demand was strongest for rounds and fancy shapes in 1- to 3-carat, SI goods, while larger stones remained very weak. In fancy colors, Polnauer reported that demand is good for 0.50- to 2.00-carat yellows, while strong Argyle-quality pinks are in short supply and intense and vivid blues are “nonexistent” in the market. Birenbaum noted that buyers have become very specific in their requests, looking for very good and excellent makes only.

Expressing Caution
Michael Aghbashoff, president of Denir Diamonds and Jewels, a diamond and jewelry manufacturer of all shapes and sizes, reported that traders are no longer buying to build stock and that it is difficult to find stones on the market, which has led to some price increases in the dealer market. He added that the usual foreign buyers are coming to Israel less often and buying less during their visits. “There is a sense that people are still afraid to buy due to uncertainty about prices and due to doubt whether the crisis is over or not,” Aghbashoff said. “Before the crash, it was too easy to sell. You would buy today and sell tomorrow, which led people to speculate. Today, I’m very cautious and I think people are more realistic.”

Targeting Asia
The Israel Diamond Institute Group of Companies (IDI) presented its largest-ever pavilion at the Hong Kong Jewellery & Gem Fair in September, which it explained was evidence of the “primary importance the industry places on the Asian market.” The IDI pavilion hosted 60 companies, with another 20 Israeli companies exhibiting elsewhere at the show. IDI provided extensive marketing assistance to Israeli participants as part of its “Together Works” program. This included a preshow media launch, targeting select Asian diamond buyers to visit the pavilion and helping exhibitors cut costs by providing free, locally hired service representatives to staff their booths.

“We believe that Asia is the growth market of the future for Israeli diamonds and that’s why Israeli companies are participating in record numbers,” said Moti Ganz, IDI chairman. “We are hopeful that this show will strengthen the business relations between Israeli and Asian companies.”

The Marketplace

• Market is stable with some improvement after summer vacation.
• Buyers are looking for very specific goods, particularly triple EX makes.
• Demand is good for 0.70- to 1.99-carat, H-J, VS-SI goods.
• Demand for D colors is improving and customers are not willing to take E-F colors as they did before on collection goods.
• Fancy yellows are in strong demand.
• The market for sizes above 3 carats is very slow, although asking prices have not decreased.

Article from the Rapaport Magazine - October 2009. To subscribe click here.