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Israel
By Avi Krawitz
After a tough year in 2015 and some improvement in recent months, Israeli diamantaires expect that the Hong Kong International Jewellery Show in March will provide a better indication of how trading will develop in 2016. “The March Hong Kong show will be an interesting time to measure where the market is going, what prices dealers are paying and what inventory requirements we will have,” said Mishael Vardi, owner of VMK Diamonds, a supplier of fancy color diamonds. The Israel Diamond Institute (IDI) pavilion is usually among the largest at the event as the Israeli industry has used the Hong Kong shows as an effective platform to raise its exposure in the Asia Pacific region. Isaac Berman, president, I. Berman Diamonds, explained that such a gathering should provide some perspective to Israeli diamantaires who are not sure in which direction the market is heading — especially in light of the declines experienced in 2015 and overall caution about the Chinese economy. He added that the event is important given the large number of dealers and buyers that attend the show and it is also the first real opportunity for jewelers to replenish inventory that was sold during the Chinese New Year Spring Festival.
Dealers who spoke with Rapaport Magazine reported that U.S. demand was stable in January and they were satisfied with the U.S. market after the holiday season. However, their attention shifted to the Asia Pacific region, which was more volatile ahead of the Spring Festival. Carmel Lustig, marketing and sales director at Lustig Brothers, which deals mainly in triple EX certified diamonds, noted that there was a tremendous improvement in the Chinese market about three months ago. Jewelers in China and Hong Kong placed most of their diamond orders in November and December so they could have the jewelry set in time for the festival, he explained. Chinese demand therefore quieted as the season approached and activity also slowed in January as stock markets slumped. “People are heavily invested in stocks and real estate and therefore it is natural that the diamond market should slow as stocks crashed,” Lustig said. “But I think the Chinese New Year will be okay and if the stock market stabilizes, the Hong Kong show will also be positive.”
Similarly, Berman expects the International Diamond Week in Israel, taking place from February 14 to 18, will lift sentiment in the local trade. Israel Diamond Exchange (IDE) President Yoram Dvash stressed the event gives local suppliers access to buyers they would otherwise not meet, while the buyers gain access to a lot of new, first-hand goods and attractive prices. Supply remains a thorny issue for the local trade as shortages have supported polished prices but also made it difficult for dealers to fill some orders. Vardi expects that there will be shortages of select goods at the Hong Kong show since manufacturers have not yet raised polished production. Polished prices firmed toward the end of 2015 due to shortages rather than a spike in demand and Vardi expects that trend will continue at the show. For that reason, Israeli diamantaires have mixed feelings about current market conditions since trading is still well below levels recorded at this time in previous years. Data published by Israel’s Economy Ministry showed that the country’s polished exports fell 20 percent year on year to $4.99 billion in 2015, with the volume of exports down 12 percent to 2.179 million carats. Polished exports to the U.S. dropped 16 percent to $2 billion, while exports to Hong Kong plunged 28 percent to $1.35 billion. Shmuel Mordechai, Israel’s diamond controller, stressed that the decline was in line with the slowdown witnessed in other centers, which stemmed from a slowdown in demand in both the U.S. and China.
Most dealers lowered their stock position in 2015 and are now only buying goods they know they can sell and make a profit, according to Vardi. He added that maintaining healthy liquidity is key to operating in such a market. Suppliers are hesitant to give credit out of fear they won’t receive payment for their goods, he explained. Credit issues and the ability to source the right goods are among the key challenges facing the market in 2016 but Vardi is confident they would be met in the year ahead. Lustig stressed that as long as rough supply and manufacturing levels remain conservative and demand is not affected by external factors such as another stock market shock, 2016 will be better than last year for the diamond industry. “I think that 2016 will be a better year and you feel that we’ve passed the bottom,” Lustig said. “All the craziness of 2015 has calmed down and I think we will see at the Hong Kong show that the market has stabilized.”Article from the Rapaport Magazine - February 2016. To subscribe click here.
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