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Israel
By Avi Krawitz
Israel’s diamond industry grew in 2013 even if it didn’t always feel that way. After all, manufacturers and dealers spent much of the year complaining that profit margins were being squeezed by disproportionately high rough prices and tightening bank credit. “The global diamond industry faced serious economic challenges in 2013 — high rough diamond prices, a slowdown in Asian markets and a reduction in credit. Despite that, the Israeli diamond industry was able to achieve significant growth through creativity and resourcefulness,” said Moti Ganz, chairman of the Israel Diamond Institute Group of Companies (IDI). Ganz noted that the United States and some European markets were flourishing, and expressed optimism about the medium-term prospects of the Asian markets. IDI reported that Israel’s polished exports rose 12 percent year on year to $6.22 billion in 2013, with exports to the U.S. increasing 14 percent to $2.32 billion and exports to Hong Kong up 6 percent to $1.68 billion during the year. Switzerland, Belgium and India completed Israel’s top five export destinations.
Shmuel Mordechai, Israel’s diamond comptroller, stressed that profit margins remained tight throughout 2013, despite the fact that the level of trade grew. He noted that large manufacturers resorted to refusing high-priced rough supply as they sought to return profitability to their businesses. Restoring respectable profit margins remains their biggest challenge in 2014. Andre Messika, founder of Andre Messika Diamonds, a supplier of diamonds to high-end jewelers, said there remains a gap between rough and polished prices that is causing confusion in the market. “I feel it is a dangerous time for the industry because there is not enough profit margin available at every stage of the pipeline,” Messika said. “In the past two years, we never reached a point where polished prices corresponded with rough prices. So we’re expecting that either rough prices will decline or polished prices will rise.” Messika, who in January was named among Israel’s outstanding exporters for the year 2012, explained that polished prices can rise only if polished production declines while demand remains stable, or if demand rises with the same level of production. For now, he added, demand is flat, with steady activity restrained by the weak global economy.
Oren Ben Mashiah and Shimon Ben Mashiah, the co-managing directors of Benma Diamonds, a supplier of fancy color diamonds, stressed that 2013 was a good year for the industry because diamonds held their value, especially as fancy color diamond prices rose significantly during the year. “I believe the rarity of the colored diamond sets the price,” they said. “It’s true there are more dealers in the market than before who are bidding up the price but ultimately, prices go up because these goods are rare. They’re always going to sell.” As prices of fancy color diamonds have increased steadily in the past few years, outpacing commercial white goods, more Israeli companies are holding colored diamonds in their inventory. The Ben Mashiah brothers added that the Israeli market is a difficult one in which to operate because there are many dealers and the diamonds change hands a few times — with each dealer making a bit of margin — before reaching the retail buyer. “It’s the nature of Israel being a dealer market,” they said. “Dealers flip it over but ultimately, the end seller is selling at the same price the retail buyer would buy at if there weren’t so many middlemen.”
The Israeli market continues to aggressively seek ways to improve margins and increase overall activity in the country. Many have noted a renewed interest to increase manufacturing in Israel. Messika, who currently outsources most of his manufacturing, has plans to open a small facility in the bourse in the first half of 2014. Increasing manufacturing, he suggested, will signal to rough suppliers that Israel is not just a trading center, but also an important producer. “We need to import more rough, especially for the small manufacturers, because we have the skills but we don’t have the goods,” Messika said. Israel’s rough imports rose 4 percent to $3.99 billion in 2013, while its rough exports grew 5 percent to $2.94 billion. In an effort to raise its profile as a rough trading and manufacturing center, the Israel Diamond Exchange (IDE) is planning to host its first International Rough Diamond Week (IRDW) from March 9 to March 13. ALROSA, De Beers, Rio Tinto, I Hennig/ Fusion Alternatives and Tzoffey’s are all scheduled to hold tenders during the week. “If we are to boost the manufacturing of polished goods in Israel, we need to increase the flow of rough to our industry,” said Arnon Juwal, IDE’s deputy president, who is heading the IRDW organizing committee. “The rough diamond supply channels are going through significant changes, with rough being produced and traded by a significantly larger number of players than ever before. Spearheaded by the IDE’s efforts, Israel’s diamond industry strategy is to build long-term, value-adding alliances with these players.”Article from the Rapaport Magazine - February 2014. To subscribe click here.
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