Israeli diamantaires appear intent on forging strong relationships across the pipeline in an effort to maintain their place in the market. While mining companies stress the need for manufacturers to get a stable supply of rough to ensure success in their businesses, many in the Ramat Gan bourse took the message to heart, making it their number-one strategy.
“The main point for any business right now is that you can’t buy goods on the secondary market,” said Ami Parter, director of Belisdiam Ltd., a specialist manufacturer of larger diamonds. “If you don’t have a stable relationship with the producers, you cannot survive.”
Parter noted the difficulty with which companies that buy rough “second hand” are operating, as premiums are high and are squeezing manufacturing profits.
Push-back From Retailers
Yuval Ben-Yona, managing director of Ben Yona Diamonds, which manufactures diamonds of 1-carat to 10-carat sizes, explained that cutters are caught between the few rough producers who are able to raise rough costs, and the retailers, of whom there are many. As a result, retailers can influence manufacturers to drop their polished selling prices.
Besides the fact that rough is expensive, Ben-Yona added that there is a shortage of rough, while much of the goods on the market do not fit cutters’ manufacturing requirements. “There is a problem because the market is being very specific in its demands so cutters are chasing the same rough, and the rest they are not touching,” he explained. “Only about 20 percent of the rough we can get fits our requirements.”
Ben-Yona noted that the market has shifted toward excellent cut makes, which means less flexibility for cutting operations.
While Parter insisted that the bullish rough market is good for the industry “because it instills confidence,” he noted that there is no correlation between rough and polished prices at the moment. Customers aren’t concerned about the rough price, he said, “rather they consider what they can sell the end product for.”
Retail Relationships
Parter noted that manufacturers often have to consider their relationships with their clients, which sometimes means having to compromise on price. “We have orders to fill and sometimes it’s difficult to find the goods,” he said. “There are shortages in some goods and sometimes you have to pay higher prices to fill the orders. But you have to maintain those relationships.”
While Israeli cutters have long been entrenched in the U.S. market, many are making inroads in the growing markets in the Far East. E.F.D. Ltd., a specialist in princess cut diamonds, recently signed an agreement with Zbird.com to be the exclusive supplier of princess cut stones to the Chinese online jewelry store. In return, Zbird will promote the sales of E.F.D.’s princess cut jewelry lines through its marketing channels, making these stones more accessible to the general public.
Zvika Kaufman, E.F.D. director, explained that the agreement would enable the company to strengthen its presence in the Chinese market, where more consumers are turning to the internet to make their luxury purchases.
Still Optimistic
Tapping new opportunities such as these is feeding optimism to Ramat Gan traders as they prepare their long-term outlook for the market. “I’m optimistic because the amount of potential customers is growing globally and we see that more people are able to buy diamonds today than before,” Ben-Yona said. “There are markets that we didn’t know before in China, India, elsewhere in the Far East, Eastern Europe. There is money in the world and they are all buying diamonds.”
Ben-Yona added that the U.S. remains the mainstay for the industry, despite its lack of growth, as it is still the largest market and still buys a more diversified portfolio of diamonds than anywhere else. He noted that since most U.S. customers reduced their inventories through the downturn in 2009, they have been more open to buying this year. “They need to replenish their stock, even if they buy according to specific needs,” he explained, Ben-Yona expects the Christmas season to be better than last year in the U.S.
Parter is less enthusiastic about the holiday season as he expects sales to remain in line with 2009. He offers stronger hopes for the Far East and Hong Kong, with even Europe showing some signs of improvement. “It all depends on the stock market,” Parter said. “The U.S. is problematic, but it is still the biggest market, and it is important to be there.”
The Marketplace
• Trading is stable with mixed expectations for U.S. holiday sales.
• Demand is good for 0.30-carat, 0.50-carat and 0.70-carat, G-I, SI-SI2 stones.
• 3 carats in all colors and clarities are strong and have emerged as a hot item.
• Demand is focused on VS-SI goods.
• There is a global trend toward cheaper goods.
• Demand is weaker for collection VVS stones.
Article from the Rapaport Magazine - November 2010. To subscribe click here.