The days when diamond manufacturers were overly confident
are over. Globally, the mood is optimistic regarding U.S. diamond consumption,
but everyone has his doubts and it will take more than one year of relative
success for the diamond industry to forget the bitterness of 2007-2008.
“On paper, the U.S. market should improve. But the question
remains whether there will be real repercussions on worldwide diamond industry
sales,” said Eli Kaufman of EFD. “If there are, which is likely, that impact
will most probably be diluted. Let’s not forget that the U.S. currently
accounts for about one-third of the worldwide diamond market. Assuming the U.S.
increases domestic diamond sales by, say, 3 percent, the net effect on the
global diamond industry would be only about 1 percent. One thing is certain,
we’re optimistic, because something positive is expected.”
Some people worry about the state of the Dow Jones stock
index and other economic parameters, such as the employment level, when
assessing business recovery in the U.S. market. Dilip Mehta of Rosy Blue said
he thinks consumer confidence is the best indicator for the diamond industry.
“You don’t want to use inappropriate indicators that are not
a barometer of consumer confidence and not relevant to our industry,” Mehta
said. “Unemployment numbers are not a good indicator for our industry because
unemployed people are not our consumers. Neither is the Dow Jones appropriate
for our industry. Diamond sales depend on consumers’ discretionary dollars and
their willingness to spend them. When consumer confidence is strong — and it is
relatively strong right now in the U.S. — one can expect growth.”
SHOW EXPECTATIONS LOW
Those watching the U.S. market also are looking toward the
summer shows. Shashin Choksi of Swati Gems explained that “JCK Vegas
expectations are not too huge, even though market improvement is being felt.
Even those who are not actively involved in the U.S. market will wait and watch
what happens over there, because we’re all going to be influenced by it, one
way or another. The U.S. is still the most important market — diamond
manufacturers sell in the U.S. and they also sell to jewelry manufacturers
around the world, who then sell a portion of their production back to the U.S.
So everybody has an interest in the evolution — and recovery — of the U.S.
market.”
In further assessment of the U.S. recovery, Choksi said it
appears that “real estate has bottomed out. Apparently, the number of people
who needed to sell diamonds and jewelry to pay their debts is declining. This
is very important, because if they are no longer selling off assets, people in
the U.S. will resume consuming and best of all, trust will come back.” Even
with the concerns that remain about the U.S. recovery, Choksi noted that “There
is no denying the fact that the U.S. still represents one-third of the world
diamond market, and it is still healthier than Europe.”
ELECTION EFFECT
Chaim Pluczenik of Pluczenik Diamonds confirmed the positive
outlook for the U.S. for 2012, but noted the importance of the post-election
period. “The U.S. market is strongly improving,” he said. “This is the case in
all election years. You can feel it in the orders placed by the majors and the big
independents. There’s more demand and more money. This recovery may also
involve another phenomenon — the fear of inflation — which pushes people to
reorganize their portfolios and perhaps invest more in gold and diamonds in
order to cushion their positions in cash.
“The big question mark in the U.S.,” continued Pluczenik,
“remains who’s going to win the elections. If it’s a new face, there is a
chance he would take measures to push the economy to give himself a better
chance of being reelected four years later. On the other hand, if Barack Obama
gets reelected, he won’t be working to be reelected a third time, and so he’s
going to have a free hand to do whatever he feels is appropriate. That could
include unpopular but necessary measures that might have a negative impact on
the U.S. consumer’s mood.”
ANYTHING FOR A PRICE
Raphaël Rubin of Rubin & Zonen concluded: “As far as
we’re concerned, America has always been one of the most important consumer
markets. We’re happy to be seeing very positive signs of recovery there. The
customers are on the way back, the market is again in motion and it is following
the positive trend of the global economy. However, it’s important to note that
the current momentum goes in two directions: toward the lower-budget goods and
toward the high-end diamonds. Consequently, the middle range is suffering. As
far as the shortage of goods is concerned, we’ve repeatedly noticed that if you
pay the right prices, everything can be found. Globally, signs are encouraging
that 2012 could be even better than 2011.”
THE MARKETPLACE
Polished:
- Commercial goods — G-K, VS-SI in all sizes — are in very
strong demand.
- D-F, VVS in all sizes continue to face weaker demand, due
to buyers downgrading quality for price. Prices can rise very fast
exponentially when sizes go up.
- Demand remains very strong for IF in all colors and all
sizes. There is a sense that price doesn’t matter with a desirable stone and a
motivated seller.
Article from the Rapaport Magazine - May 2012. To subscribe click here.