Signs of Stability

Yuval Ben Yona, owner of Ben Yona Diamonds, which manufactures 1-carat to 10-carat diamonds, noted that demand for fancy shape stones is on the rise, as consumers and dealers shift to cheaper price points in response to global economic uncertainty. Ben Yona attributed some of that demand to the significant difference in prices between fancies and rounds and the fact that fancy shapes are sold at very small discounts, adding to their appeal.

Avi Mandler, general manager at Beta Diamonds, which specializes in rounds and fancies of .5 carats to 5 carats, agreed, but reported that demand for large diamonds remains weak.

MARKET STABILITY
Jeremy Medding, owner of EMA Diamonds, which specializes in .10-carat to 3-carat stones in all colors and clarities, contended that trading has recovered from the seasonal quiet following the Chinese New Year in January. Many dealers were waiting for the February Hong Kong show, where sales proved that demand for diamond jewelry in China has not collapsed and that there is still strong demand for goods, he explained.

Faltz added, however, that while retailers are searching out goods, they remain cautious and selective in their purchases. “Retailers are buying only what they can sell and only if they have an order for something,” he said. 

Medding said that while activity in the main cutting centers — Tel Aviv, Antwerp and Mumbai — has been relatively quiet the past few months, business is better in other markets and companies that focus on exporting to those markets are doing reasonably well. As a result, both Medding and Faltz observed that there is currently a shortage of good-quality, well-cut stones overall, while there is sufficient supply of lower-quality goods.

MONTH BY MONTH
Steady March trading in Ramat Gan was an improvement over January and February. Most dealers who spoke with Rapaport Magazine noted that dealer confidence rose after February 23, when Israeli authorities suspended for one month their investigation into alleged fraudulent money-lending practices in the bourse. Some dealers were concerned at press time that the investigation would resume after the one-month freeze and they were hoping for assurances from the government that the whole industry would not be brought to a standstill again.

“It is not clear whether they are going to persecute an entire industry for a few rotten apples or even if they going to proceed with the investigation at all,” Medding said. “It remains to be seen how the episode will play out.” Unfortunately, he noted, “What happens next is not in the industry’s hands.”

A combination of the investigation and the weak overall market led to Israel’s polished diamond exports dropping by 81 percent year on year to $137.5 million in February, according to the Central Bureau of Statistics (CBS). Polished exports were down 47 percent to $705.7 million for the first two months of 2012.

Medding stressed that it has become very difficult to compare year-on-year figures, given the market volatility over the past few years. “The numbers have become almost irrelevant,” he said. “You just have to proceed month by month and plan very carefully and build for the future.”

Israel’s rough trade was similarly cautious in the first quarter and manufacturers are hoping the influx of Zimbabwe rough to the global market will help soften prices and improve profit margins, despite the fact that the Zimbabwe rough caters to the lower end of the market. Many in the industry are waiting for the April Diamond Trading Company (DTC) sight to better assess the second quarter and beyond.

“There is still an issue of manufacturing profitability and margins are still very, very tight,” Medding said. “Manufacturers are hoping that profitability will come back in the next few months. Other than that, we’ll have to see how demand in China and the Far East holds up and what the summer months bring.”

OPPEMHEIMER HONORED
The Israeli diamond industry honored Nicky Oppenheimer, outgoing chairman of De Beers, with a lifetime achievement award during a visit by De Beers management to Ramat Gan in March. During the visit, Oppenheimer, together with Philippe Mellier, De Beers chief executive officer (CEO), Varda Shine, DTC CEO, and Moti Ganz, chairman of the Israel Diamond Institute Group of Companies (IDI), met with Israel’s Prime Minister Benjamin Netanyahu. Pledging to enhance the Israeli diamond center, Netanyahu told the group that he regards diamonds as vital to Israel’s economy and considers them a draw for Jewish diamantaires from all over the world.

The Marketplace

• Dealer trading improved after the first-quarter trade shows.
  
  
• There is lingering concern regarding the tight profit margins on cutting operations.
  
  
• Demand for fancy shapes is improving, especially in cushions and princess cuts.
  
  
• The shift toward cheaper price points is continuing, with SI stones the most popular.
  
  
• Demand is weak for large stones above 3 carats.
  
  
• Rough trading is steadying but remains relatively weak.

Article from the Rapaport Magazine - April 2012. To subscribe click here.