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U.S. Wholesale
By Brian Bossetta
Diamond dealers in the U.S. wholesale market are hoping spring will not only bring warmer temperatures but a sunnier business climate as well. Just as the winter a year ago, the brutally cold conditions across much of the country the past few months put a chill on a diamond industry that was already struggling. “Business is dead,” said Avner Almog, president of A. Almog Diamond Co., a diamond wholesaler and manufacturer in Houston, Texas. “There are billions of dollars in inventory that nobody is buying.” Jeff Fischer, president of Fischer Diamonds, Inc., a diamond manufacturer and wholesaler in New York City, said he wasn’t sure how much of the slowdown could be attributed to the weather, but it certainly hasn’t helped. “This season was rougher than most and restricted a lot of people from shopping. Hopefully, the spring thaw will help frozen budgets,” Fischer said.
In Almog’s view, it is the price of rough, not weather, that has been the heaviest drag on business. “The price of rough is just too high to afford,” he said. “These high prices are only serving the mining companies, no one else.” In order to get goods and business moving again, Almog believes prices need to be reduced to 2006 levels. “I have many friends in the industry who can’t make a profit because of the high price of rough,” he said. “They don’t know what to do, they are just sitting and waiting for the industry to come back.” Shakeel Japanwala, manager of the certified diamond division at C.D. Diam in New York City, said many in the industry are waiting for prices to drop before stocking up on goods, and they are losing confidence. To move goods already in stock, Japanwala said dealers have to significantly reduce prices. “Anything will sell if it has a very cheap price.”
Another anchor holding back business, especially for dealers in Texas like Almog and Ami Koret, vice president at Davidoff Diamond Corp. in Houston, is the drastic reduction in oil prices. “We are significantly affected by oil prices here in Texas,” Koret said. “States like Texas, Oklahoma, Louisiana all depend on the oil industry and I have a lot of customers in those states. When they start laying off and cutting back, it directly affects business.” Debbie Hakimian, vice president of marketing at Doves Jewelry, a jewelry design company in Great Neck, Long Island, a suburb of New York City, said it’s not just oil prices in the U.S. that affect the industry. “We have customers in Venezuela and Russia and they are not spending because of the drop in oil,” she said. Japanwala said that prices should most likely stabilize as a result of the shortage of goods caused by reduced manufacturing. Koret agreed. “Prices have a way of going up and down according to demand and availability,” Koret said. “Business will adjust.” Japanwala, however, still remains unsure of the future. “I think many people are leaving this industry and going into different businesses,” he said. Profit margins have narrowed so drastically, Koret added, that even though De Beers has lowered the price of rough, sightholders are losing money “on every box they buy.”
If wholesalers were looking to Hong Kong for any momentum to help the stagnant market, they were looking in the wrong direction. By all accounts, the Hong Kong International Jewellery Show in March was one of the worst ever and indicative of a weakening Asian market, which significantly impacts business in the U.S. “I’ve heard nothing good about the show. Nothing good from exhibitors or buyers,” Koret said. The only positive from the show, Fischer said, is that dealers went to Hong Kong with “their eyes wide open” and didn’t have unrealistic expectations. “Given the situation and the mood internationally in the diamond industry, how could anybody go in with high expectations?” he asked. With the Asian market softening and without a tailwind coming out of Hong Kong, Fischer said it was the U.S. that remained the most viable market in which to move goods. Another headache for dealers, according to Japanwala, is the growing problem of synthetic diamonds, especially melees, getting mixed in with large parcels. “Maybe the person selling doesn’t know,” Japanwala said. “But there’s no way to check entire parcels and you have to remove stones from the parcel and you lose money.” Despite positive signs that the economy is improving, Hakimian said that many American consumers remain “skittish to buy luxury items.” She also suggested that after a relatively strong Christmas, consumers are in a post-holiday lull. However, Hakimian noted that since the holidays she has sold more higher-priced goods between $8,000 and $10,000, whereas a year ago most of her sales were at lower price points between $3,000 and $5,000. “I don’t know what that means,” she said. “It’s possible that the upper to middle class is doing better, which could be a good sign that others will begin to spend as well.” Article from the Rapaport Magazine - April 2015. To subscribe click here.
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