Rapaport Magazine


By Avi Krawitz
Repolishing Polished Sustains Business

The Israeli diamond market continues to be active in a tough trading environment in advance of the all-important end-of-year selling season. While the mood in the Israel Diamond Exchange (IDE) was mixed during October, dealers reported pockets of positive demand and strong competition to gain access to the right type of goods.
   “People are really buying according to their specific needs. Buyers come with a list of requirements and stick to it quite strictly,” said Steve Tugendhaft, owner of 2G Diam, which buys and sells certified polished diamonds. “On the other hand, there is a shortage of goods and people are willing to pay the price to get the right diamonds. So it’s a buyer’s market but at the same time there are no goods.”
   Given those shortages, prices have remained relatively firm and Tugendhaft stressed that no one is dumping goods at cheaper prices to improve their cash position — as some were predicting before the September Hong Kong show. “It’s a tough market but we’re not in a crisis,” he added.

Polished Focus
   Israeli dealers were focused on finding the right goods for the holiday season to supply their customers, who are largely in the U.S. As a result, many traveled to India in October, shopping for goods before businesses there closed for the Diwali break. Some reason that it is more viable to trade in polished than to manufacture new goods, given the tight margins apparent in the rough market.
   Mishael Vardi, the owner of VMK Diamonds, a supplier of fancy color diamonds, argued that the shift toward polished trading is also the result of the tedious bureaucratic process and high taxation involved in importing rough from primary sources in Africa. These roadblocks are especially difficult for small- to medium-size manufacturers to maneuver, he suggested.
   “It’s easier for them to buy polished and upgrade the stone to their requirements than to buy rough,” Vardi explained. “But we need more rough in Israel and it needs to be easier to import the goods.”
   Despite these difficulties, Israel has maintained steady rough buying so far in 2013 with rough imports up 9 percent year on year to $2.9 billion in the first nine months of the year, government data showed. The strongest increase occurred during the third quarter.

Out of the Box
   Most recognized, however, that manufacturers have been working with very tight margins and many are therefore seeking new and creative ways to expand their businesses. Vardi reported that his company is targeting retail in its growth strategy, by developing a business-to-consumer (B2C) website that will enable consumers to design and order their own custom-made colored diamond jewelry. “At the moment, we supply only to wholesale but we’re gradually shifting because retail will improve our margins,” he explained.
   Vardi also noted a shift among Israeli dealers toward color stones, given the strong performance of this sector since 2008. He singled out fancy purplish pink diamonds as being particularly hot right now, noting strong prices for these goods at Rio Tinto’s recent Argyle pink diamond tender.
   Both Vardi and Tugendhaft agreed that diamantaires need to think out of the box in today’s market conditions. Tugendhaft stressed that businesses cannot afford to remain stagnant and have to constantly renew their strategies to find the right goods, new customers and new ways to profit from the goods they have and in their marketing programs.
   In so doing, he contended that companies can always find a solution to the challenges they face in the market. “You have to always look forward and think three steps ahead,” Tugendhaft explained. “Every diamond has an address. You just have to find it and market effectively.”

Some Holiday Cheer
   The Israeli industry as a whole also has increased its marketing efforts. As a result, the Israel Diamond Week taking place at the Diamond Dealers Club in New York November 11 to 14 is oversubscribed, with more than 160 Israeli companies applying to attend, with space limited to around 120 companies.
   Moti Ganz, chairman of the Israel Diamond Institute Group of Companies (IDI), noted that while the industry continues to face economic challenges, there has been a rebound in the United States and Europe. Therefore, despite the mixed mood in the bourse, dealers maintained a positive outlook for the U.S. holiday season,.
   “People did not want to spend in the past two to three years and were very conservative, keeping their expenses at a minimum. Now, I believe they want to have some fun and want to buy something new, exciting and fashionable,” Vardi said. “I believe they will go out there and buy themselves diamond jewelry.”

Article from the Rapaport Magazine - November 2013. To subscribe click here.

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Tags: Avi Krawitz