Rapaport Magazine


By Ronen Shnidman
Top Dollar for Top Quality

Israeli melee manufacturers are cautiously optimistic that returning demand for high-quality goods will bring back their profit margins as the fourth-quarter holiday season approaches.
   A handful of Israeli manufacturers specialize in production of top-end melee. They supply these diamonds, largely D through F, IF to VS melee with fine makes, primarily to high-fashion jewelry and Swiss watch brands.
   “In our major markets in Europe as well as Asia and the U.S., there has been a bit of a slowdown on the consumer level,” said Moshe Pinkusewitz, owner of Selected Diamond Traders. “But demand for beautiful, high-quality goods has not fallen. If anything, demand for these goods has increased while manufacturing has declined.”
   Pinkusewitz continued, “I can show two diamonds that are nearly identical but differ significantly in price because one meets the specifications of haute jewelry customers and the other does not. Both diamonds are certified by the same lab, they are both triple EX but there is a difference in the table of the two diamonds.”

Labor Costs
   These local melee manufacturers acknowledged that Indian melee manufacturers have a competitive advantage due to labor costs. As a result, while these manufacturers maintain head offices in Israel, all moved their production facilities to China in the 1990s to benefit from the lower-wage labor there. China’s local workforce is well suited to performing high-skill labor and there are less worries about them transferring their skills to potential Indian competitors.
   The labor, logistics and financial resources needed to manufacture and sort high-quality, fine-make melee to the specifications of leading jewelry brands is immense, said Abraham Fluk, chairman of Yoshfe Diamonds International (YDI). In China alone, YDI employs 80 diamond sorters to classify diamonds according to its SORTIFIED™ methodology, designed to meet the specific needs of high-end jewelers and watchmakers.
   As a result, Fluk said melee cannot be procured on an ad-hoc basis like larger diamonds. The process of manufacturing, sorting and then calibrating the diamonds can take months.
   “The lack of affordable rough diamonds will certainly impact the jewelers because a shortage in high-quality melee is developing,” said Fluk. “I already see quite a few leading diamantaires who stopped manufacturing and are now contacting us to find the goods that they need to fill orders.”

EGL Unifies Grading
   A return to quality was also the central message at a discussion held by the European Gemological Laboratory (EGL) with bourse members at the Israel Diamond Exchange (IDE) on July 7.
   Menahem Sevdermish, EGL’s global manager, unveiled plans to unify grading standards across the EGL chain of labs outside of North America. EGL also said it would abide by the decision of the World Federation of Diamond Bourses (WFDB) that all diamond grading reports must be within one color grade of accepted industry grading standards.
   Nevertheless, some diamantaires are skeptical that EGL grading reports can regain the level of use they had before the recent controversy over different grading standards.
   “I use EGL less today because my clients don’t have confidence in EGL at this point,” said a local manufacturer, diamond trader and IDE board member who asked to remain anonymous because of the sensitivity of the issue. “This might change with the new standards, but if so, it will take a long time.”
   In an interview with Rapaport Magazine, Sevdermish acknowledged that it would take time to restore EGL’s reputation but he was optimistic that the process could be accelerated by reaching out to the industry. To this effect, he said the lab would participate in a large number of trade shows, trade association meetings and a public relations campaign targeted at industry members across the globe in the coming months.
   “We have clients who returned to using our grading reports the moment they heard we were implementing a high standard and the new reports are already accepted by people in the market,” said Sevdermish. “I think most people would agree that it is unhealthy for the industry to be dominated by one lab with a monopoly on grading services. Keeping the EGL labs as a respected brand is not just an issue of maintaining high standards but also of preserving a healthy degree of competition.”

Polished Fair
   The overall polished market in Israel during July was less positive. Local dealers noted that stable demand from the U.S. was not enough to compensate for weak and softening demand for diamonds in the Asia Pacific and other markets.
   To drum up business on the trading floor, the IDE held a daylong polished trade fair for local diamantaires on July 21, in which 60 companies participated. Following the event, Shmuel Schnitzer, president of the IDE, said that the bourse’s board would discuss ways to promote greater trading volume at the exchange amid a weak global market.

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

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