While trading in the Israel Diamond Exchange (IDE) remained
quiet in September, dealers took solace from the improvement in overseas demand
that was occurring.
“There’s been an improvement and we’re beginning to feel
that there is a shortage of goods, especially in the fancy shapes,” said Assaf
Granot, chief executive officer (CEO) of A.G. DiamonDirect, a manufacturer and
distributor of diamonds up to 10 carats, D to L, IF to SI. “I think that people
panicked a bit during the summer but things have started to stabilize and we’re
getting orders.”
Haim Katz, owner of Haim Katz Diamonds, which buys diamonds
of
.30 carats and up from Indian partners to sell in the U.S. and the Far East,
agreed. He noted that there are shortages of clean-cut SI goods and fancy shape
diamonds, while there is sufficient supply of low-color VVS stones. “For now,
the market is working,” Katz said. “It’s not what we had in 2011 and everyone
is buying and selling less, but there is business.”
Katz added that there is not a lot of polished inventory
being held in Israel, which has contributed to the prevailing weak local
trading environment. He further reasoned that overly cautious bank lending has
contributed to the lack of growth. In addition, following the raids on various
companies by tax authorities earlier in 2012, dealers became discouraged by the
confusing, unclear tax requirements pertaining to the trade. As a result, Katz
noted that Israeli companies prefer to keep inventory in their office locations
abroad to avoid having to deal with the local bureaucracy.
Granot also acknowledged that there are not a lot of goods
being held in Israel and agreed with the general lack of confidence in the
local trade.
Still, there was some optimism during September as a large
delegation of about 90 companies participated in the Israel pavilion at the
Hong Kong Jewellery and Gem Fair. (See pages 18 and 66 for show coverage.) Both
Granot and Katz reported an increase in inquiries from U.S. and Far East buyers
in September, which fueled some optimism for fourth-quarter sales.
“We want to see
if the Indian and Chinese buyers will continue the momentum that we saw at the
August Mumbai show,” Granot said.
Katz cautioned against placing too much emphasis on the
trade shows and questioned if they are worth the expense in the current market
environment. “Profits for manufacturers and polished dealers are so small
because the internet has brought greater price transparency,” Katz explained.
“To compete, we have to minimize expenses and maximize our volumes.”
He stressed that the internet has become a year-long trade
show where you can find buyers you never had access to before, further
diminishing the need to personally attend the various events. “The internet has
become a very important part of the business, not only as an indicator of
prices, but also of what’s available,” Katz added.
Leadership in the Israeli industry stressed the need to
reduce operating costs for local companies as the Gemological Institute of
America (GIA) opened its laboratory in Ramat Gan. Moti Ganz, chairman of the
Israel Diamond Institute Group of Companies (IDI), estimated that the new lab
will save the industry between $30 million and $50 million a year in reduced
shipping and related insurance costs.
Avraham “Bumi” Traub, president of the Israel Diamond
Manufacturers Association (IsDMA), said he “expects the lab will grow as the
trade aims to restore Israel’s once-large manufacturing industry.”
While Israeli diamond manufacturers employ an estimated
30,000 people across the globe, only approximately 2,000 of those are based in
Israel. At its peak in the 1980s, when local manufacturers were still focused
on small, mass-produced melee goods, about 20,000 people were employed
domestically in Israel’s diamond industry. The decline came as the trade was
unable to compete with the cheaper labor markets of India and China, and as
beneficiation took shape in southern Africa.
“Manufacturing is coming back to Israel,” Traub said. “The
cost of polishing today is so high that the labor cost has become a small
percentage.” Ganz added that Israel will continue to focus on developing
its
niche of manufacturing large diamonds. However, Katz questioned whether Israel
has the financial capacity to compete with India’s vast manufacturing sector
and stressed that the local industry should rather
focus on enhancing its role
as a polished trading hub.
“There is opportunity for us and we can definitely
strengthen polished trading here and be serious players as polished
distributors,” Katz said. “We can attract clients to come here and we can bring
back confidence
so that Israelis will hold stock here. They don’t have to hold
stock in
other centers.”
Article from the Rapaport Magazine - October 2012. To subscribe click here.