|
|
Israel
By Avi Krawitz
There was some pent-up frustration in the Israel Diamond Exchange (IDE) as October trading fell below the usual preholiday levels. “There is much lower activity in the bourse than there should be during this time of the year, as it is everywhere at the moment,” said Jeremy Medding, owner of EMA Diamonds L.P., which specializes in .10-carat to 3-carat stones in all colors and clarities. “Dealers in Israel are being as careful as anywhere else. They don’t want to hold inventory and if they do buy inventory it has to be the right type.” Avner Eizenstien, whose family business supplies .30-carat to 5-carat diamonds to the U.S. and European markets, added that buyers have become very selective in what they want. Buyers are largely focused on SI to I2 clarity diamonds, considered bread-and-butter goods for the U.S. market. Medding pointed out that buyers are looking for the nicest SIs, while tainted goods, such as those with black spots or fluorescence, are harder to sell.
Consequently, there is a significant overhang of “the wrong inventory” of goods left in the trade, which are not in demand. And both Medding and Eizenstien observed that there are not a lot of the “right” goods available. Given buyers’ selectivity and the prevailing low level of demand, Medding and Eizenstien acknowledged that the industry — both in Israel and abroad — is undergoing some consolidation, which Eizenstien admitted has affected the mood in the bourse. “People are more cautious about giving credit and are doing much more thorough background checks than they used to,” he said. In order to survive, Eizenstien suggested that companies have to get out of their offices to meet buyers and suppliers and be more professional in the service they provide and how they conduct their business. He stressed that in such a market, the most important element is how you buy — both polished and rough. “Our margins are so tight that you just can’t afford to get it wrong,” he explained. “But if you source the right goods and have the right inventory available, you can survive.”
With excess polished inventory, rough demand has consequently slowed significantly this year. The market is seeking to streamline inventory levels and find a balance between the right supply and demand, according to Itzik Eliyahu, production manager at Eliyahu Yona Diamonds Ltd., a manufacturer of high-end diamonds from 3 carats to 10 carats. Eliyahu reported that rough trading on the secondary market is very quiet as manufacturers have decreased the amount of rough they’ve bought at the De Beers sights and ALROSA contract sales. He added, however, that buying on the auction and tender circuit is stronger, as auction prices have dropped by a larger margin than De Beers and ALROSA’s supply and therefore offer better margins. “The rough auctions are still very competitive,” Eliyahu said, while clarifying that his company generally bids for large single stones. Within that category, Eliyahu reported that polished demand for 3-carat and larger diamonds has slowed, but demand remains strong for exceptional diamonds, including 10-carat and larger goods and fancy blues and pinks. Demand for white diamonds is concentrated in the lower clarities as consumers have become more economical, he said.
Many Israeli dealers that spoke with Rapaport Magazine said they were focused on commercial goods during October, which should be at their peak selling period before Christmas. Dealers are hoping that retailers will sell enough during the holiday season that they will need to buy greater volumes to replenish inventory in the first quarter of 2016. Suppliers are encouraged that U.S. demand has been steady and to an extent supported the trade in the past year while Asia Pacific demand has slowed. Medding noted that China’s decline was already evident in late 2013, but the market was slow to recognize it. “It’s been hard to read China properly but the pullback is making a big impact on the market now,” Medding said. “We always had the stable U.S. and growing emerging markets but since China has pulled back, the U.S. alone is not enough to support the industry, so we’ve seen a deflation in prices.” Eliyahu certainly believes that the only way to stop the decline is to increase the industry’s marketing efforts — although it will probably take some time before pending marketing campaigns by De Beers and others will have a lasting effect. “After so many years that no one did anything, it’s hard to say if these campaigns will have an impact on the season,” Medding said. “The neglect has been glaring; it’s no wonder that consumers are buying other luxury items instead of diamonds. Sales in America will be fine and eventually demand will recover but it’s going to take a few months to get some momentum back in the trading centers.”Article from the Rapaport Magazine - November 2015. To subscribe click here.
|
|
|
|