Indian Prime Minister Narendra Modi didn’t talk diamonds
when he came on a much-hyped visit to Israel in July. This was partly because
there were bigger trade matters for him to negotiate, such as defense and
technology agreements. But then, India barely needs special deals to boost its
diamond sector. For the past two decades, India has been sawing away at
Israel’s polished-diamond business. Now numbers show it has knocked it off the
top spot in the most important consumer market: the US.
Polished exports to America have more than doubled from both
Israel and India since the late 1990s, according to US government figures, but
the two nations have seen subtly different trajectories. Israel’s US trade
peaked at $9.48 billion in 2007 before stagnating. In contrast, India’s
shipments have grown consistently since 1997 and took a flying leap in 2010,
going from $5.17 billion to $8.62 billion in the next six years.
Last year, a sharp increase helped India overtake its rival
for the first time on record. The extra $1.25 billion of American business that
India gained that year closely matches the $1.24 billion that Israel lost,
suggesting this was a case of one country grabbing another’s market share.
Israel’s polished exports to the US in the first half of 2017 dropped 6% year
on year to $3.11 billion.
Israel’s defenders give two related retorts. One is that the
nation is still the leader in manufacturing and supplying stones above 3
carats, even if India has pinched other work. The other claim is that the
industry is too international for just one or two trade routes to dominate how
we assess the state of the market.
“Most of the big stones, 3 carats and up, are selling now in
the Far East,” said Yoram Dvash, president of the Israel Diamond Exchange (IDE)
and owner of Y. Dvash Diamonds. “The US is mostly buying the medium-sized
goods.... For me, it’s a shock, because most of my [own] business was built on
the US.”
Yet the finer points of the data show India is making
inroads in the larger categories, too. In goods above 0.50 carats — including
those destined for the all-important 1-carat engagement rings — India’s
stateside exports have taken off since 2007, jumping from $2.03 billion to
$7.48 billion. Again, Israel reached its high point of $9.12 billion in 2008,
but has failed to get back to that level, and last year lagged behind India.
What’s more, India’s average export price for the larger diamonds has kept on
growing, suggesting it is cutting bigger and higher-quality goods — so India
may slowly be creeping up on Israel’s forte.
“You will see in another few years, the bigger sizes will
also go to India,” predicted one large Israeli exporter.
To try to keep this business in Israel, the bourse plans to
open two cutting factories mainly for 3-carat-plus stones — one in the coming
months and a second next year. It has also set up programs to attract rough
suppliers to the bourse, in the hope that this will have a positive effect on
production levels.
“We don’t feel the Israeli market is weakening,” said Shai
Schnitzer, president of S. Schnitzer Diamonds and chair of the IDE’s rough
committee. The export trade is stable, and the global nature of the industry
means it is not a straight competition with India, he added. “Some Israeli
companies are active in India, and some Indian companies are active in Israel,”
he pointed out.
However, there are other factors outside most Israelis’
control. Many Indian cutting firms can get bank credit without providing proof
of actual diamond sales, explained Orit Samet, CEO of Israel-based EZ Diamonds.
This enables them to offer attractive terms, making it almost impossible for
Israelis to compete.
“Our whole industry could go to the Indians if nothing
changes with the financing system,” Samet warned.
Article from the Rapaport Magazine - September 2017. To subscribe click here.