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Israel
By Ronen Shnidman
Israeli diamantaires have become worried about the damage to their reputation abroad caused by a scandal involving four Israeli companies that was discovered by the Gemological Institute of America (GIA). The GIA issued an alert on the evening of May 12, stating that four Israeli companies had submitted approximately 500 diamonds that were treated to temporarily improve their color by up to three grades without providing proper disclosure. The lab alert provided the grading report numbers of 424 stones not held on GIA premises that were suspected of being treated. GIA also announced that it had banned the companies — LYE Diamonds, E.G.S.D. Diamonds, Abramov Romok and Yair Matatov — from further submissions for the duration of the investigation.
The Israel Diamond Exchange (IDE) responded by calling an emergency meeting that delegated authority to four board members to investigate and address the issue on an expedited basis. The IDE also said it was aiding a separate police investigation into the matter. Meanwhile, the IDE and Israeli authorities have refrained from taking any disciplinary action against the four companies pending the findings of the investigations. “It is still unclear if these four companies did anything wrong,” said Shmuel Mordechai, Israel’s diamond controller. “I don’t know and neither does the GIA. But their reputations are ruined even if they didn’t do anything wrong. No one will go to them even to buy a piece of cubic zirconia.” The IDE has banned members from trading any of the 424 diamonds listed by the GIA with their original certificates. The bourse instead instructed all IDE members holding any of the stones to send them back to the GIA for regrading, free-of-charge. The bourse has permitted members to trade the stones after they have been regraded and inscribed with new GIA certificate numbers. Meir Dalumi, chairman of the legal committee at the IDE, told Rapaport Magazine that he expected the bourse investigation into the conduct of the four companies to conclude within days. At press time, the investigation was still ongoing. Dalumi, one of the IDE board members conducting the investigation, declined to provide any further comment until the end of the bourse proceedings on the matter. The IDE also declined to provide any additional comment when contacted by Rapaport Magazine, saying that the matter was still subject to a police investigation. It noted that providing any additional information could be legally construed as subverting the course of an ongoing investigation.
Trading volume was low and manufacturing volume declined in Israel during May, as local diamantaires continue to ride out a period of low polished demand and high rough prices. There is little trading taking place in Israel, said a senior employee of Leo Schachter & Company, who asked to remain anonymous. He added that buyers from the U.S. drove demand in the market during the month, particularly for piqué goods. Several Israeli manufacturers and dealers noted that the trade in Israel has been impacted by the weak growth in U.S. Christmas sales in 2014 and the lack of consumer demand outside the U.S. since then.
“There is a slowdown in diamond polishing, but local manufacturers are doing their utmost to keep their staff employed,” said Jacob (Kobi) Korn, president of the Israel Diamond Manufacturers Association (IsDMA). “Everyone is manufacturing less and hoping that consumer demand in the U.S. will recover by the fourth quarter of this year.” According to Avraham (Bumi) Traub, former IsDMA president and founder of A.B.T. Diamonds, the reduction in polished manufacturing in Israel and elsewhere is part of a broader realignment caused by global changes in consumption. “This realignment is occurring in all industries, not just diamonds,” he said. “We, as business owners, must adjust our expenses to operate at lower levels of turnover.” However, many diamantaires noted that scaled-down polished manufacturing around the globe had reduced the downward pressure on polished prices in the local market in May. Traub said that potential buyers who had made low offers for diamonds a week ago returned to his company because they could not find the diamonds that they wanted elsewhere. “I’m not selling more than I used to, but I am selling at better prices,” he said. “We are in an adjustment period, where the phenomenon of people seeking to buy $1 of goods for 90 cents is gradually disappearing.” Several polished dealers said that many Israeli diamantaires had reacted to weak trading in the local market by sending most of their stock abroad on memo. A dealer who requested anonymity noted that very few deals were now being done for cash as opposed to the same time a year ago. Nevertheless, he said, the prices he received for diamonds sold abroad on memo were significantly higher than the prices he received for similar diamonds that he sold for cash in 2014.Article from the Rapaport Magazine - June 2015. To subscribe click here.
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