Rapaport Magazine


By Avi Krawitz
Watching and Waiting

Diamantaires in Ramat Gan were satisfied with the level of polished demand in December, even though trading was relatively muted compared to previous years. Dealers noted steady U.S. demand but were still uncertain regarding the extent to which year-end holiday retail sales will spur diamond buying in the first quarter of 2013.
   “The U.S. is the only market that is really working,” said Yariv Har, a partner of ADR Kropveld, manufacturer of the Passion Cut. “December was okay, not great, but not bad. I’d say that sales were about the same as 2011, maybe a slight increase.”
   Nissim Zuaretez, chief executive officer of D.N. Diamonds, a manufacturer and supplier of polished, agreed, and noted that the market has improved since October, following a weak third quarter. He added that trading in the bourse improved in November and December, with some customers buying to increase their inventory. He observed that polished dealers who bought goods in August, when the market was at its weakest, were seeing positive returns on those purchases now. Still, Zuaretez cautioned that the diamond market remains dependent on the global economy, with the euro crisis and the U.S. fiscal debate continuing to dampen confidence.
   Har added that everyone in the Israeli diamond industry is keeping an eye on the U.S. “fiscal cliff” discussions, given that the U.S. accounts for about one-third of Israel’s polished exports. “The U.S. is a trickle-down economy so we need to know if the wealthy are spending and where,” Har said. “Consumer confidence drives the economy there, and that has a bearing on our business.”

   Polished suppliers who participated in the Israel Diamond Week in New York’s Diamond Dealers Club (DDC) in early December were encouraged by the response from buyers at the event. Forty-six Israeli diamond companies reportedly made the trip to New York and were rewarded by substantial business transactions conducted on the spot with hundreds of DDC members on the DDC trading floor.
   Alex Daniel, owner of Alex Daniel Diamonds, explained that in contrast to attending trade shows, the face-to-face meetings provided Israeli manufacturers and dealers access to the open market at a low cost while shortening the sales cycle. Shabtay Vogel of Dor Diamonds reported that onsite sales during the visit exceeded expectations, with a variety of goods in demand. “There was a lot of activity and we were exposed to many buyers and sellers, and we are very satisfied with this initiative,” he said.
   The positive New York City meeting results resonated through the Israel Diamond Exchange (IDE), which organized the event with DDC, injecting some confidence that trading will improve in 2013, after a challenging year in 2012. Zuaretez, whose company sells mainly in the Far East but also in the U.S., said he expects prices to rise during 2013, given that retailers have slowly diminished their inventory and given that there are fewer nice-make, triple EX goods around.
   “I believe prices will rise,” Zuaretez stressed. “We’ve already seen in the past few months that it has been easier to profit in certain items.” Har added that recent price stability may signal that the market has bottomed out and will improve in the coming months.

   Still, manufacturers continue to struggle to achieve profitable margins. According to Har, manufacturers are facing challenges from recycled goods. While retailers are carefully managing smaller inventory, he noted that they’re also increasingly looking for goods in the recycled market, rather than from traditional polished suppliers. “We’ve seen in the past two years that retailers are buying more off the street,” he said. “They simply get better margins there.”
   Many in the bourse noted that the influx of Zimbabwe goods is depressing overall polished prices, particularly because disclosures contained in certificates and on online sites are not always clear regarding the Zimbabwe origin. The polished Zimbabwe goods, which are sanctioned and illegal to trade in the U.S., are distinguished by a characteristic green tint and accordingly are selling at discounted prices on the open market.
   One polished dealer who requested anonymity noted that “There are a lot of Zimbabwe goods around that are dragging down prices of other goods. Demand for I-K colors is very weak because many of the stones in those categories are Zimbabwe stones.”

   For now, though, most in the industry are focused on assessing the year-end holiday season as they plan their strategies for 2013. Har noted that many businesses are holding tight to see what type of goods moved during the season. “People are definitely still buying diamonds. But we need to know if their spending habits have changed, who’s buying, how old they are and what they’re buying in order to plan for the year,” he explained. “I believe 2013 will be a stable year and if you have the right road map and the right merchandise, you will be okay.”

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

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