Israeli diamond dealers appeared unfazed as financial markets
took a wild ride in August — first plummeting, then recovering — after Standard
& Poor’s (S&P) lowered its rating on U.S. long-term debt. Their hope
was that the diamond market would stabilize by the time the Israel Diamond
Exchange (IDE) reopened in late August, after the bourse’s annual three-week
summer vacation period.
“We are very lucky that
the Israeli bourse was on holiday
because it gave people enough time to digest the new normal and assess
whether we were entering another crisis or if we have achieved stability in
diamond prices,” said Emanuel Namdar, managing director of Schachter &
Namdar Asia, which specializes in .30-carat to 4.99-carat stones. “I think the
whole chain of supply will see stability for
now and that is a blessing.”
Trading was slower than expected at the early August India
International Jewellery Show (IIJS), with
dealers expressing concern about the impact of the S&P downgrade on
the struggling global recovery.
Yacob Mor, a manufacturer specializing in ideal cut with
hearts and arrows, noted that polished prices softened before and during IIJS,
and Israeli attendees left disappointed, after reporting hesitant loose diamond
trading. Mor stressed, however, that the weaker market was a temporary trend
that would not stick, especially when financial markets steadied through the
rest of August. “Rather, the uptrend will continue because it’s really a
continuation of the increases we saw before the crisis of 2008, driven by the
intrinsic supply shortage in the diamond market,” he said. “So how can there be
a decline if there is this shortage? I feel there will be stability in the
market for a few months and ultimately, the uptrend will continue.”
The U.S. Effect
Mor noted that the S&P downgrade merely highlighted the
cautious economic climate in the U.S., which has been struggling through its
recovery for the past year and a half. Namdar agreed that feedback from the
U.S. market indicates declining consumer confidence. “The good news is that I
don’t feel that the industry depends on the U.S. anymore. Parts of it do, but
not all of it,” Namdar said. “We saw in 2008 how badly the U.S. slump affected
the Israeli market, which responded by diversifying out.”
Still, the U.S. represents Israel’s largest market and
accounted for 48 percent of Israel’s gross polished diamond exports in the
first half of 2011, down from 53 percent in the same period of 2010. Exports to
Hong Kong represented 27 percent of the total, compared to 25 percent in 2010.
Heading East
Israel’s expansion into
Asian markets is expected to continue, which is evident in the record number of
Israeli companies attending the
September Hong Kong Jewellery & Gem Fair. The two Israel Diamond
Pavilions will house 105 companies, compared
to 71 in 2010, while another 20 Israeli companies are exhibiting in
other locations at the show.
“Asia, with Hong Kong as its gateway, represents a tremendous
and largely untapped market for Israeli diamonds,” said Moti Ganz, chairman of
the Israel Diamond Institute Group of Companies (IDI). “There is huge interest
in Asia in luxury goods, including gold and diamond jewelry. I’m happy that the
Israeli diamond industry is able to play an important role in supplying this
demand.” Namdar noted that consumers in Asia, in particular China and India,
tend to view diamonds more as a commodity than their U.S. counterparts, and
they are concerned about whether to buy a stone now or later, and whether it
will keep its value.
Weak Dollar Fuels Demand
Namdar added that the appreciation of the Chinese yuan
renminbi against the U.S. dollar presented strong opportunities for the diamond
industry. “There are millions of people getting married in China every month
and every month they are getting wealthier in dollar terms,” Namdar explained.
“Millions of couples, who previously would have bought cubic zirconia or just a
plain gold ring, can afford a 30-point diamond today.”
Edi Faltz, owner of Edi
Faltz Diamonds, a dealer in all size and shape stones, added that the
depreciation of the dollar was also raising awareness of investment
opportunities in the diamond industry. For this and other reasons, Faltz has a
positive outlook for the market for the second half of the year, despite the
caution apparent in August. “I feel that the second half will see more price
increases because stocks are low for the Christmas season,” Faltz said. “People
didn’t buy goods before because they were waiting to see what would happen with
prices, but now they need the goods and will pay the price necessary to get
them. The crisis in the U.S. will make us even stronger because people see
diamonds as a store of value.”
The Marketplace
- Trading was limited in August as the Israel Diamond
Exchange (IDE) closed for its three-week summer vacation period.
- Dealers returned from the IIJS Mumbai show disappointed,
but with high expectations for the September Hong Kong show.
- Trading in rough is cautious.
- Demand is good for pointer sizes and 1-carat, I+, VS-SI,
triple EX goods.
- Demand is weaker for larger stones above 3 carats.
- There are shortages in well-cut fancy shape diamonds.