Rapaport Magazine


International Holidays Spike Demand

By Avi Krawitz
The mood in Israel’s diamond community improved in November as the holiday season in India and the U.S. helped push polished demand. However, suppliers noted that in the midst of continued economic uncertainties buyers remain focused on lower-quality goods and are still hesitant to make large inventory purchases.
   “The past few months have been slow in terms of daily demand but people are willing to buy at wholesale if they feel comfortable with the price,” said Mishael Vardi, owner of VMK Diamonds, which specializes in fancy color diamonds. “There are people sitting with cash and waiting for opportunities to buy, but they are looking for good deals.”
   Vardi reasoned that while the global economic situation has influenced all import and export businesses, people are looking for places to put their money. As a result, interest in buying investment-quality diamonds has increased, particularly for fancy color stones. He stressed that the industry needs to promote the investment potential of diamonds in the financial community and lobby governments to lift barriers to facilitate their trade.

Discounted Demand
   In general, however, Vardi reported that prices have softened, which has placed additional pressure on manufacturing and trading margins. “I need to be certain that what I buy, I can sell and pass on some margin to the next level of the supply chain,” Vardi said.
   Edi Faltz, owner of Edi Faltz Diamonds, a manufacturer and polished dealer, noted that there has been a steady flow of business and “People are still buying but they are focused on discounted goods such as the European Gemological Laboratory (EGL) goods and poorer makes,” he said. “There is availability but often, when you see the goods, you can’t use them.”
   Faltz added that there is a shortage of nice-make stones, which remain relatively expensive and in demand. He forecasted that more shortages in specific, high-demand categories will become apparent in 2013.
   “I expect that next year prices will go up because people will have fewer goods because they didn’t manufacture in 2012,” Faltz noted. “I also believe that people will move to EGL-certified stones and away from triple EX goods because they need to find ways to improve their margins. Otherwise, they can’t compete.”

The U.S. Trade
   Vardi noted that there is good demand for medium-quality goods, particularly in the U.S., where jewelers have been gearing up for the holiday season. He added, however, that most jewelers already have their Christmas stock and will probably not be looking to stock up again until January — when, hopefully, they will need to replenish depleted inventory.
   While Faltz acknowledged Christmas as an important retail period, he noted that the season is not as important to the diamond market as it used to be. “Christmas is not so much of an influence anymore because diamonds are now something you can buy all over the world,” he explained. “We just had Diwali in India, and soon it will be the Chinese New Year. Sometimes our best months are in summer. The industry isn’t so seasonal anymore.”
   Still, for many in the Israel Diamond Exchange (IDE), Christmas remains a bellwether of overall market conditions, especially for the U.S. market, which accounts for more than one-third of Israel’s polished exports. During the first nine months of 2012, Israel’s net polished exports to the U.S. fell 30 percent year on year to $1.49 billion, while its total polished exports declined by 27 percent to $4.26 billion, according to data published by Israel’s Ministry of Industry, Trade and Labor.
   To foster stronger cooperation, IDE and New York’s Diamond Dealers Club (DDC) arranged an “Israel Diamond Week” in New York City, scheduled to take place during the first week of December. Yair Sahar, IDE president, said the event will help its members improve relations with their New York counterparts and facilitate future trade.

Sandy and Security
   Business was slightly disrupted in late October, when some suppliers delayed their trips to the U.S. as Super Storm Sandy hit the Eastern Seaboard and in November, when buyers cancelled trips to Israel when the country’s military launched Operation Pillar of Defense to combat missile attacks being made from Gaza into Israel.
   Despite the cancellations — which included a scheduled visit by
De Beers management to Israel — dealers in Ramat Gan remained confident that the security situation would not have a long-term impact
on the trade.

   “Buyers cancelled, but this will finish soon,” Faltz stressed, during
an interview that took place while the Israeli operation was still taking place. “Some buyers actually came here this week thinking they could buy cheap because of the situation, but that didn’t happen. Businesses here are too strong for that and there is no urgency to sell. Israel remains a very good market.”

Article from the Rapaport Magazine - December 2012. To subscribe click here.

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