Trading in the Israel Diamond Exchange (IDE) got off to a quiet start in April, with bourse services remaining closed through the seven-day Passover holiday in the first week of the month. Business slowly returned soon after as local cutters continued their focus on selling to the Far East.
“The Hong Kong market is strong and the U.S. less so, but it is slowly improving,” said Haim Katz, owner of Haim Katz Diamonds, which buys diamonds of 0.3 carats and up from Indian partners to sell in the U.S. and the Far East. “But you also get the feeling that U.S. dealers are selling in the Far East and that a portion of the goods we sell to them ends up there.”
Abe Hazan, chief executive officer (CEO) of SWA Trading, which owns the Trapz brand, reasoned that it was simply cheaper to operate in the Far East than in the U.S. “The U.S. market is quiet but we still believe you have to have a presence there,” Hazan said. “It is expensive to work there so I’m not sure how many can afford it. Insurance is high and payment terms are weak for sellers, so it is natural that people would go to the Far East where they have an easier time.”
Far East Momentum
Much of the momentum in the Far East emanated from the Hong Kong International Jewellery Show in March, even though reports from the event indicated an “average show” for many Israeli manufacturers. Raanan Kessel, a partner at Kessel Diamond Manufacturers, which specializes in high-end diamonds, 1 to 15 carats, VVS and VS, G color and up, noted that while the show was “not great” for the company, the follow up through the rest of March proved to be strong as Far East buyers came to accept new prices.
The positive trend helped diamantaires build confidence, which has slowly improved since the beginning of 2010 as trading has picked up. Israel’s polished diamond imports in the first quarter rose 55 percent to $1.45 billion, according to the Ministry of Industry, Trade and Labor. The U.S. remained the largest market for Israeli polished as exports there increased by 70 percent to $561.7 million, while exports to Hong Kong rose 188 percent to $398.1 million during the three months. Rough imports more than tripled to $916.7 million for the period.
Not Quite There Yet
Most diamantaires recognized, however, that the numbers are still well below 2008, a record year for the Israeli diamond industry. Hazan hinted that the local industry emerged from the recession in a weaker position than before, particularly considering the strength of the Indian industry. “Over the years, Israelis sold goods in India but now the Indians need them less as they have formed alliances with local jewelry companies,” Hazan explained. “They also have been subsidized by the government, and have support from their banks, which the Israelis do not.”
SWA Trading recently formed a joint venture with India’s Shrenuj & Co., which Hazan said gives his company a global reach to source rough, another production outlet in India and access to cheaper Indian financing.
In closing the 2009 “Together Works” marketing campaign conducted by the Israel Diamond Institute Group of Companies (IDI), Eli Avidar, IDI managing director, noted that Israel was the only leading diamond hub that succeeded in coping with the downturn independently, without government credit or assistance. He added that the country is emerging from the crisis “relatively unharmed.”
Israeli companies that spoke with RDR in April unanimously listed high rough prices among their chief concerns, while noting the lack of suitable goods on the polished market. “There are no goods on the market and no profitability,” Katz said. “You get requests but there are more requests than goods.”
Reports from the market indicated good demand for 3-carat, D to F, VS to SI and 1-carat, H to I, VVS goods, while there also has been a flow of requests for 2-carat, IF, VVS stones. Demand for 0.75-carat and 0.90-carat goods has also been steady.
Assuming Responsibility
Following the success of the “Together Works” program, IDI launched its 2010 strategic direction at BaselWorld with the slogan, “Responsibility is Good. Business.” The campaign comes as Israel has assumed the chairmanship of the Kimberley Process (KP).
Avidar explained that the new campaign signifies that the Israeli diamond industry will act responsibly as it emerges from the economic crisis. “We believe that it is essential now to adopt a policy of responsibility — in prices, marketing, manufacturing, customer services and credit strategies. Our message is that the Israeli diamond industry will now be pursuing a very responsible path to renewed growth.”
Article from the Rapaport Magazine - May 2010. To subscribe click here.