Rapaport Magazine

U.S. Wholesale

By Shuan Sim
U.S. Market Steady Amid Global Turmoil

Slow sales have been the trend for the past few months, but wholesalers have said that things were gradually picking up. “It’s still a slow period right now, but it’s a year-in, year-out thing,” said Roderick Watterson, owner of Diamond Exchange Dallas, a wholesaler based in Dallas, Texas. Many buyers were still on vacation, but some have returned to business as usual. Some sellers have reported stronger sales from their private clientele rather than retailers. “On the retail side, it has been very quiet,” said Josh Fishman, president of New York City–based manufacturer A. Fishman & Son Diamonds, who reported that business otherwise has been pretty good.
   Diamantaires have noticed prices coming down, adjusting downward about three times in the past six to nine months. Most wholesalers reported no inventory problems, though some have noticed some difficulty in replacing better-quality goods as production ramps down worldwide.

Depressed Global Sentiment
   With the bailout of Greece in the Eurozone and reports of bankruptcies and lowered production in India and China’s ailing stock market, buyers and consumers have become conservative in their purchasing. “The dropping stock market and all that is causing anxiety around the world,” said Fishman, adding that nobody wants to buy goods of high value such as diamonds during this time. Amish Mehta, president of Amipi Inc., a New York City–based manufacturer, said that if China’s stock market were to decline even further in the second half, it could provide a good buying opportunity to stock up amid falling prices.
   According to wholesalers and manufacturers, however, the U.S. remains a stronghold for diamond sales compared to global markets. “I can’t say very much for the rest of the U.S., but at least here in Dallas, the market is pretty strong,” said Watterson. He expressed confidence that things will pick up soon locally, noting that companies are setting up headquarters in the Texan city and investments are flowing in. Likewise, Mehta said that the U.S. market has not been too affected by the worldwide gloom. He commented that his sales had been surprisingly strong, attributing the success possibly to a strong JCK Las Vegas show in June.

Price Challenges
   Prices are currently soft and will continue to be, speculated Mehta. However, the market remains challenging as big players set prices for their diamonds that make it hard for smaller dealers to keep up. Keith Saxe, president and founder of NYC Wholesale Diamonds in New York City, said that large, established diamond companies are setting up ridiculous prices that can be challenging for smaller diamantaires. Saxe declined to name which companies specifically. “In many of these cases, their diamonds are nondeliverable, where they are setting prices for goods they don’t actually own in their inventory,” he said. Sales have been good for Saxe, but he is concerned about further price decreases.

Inventory Challenges
   As India reduces its production, buyers have become more selective, wanting only inventory that moves fast, said Mehta. He observed that there have not been many good discounts during this period, adding that retailers who believed in keeping inventories up and never stopped buying were the ones who have done well and will continue to do so. Those who only want memo and only buy on consumer demand might suffer a wait as certain stones become scarce, Mehta explained.
   “Less manufacturing creates an environment where you have to be careful,” said Stanley Zale, vice president of diamonds and gemstones at Stuller, a Louisiana-based manufacturer of diamonds and finished jewelry and supplier of various goods to the diamond industry. “Diamonds are not a commodity in that you don’t have a hedge for it,” Zale said. “Unlike gold, you can’t protect yourself against a downward trend.” He explained that diamonds are a luxury item and are not traded as a commodity. During this period of squeezed production, wholesalers have to be extra vigilant about not only inventory levels, but also what they obtain and let go. Zale expressed optimism that things will improve in the coming months.
   Buyers continue to ask for diamonds bearing grading reports from the Gemological Institute of America (GIA) and shunning European Gemological Laboratory (EGL) goods, even as the EGL attempts to reinvent itself after having its grading standards questioned by the industry recently. “No one wants EGL goods, which I’m personally glad for,” said Saxe. He welcomed the move to more cohesive grading standards in the industry, which will only help benefit traders. Mehta, too, has noticed that demand for GIA goods remains strong.
   Moving forward, according to the diamantaires, the world will be looking at the U.S. market. “The U.S. is still the core solid market,” Zale said. Watterson feels that this holiday season will be a good one and expects sales to really start picking up during the September to December period.

Article from the Rapaport Magazine - August 2015. To subscribe click here.

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