“Prices are too high” has become the universal refrain for wholesalers asked about the market. The ever-increasing figures pose an obstacle to restocking, especially after a record-breaking 2021. Still, most remain positive — at least until the summer.
New York: Accepting increases
Yoni Nitzani summed up his sales in one word: fantastic. After a record 2021 for his company, New York City-based wholesaler Polo Gem Co., business has continued at a strong pace through the first two months of 2022. However, the high price of diamonds has made restocking for inventory challenging.
“The market is fueled by excitement and speculation,” said Nitzani. “Manufacturing is at full capacity; producers are already paying a premium and are pushing those higher prices onto the US market, which is the strongest global market.”
Rounds have become “untouchable”, especially for 1.20 carats and up. He pointed to strong demand for larger elongated stones (1.50 carats and up) as driving prices higher; marquises, for instance, have increased 40% over last year.
“We don’t have a choice about resisting a price increase. We need the goods to fulfill our orders, and demand is still high,” said Nitzani. However, it means he’s had to “work that much harder” to source goods, and accept lower profit margins in order to sell them at “an acceptable price that makes sense for our customers who want the finest makes.”
Nitzani does not anticipate a drop in demand, nor does he foresee any price corrections for at least the next few months. A correction would only occur after “several months of very slow demand,” which isn’t currently the case, he said. Furthermore, diamond dealers have strong liquidity. In fact, he believes the market may have reached some stability on pricing. While cautious, he plans to expand his inventory in the months to come, as he is “very bullish” on 2022.
Rochester: ‘Crazy’ market
“The year was off to a great start,” said Andrew Rickard, vice president of operations at wholesaler RDI Diamonds in Rochester, New York. However, he described the market as “crazy,” admitting he had never seen pricing like today’s. While acknowledging that limited inventory was driving some of the price hikes, Rickard drew a distinction between “real pricing and people trying to take advantage of the situation.”
The challenges are real enough. “You get to a place where there is pushback, first from the jeweler and then the consumer, because when a 1-carat becomes so expensive, people will not buy,” he explained. He expressed concern that the industry was on an unsustainable path with the rising prices, and he expects a correction at some point.
The explosion in lab-grown stones may be a result of people seeking an alternative to high natural-diamond prices, he posited. That said, he also noted a decline in the price of lab-grown.
Meanwhile, retailers are replacing “fast movers” ranging from 0.75 and 1.50 carats up to 2 carats, in I1 and SI clarities, according to Rickard. “True I1s are very tough right now. They’re very expensive because there are so few out there.”
While he doubted that the success of the last 15 to 18 months would continue long-term, he was still hopeful. “We’ll continue to ride the wave. I’m pretty confident for the first half, but it’s TBD [to be determined] as we get into summer.”
Los Angeles: Looking to technology
“The quite healthy market is driving strong demand for our manufacturing services,” said Christian Tse, owner and president of Tse Designs & Manufacturing. However, he believed being based in Los Angeles was giving him an advantage.
“With all the supply chain issues, more brands and designers are looking to avoid the risks and delays of offshore manufacturing,” he elaborated, so domestic production helped allay their concerns.
Higher-color and lower-clarity natural diamonds were strong sellers. Tse’s clients have prioritized “brighter-looking” over “cleaner” stones, favoring F to G colors and SI clarity, he reported.
Given the growth in demand, his biggest challenge has been hiring qualified jewelers, setters and polishers. He has an “open directive” to hire for all positions and has increased wages significantly as a “cautionary move to keep our talent.” Traditionally, annual increases based on inflation were 3% to 4%; this year, wage hikes range from 10% to 15%.
Looking to the future, Tse is designing and creating robotic systems to polish and to handle quality control via high-sensor cameras. However, this will not obviate his need for high-quality skilled artisans, he added.
He voiced cautious optimism for the first half of 2022, though his suppliers have informed him that future orders will cost more. “Our strategy for now is to take advantage of higher demand, because we can support it through equipment, technology and staffing,” he stated.
Article from the Rapaport Magazine - March 2022. To subscribe click here.