RAPAPORT... Year 2007 started with little fanfare, void of the annual kickoff press briefing held by leaders of Israel’s diamond industry. The general consensus among diamantaires is that 2006 was a challenging year, both globally and locally. Statistics recently distributed by Israel’s Ministry of Industry, Trade and Labor presented a gloomy picture for Israel’s industry in 2006. There was a bright spot, however, for higher-end jewelry manufacturers, particularly in exports of gold and platinum jewelry set with diamonds and colored gemstones.
The NumbersOverall, polished exports dropped 1.5 percent in value and 7.6 percent in volume in 2006. Rough imports also fell 11.4 percent in value and 16.4 percent in volume. Diamond Controller Shmuel Mordechai attributed the drop in polished exports to a down global market and blamed high rough prices for the significant reduction in rough diamond imports. Mordechai credited increased variety in Israeli designs and a number of manufacturers entering the jewelry industry for the rise in the country’s jewelry exports. Exports of gold and platinum jewelry set with diamonds and colored gemstones increased 4 percent to $131 million during the year.
Year 2006 was a difficult one for the diamond industry, agreed Yuval Kemp of Dalumi Diamonds Ltd. “There were margin issues due to high rough prices, stocked pipelines and a decline in demand from retailers across the United States and Japan,” he said. Kemp attributed the decline in the U.S. to stock inventories and in Japan to a reduction in consumer demand. Dalumi offers mostly midlevel goods ranging from $500 to $1,500 in price.
The fancy shape market, in terms of pricing, was full of fluctuations in the larger goods of 2 carats plus, noted Moshe Sinai, marketing and sales manager of Ovadia Diamonds Ltd. Sinai emphasized the particular challenges faced by the fancy shape market, blaming them on the price of rough, which did not accurately reflect what was achievable on the polished fancy market. On the upside, Sinai noted that the retail market, saturated with round goods, has begun demanding marquise and pear shape cuts. On the whole, the fancy shape market is increasingly more selective in terms of orders and specifications. Ovadia’s sales in 2006 focused on layouts, pairs and necklaces rather than parcels.
After receiving mixed reactions from clients in the United States, Ossif Tamir of Salant Group Ltd. concluded that 2006 sales were similar to the previous year. Salant carried out a restructuring of its organization, which included dissolving its partnership with Fabrikant Ltd. and increasing the company’s offshore manufacturing activities. In general, Salant was satisfied with its year-end results, Tamir noted.
Platinum DemandOnly a few Israeli companies manufacture and export platinum jewelry, according to Sigal Shidlovsky, director of the jewelry division in Israel’s Ministry of Industry, Trade and Labor. To date, Israel has no platinum casting facilities. “Demand for platinum jewelry is steady,” noted Shidlovsky. “Platinum set with diamonds is used mainly for bridal jewelry lines in Japan and the U.S.” As platinum is both an expensive and unique metal to work with, it is usually reserved for the highest-end jewelry and highest-quality diamonds, she added.
Podicko Diamonds, specializing in manufacturing high-end jewelry, is one of the few Israeli companies that use only platinum for their jewelry. “Once you manufacture jewelry for the luxury market, you can forget about gold,” maintained Joseph Porecki, company owner. It goes without saying that high-end and expensive goods must contain platinum for today’s upscale consumer, he added. Porecki noted the upward demand for luxury jewelry in 2006, explaining the trend is consistent with general market behavior.
In line with the company’s midrange focus strategy, Dalumi manufactures only gold jewelry for its Journey and bridal jewelry collections. “While there is a push toward platinum in the U.S. and Europe, it is not a major part of the market and is still very much a niche,” explained Kemp. Platinum is more expensive than gold and, while Kemp anticipates it will remain in the market for consumers looking for high-end goods, he does not expect any imminent entry into the middle-range market. “Today’s platinum programs match a specific diamond or Excellent cut or quality diamond — this is not our main market,” he maintained.
Existing CustomersLooking forward into 2007, dealers are emphasizing more intense customer relationships by augmenting customer services, programs and value, which are more specific and demanding in nature. Many are focusing on solidifying and expanding activities within their established markets. All are in agreement that the days are gone when dealers could sit back and have their goods sold. Now, they must lure customers with more attractive, competitive and unique products and services.
The Marketplace• Trading activity remains soft for midrange goods.
• High-end jewelry market is solid and growing.
• Demand for white gold is strong; yellow gold is growing.
• Demand is steady but soft for triangles, hearts and ovals.
• In fancies, everything is moving well in 2 carats+.
• Shortages exist in top-quality rough.
• Demand is solid for pear shapes and marquise cuts.
• In rounds, 70 pointers are weak, 1 to 1.50 carats are moving well and 2 carats are slowly picking up.
• Fancy colors are still strong.
Article from the Rapaport Magazine - February 2007. To subscribe click here.