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Israel
By Sarah Manning
The export figures are in for 2014 and they show that the Israeli diamond industry exported $9.324 billion of rough and polished diamonds during 2014, a slight increase of $160 million —approximately 1.7 percent — over 2013. Once again, the U.S. was Israel’s main trading partner, accounting for 38 percent of all diamond exports, or $2.371 billion, while Hong Kong came in a close second with 29.7 percent, or $1.864 billion. Trade with Belgium was worth $532 million, with Switzerland buying $405 million and the U.K. $234 million. According to the recently published report by Diamond Controller Shmuel Mordechai of Israel’s Ministry of Economy, the value of net exports and imports of rough and polished stones all increased during 2014. The percentage increases ranged from .6 percent and .8 percent for net polished exports and net rough imports, respectively, to 4.2 percent and 4.8 percent for net rough exports and net polished imports, respectively. Despite those posted increases, the industry is feeling less than positive. Increased rough diamond prices and downward pressure on polished diamond prices are making the Israeli diamond industry less profitable, with lower profit margins and even losses for some diamantaires. The mood in the Israel Diamond Exchange (IDE) is tense, with reports of several companies closing their doors because they cannot make a profit.
The fourth quarter of 2014 was very tough for many Israeli diamond companies. In recent months, several of Israel’s major banks have reduced their lines of credit to diamantaires, affecting their liquidity and making it difficult or even impossible for some of them to continue trading. Eli Iton, chief executive of Hoshen Argaman, a manufacturing company specializing in large white and fancy color stones from 3 carats to 50 carats and a dealer in both rough and polished diamonds, believes that the major problem for the industry is that margins are too tight, forcing the market to move away from Israel. “The local industry’s biggest problem is the narrow gap between rough and polished prices,” said Iton, “which makes the margins too tight for manufacturing in Israel. While we are continuing to polish our larger stones in Israel, we are considering shifting much of our manufacturing abroad due to the tight margins and high operating costs in Israel. We are also selling our cut diamonds in the U.S., Europe and Hong Kong, where sales are more profitable than in Israel.”
Steven Farber, who oversees Leo Schachter’s international fancy diamond business, believes that well-diversified companies stand the best chance in today’s difficult market conditions. “Because we are active across all the various markets and across different product lines,” he explained, “we can allocate capital to each part of our company every year according to its changing needs and performance. We have always taken a long-term approach, investing heavily in building our Leo Cut brand and in strengthening our relationships with our customers, suppliers and banks.” Leo Schachter was the first Israeli diamond manufacturing company to start marketing branded diamonds over 15 years ago in America, and this experience has helped it more recently to build successful branded diamond programs with retailers in the Far East. “We believe that programs of this kind are crucial to helping retailers to differentiate our products, which enables them to compete on criteria other than price and sell successfully in highly competitive markets,” said Farber. “The Israeli diamond industry has to market itself in new ways, because we cannot compete with Indian labor costs without adding value through either product differentiation or marketing expertise.”
More than 500 international buyers are expected to attend Israel’s International Diamond Week in Ramat Gan from February 8 to 12, 2015, to trade with members of the IDE, the Diamond Dealers Club of New York and the Antwerp Diamond Bourse. The summer edition of this semi-annual event was canceled in 2014, so Israeli traders are hoping that this winter’s gathering will help kick-start business. In March 2015, Israel will send the largest country delegation to the Hong Kong International Jewellery Show (HKTDC), with 150 Israeli companies due to participate. With Hoshen Argaman one of the Israeli companies exhibiting at both events, Iton said, “Israel Diamond Week is important not only as a showcase for international buyers, but also to strengthen connections within the local market. We hope that traveling to Hong Kong will help us to increase our overseas sales volumes.”Article from the Rapaport Magazine - February 2015. To subscribe click here.
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