Israeli manufacturers, under pressure because of the high
cost of rough, have created a new profit niche in recutting polished diamonds.
“They’re buying polished goods because they’re not manufacturing,” said Moshe
Barzilai, who deals in .90-carat to 5-carat stones. “Local manufacturers are
using their expertise to recut polished. They can’t buy rough because it’s too
expensive so they are finding ways to profit by recutting. It’s a source of
goods and the secondhand market for recycled goods is enormous, particularly in
Barzilai, who went to the JCK Las Vegas show specifically to
buy polished, explained that Israeli cutters are able to use their knowledge to
recut polished into a better-quality stone with improved profit potential. He
noted that the show offered Israeli cutters considerable opportunity to
purchase a wide range of secondhand, or recycled, goods, especially those
cutters who don’t have the resources to travel to the U.S. and source directly
“We’re able to buy at the shows from people who buy from the
pawnshops,” Barzilai said. Given the potential size of the recycled market, he
indicated that there is sufficient supply of polished to satisfy the current
level of demand, even if the quantity of polished coming from manufacturing
from rough is down.
TO VEGAS TO BUY
Despite the large Israeli exhibitor pavilion at the JCK Las
Vegas show, it was Israeli buyers who made their presence felt this year,
somewhat filling the void left by the notable absence of Indian and Far East
“Israeli buyers came because they saw an opportunity to find
bargains,” said Jacob Kattan, a member of the Israel Diamond Exchange (IDE)
board and owner of JKD – Kattan Diamonds, which manufactures round and fancy
shapes of .50-carat stones and larger. “We sold to Israelis at the show because
we had more exposure to them there than in the bourse.” Kattan agreed with
Barzilai that Israelis are buying polished because it’s more profitable than
manufacturing rough at the moment, given the apparent disconnect between rough
and polished prices.
Still, dealers reported that there is a shortage of SI goods
and of well-made, better-quality fancy shape stones, both of which sold well in
Vegas. Trading at the show, and subsequently in the bourse, indicated that
buyers continue to seek more affordable price points.
Roni Stschik, managing director of Majestic Jewelry Ltd., a
jewelry manufacturer that utilizes high-tech solutions to present a collection
of small stones as one large piece at more affordable price points,
acknowledged this trend. “In today’s market, you have to think out of the box
and you have to always consider how you can provide added value,” he explained.
Stschik noted that buyers in Vegas waited longer than usual
to make their purchases, reporting that sales on the final day of the show were
stronger than previous days. “The market’s okay but you do feel there is a lack
of confidence out there,” he said. “It seems buyers are looking around more and
really doing their homework and checking the goods before buying.”
Kattan agreed and suggested that buyers are being more
careful because they don’t want to commit to purchases if they can’t obtain the
money to pay for them. He explained that tight liquidity in both the
manufacturing centers and the consumer markets was holding back trading
Noting that banks everywhere are tightening their lending
and trying to increase their margins, Kattan said Israel is no exception.
Barzilai added that while there are a few strong, larger local companies who
have been able to obtain financing, the small-to-medium size companies were
having a tougher time.
Barzilai said trading in the bourse is down from previous
years and in relation to other centers. Data from Israel’s Central Bureau of
Statistics (CBS) showed polished exports fell
6 percent year on year to $3.32
billion in the first five months of 2012.
VEGAS TO HONG KONG
activity in the market, but it’s not easy,” Barzilai said. “We are mainly
working for the U.S. at the moment.” Vendors at JCK were reasonably satisfied
that the U.S. market is stable, even if overall trading was down from a year
earlier. But with the arrival of the quieter summer months in the U.S., many
were hoping the Far East market, relatively quiet in recent months, would come
alive at the June Hong Kong Jewellery and Gem Fair in late June.
Despite their high hopes, many among the large Israeli
delegation that traveled to exhibit in Hong Kong went with low expectations,
given that it is a comparatively small event. Most view the September Hong Kong
show as the more important market indicator, especially since trading in the
bourse, and demand in the U.S., also is expected to improve around the time of
the show “after the Jewish holidays, the summer vacations and maybe even the
U.S. elections have had an influence,” Kattan said.
Buyers, on the other hand, continue to travel to the shows
in search of the elusive bargain.
- .50-carat to 2-carat SI clarity goods are the best
- Fancy shapes are in demand, with shortages of well-made
- Demand is strong for princess and cushion cuts in .20
carat to .25 carat in all categories except VVS.
- The industry focus has returned to selling in the U.S. as
demand from other centers weakens.
- The rough market is difficult and manufacturing profit
margins are weak.
Article from the Rapaport Magazine - July 2012. To subscribe click here.