RAPAPORT... While Israeli diamantaires have made a concerted effort to diversify into the Far East in marketing their goods, they have kept a positive long-term outlook for the U.S. market, despite the weakness in the world’s biggest economy. The U.S., traditionally the mainstay of the Ramat Gan trade, accounted for 35 percent of Israel’s polished exports in the first quarter of 2009, even as overall exports to the U.S. fell 59 percent to $326 million during the period.
“I am confident the U.S will improve. Without it, we may as well all go home,” said Nir Scolnic, sales manager for L&N Diamonds, a manufacturer of 30-pointers to 10-caraters. “It all depends on the U.S. economy and consumer confidence there.” Scolnic noted that there is more confidence among manufacturers and dealers in Israel, but predicted it would take about a year for the market to balance out before a real recovery will begin.
Yigal Hausman, chief executive officer (CEO) of Hausman Diamond Manufacturers and Online Diamond Trade, agreed, adding that he expects the long-term trend will be positive. “I think the market has bottomed out and I don’t see any reason for another correction because demand is up, even though it is still soft,” Hausman said. “The main thing now is that dealers are growing in confidence.”
Proper PackagingScolnic, whose business focuses on the U.S., explained that demand there has been upheld by the engagement ring market, where 1-carat, SI goods and 1-carat goods in the low-color, $2,000 price range are popular.
The trend toward cheaper goods and the bridal market in the U.S. led ADR Kropveld Diamonds Ltd. to develop its Passion Cut™, which the company says improves the brightness of a diamond by adding 24 extra facets to the stone. “We have discovered the perfect way to cut a round brilliant diamond with ideal proportions that refracts light in a precise way to help hide the internal inclusions in a diamond, while adding more brilliance and fire than a normal 57-facet round diamond,” the company explained in a brochure. Yariv Har, sales manager for ADR Kropveld, added that the company is targeting 1-carat, SI goods with the concept, where average price points have dropped from $5,000 a carat to $3,500 in the past year.
Stressing the need to sell to the engagement market correctly, Har claimed that the Passion Cut may provide the answer for retailers. “If you see one stone that is flawless and another that is SI2, and the SI2 looks better, why would the consumer pay more for the flawless stone?” he challenged. “The problem is that on the retail side, they are not selling romance anymore, but paper. They’re too busy explaining the certificate. Retailers have got to get back to basics and let the customer look at the stone and choose which is prettier.”
Har expects that the same trend is developing in Europe, where the continent is opening up to the SI clarities, rather than VS, which has been its traditional preference.
Profitability is KeyRami Seren, managing partner of Seren Diamond, which specializes in fancy color diamonds, noted that the Far East and Europe are currently stronger than the U.S. He added that the market for fancies has remained relatively strong and that prices for pinks, blues and reds in particular have held steady. Seren cancelled its booth at the JCK Vegas show due to weakness in the U.S. market, and others have done the same. Just 44 companies are participating in the Israel pavilion at JCK — which is run by the Israel Diamond Institute Group of Companies (IDI) — compared to 54 last year.
Nevertheless, attendees have gone to Vegas with greater optimism than they had a few months ago as the price stability seen recently has calmed their nerves. Many are calling for a price increase on the Rapaport List to follow the recent rise in rough prices. “I think prices have increased by 5 to 10 percent across the board and the list needs to follow suit. Then it needs to stay where it is for about six months,” Seren said.
Hausman, who is a former president of the International Diamond Manufacturers Association (IDMA), noted the correlation between rough and polished prices but stressed that the industry needs to be more aware of the manufacturer than it has been in the past. “The days when rough dealers and producers made money on the backs of manufacturers are over,” he said.
“People are more conscious about profitability and the manufacturer is the most important link in the chain. Without a strong, well-established manufacturer, the industry will be weak and will suffer.”
“Especially now, after many manufacturers are out of the game, we need to encourage manufacturing,” Hausman added.
Marketplace• Diamantaires are paying higher prices for rough because they expect polished prices to rise. Some shortages exist in certain polished goods categories.
• Strong demand exists for 0.5- to 1.5-carat, D-E and H-J, IF and VS1-SI1 stones.
• Demand for noncert, cheap goods of $500 to $1,500 per carat has improved.
• Demand for low colors is getting better.
• In fancies, demand is good for cushion and princess cuts in 0.70 to 1.50 carat,
I+, VS-SI.
• Demand for cheap, fancy yellow stones has improved.
Article from the Rapaport Magazine - June 2009. To subscribe click here.