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Israel
By Avi Krawitz
Sentiment in the Israel Diamond Exchange (IDE) improved in December as dealers noted that polished prices stabilized due to shortages and the slight increase in activity around the holiday season. “Prices leveled off in the past month or two and there is a sense that the market has bottomed out,” said Jacob Kattan, president of JKD Trading, which manufactures round and fancy shapes of .50-carat stones and larger. “There is a shortage of goods and that has influenced prices to firm up.” Moshe Barzilai, who deals in .90-carat to 5-carat diamonds, agreed, adding that price stability did not stem from a boom in demand as much as a shortage of mainly bread-and-butter SI-and-lower clarity goods on the market. He explained that the shortages resulted from manufacturers reducing their factory output throughout 2015, especially during November when Indian factories closed for Diwali. “The biggest challenge right now is finding the right goods at the right price,” Barzilai said. “If you can do that, the rest is easy.” However, Kattan reported that there is still somewhat of a bottleneck in the market since everyone wants the same goods due to the lack of manufacturing.
Kattan noted that U.S. demand was okay in preparation for the holiday season but not as strong as in previous years. He added that some buyers waited until the absolute last minute to place orders. Barzilai also observed the trading cycle has changed in recent times. “We don’t feel the season like we did five-to-ten years ago. Sales are more spread throughout the year,” he said. While local dealers may not rely on the season as much as they used to, Israel remains the largest supplier of polished diamonds to the U.S. During the first ten months of 2015, Israel accounted for 36 percent of U.S. imports, according to the most recently published U.S. Commerce Department data. U.S. polished imports from Israel fell 8 percent to $7.12 billion during the period, as they declined from most supply countries. Israeli dealers noted that turnover and wholesale trading in general was slower throughout 2015, even if it picked up in the final two months of the year. Barzilai hopes the uptrend will continue in January and that the prevailing shortages will influence U.S. retailers to buy lower-quality goods — which are still readily available — when they look to restock inventory that was sold during the holiday season. That would help suppliers further reduce their inventory levels, he explained.
While most dealers who spoke with Rapaport Magazine expect a better year in 2016, Kattan cautioned that it will take some time before the market fully recovers from the challenges that 2015 brought. Kattan noted that a number of businesses have closed in the past year and expects that the industry is likely to continue to consolidate in the new year, which will help strengthen the companies that remain. “I’m optimistic for 2016 because those who survive will be stronger and will be able to do business and profit,” he said. Similarly, Barzilai noted that the market is in a difficult process of restructuring and it will take some time to get used to the new way of doing business. In many ways that presents greater challenges than the 2008-2009 crisis, when there was a one-off shock during which the market bottomed quickly and could then work its way back up, he explained.
Yoram Dvash, owner of Y. Dvash Diamonds, a manufacturer of round and fancy shapes up to 5 carats, recognized the current challenges as he took office as the new president of IDE. Dvash, a first-generation diamantaire, won the election that took place in December, replacing Shmuel Schnitzer, who completed his third nonconsecutive term in the position. Among the themes that he focused on while campaigning, Dvash stressed that the ongoing four-year negotiation with the Tax Authority needs to finally be put to bed, while the bourse also needs to work more closely with the government on other matters to advance the diamond trade. That would include support for a program he previously spearheaded to encourage more diamond manufacturing in Israel. Manufacturer and dealer profitability is also a central issue for the new president, who vowed to lobby for greater availability of credit to the Israeli industry, increase its access to rough and raise the bourse’s participation in efforts to more effectively market diamonds and enhance the Israeli brand. Dvash thanked the out-going committee for dealing with the many difficulties facing the local trade, not least of which was the slump in global trading during 2015. “We can expect two challenging years,” Dvash said of his upcoming term. “We’re going to work hard and make the exchange younger, more technologically driven, a little more hungry and do as much as possible for members of the exchange and its community of diamond dealers.”Article from the Rapaport Magazine - January 2016. To subscribe click here.
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