Rapaport Magazine


By Avi Krawitz
Summer Slump or Market Slip?

Sentiment was weak in the Israel Diamond Exchange (IDE) as the quiet summer period set in. However, dealers were more concerned about the prolonged slowdown in demand than the seasonal lull in trading since diamond market weakness and global economic factors have taken their toll.
   “The market is volatile,” said Lior Rotem of L.J. Diamonds, a supplier of round and fancy shape diamonds in all sizes. “People don’t know what a good price to buy is and they don’t know what a good price to sell is.” That opinion has affected confidence, according to Avi Mandler, a partner at Beta Diamond, which specializes in rounds and fancies of .50 carats to 5 carats. He noted that buyers tend to refrain from buying in a downtrending market and there is consequently very little buying for stock at the moment. While those conditions have been prevalent since the 2008-2009 crisis, Mandler reasoned the slowdown is partly due to a drop in global demand and partly to issues specifically affecting Israel.
   “We don’t get the same support from the authorities as other centers like India do,” Mandler said. “The banks are also squeezing us, reducing their credit to the industry, and the best buyers aren’t coming here anymore.” Consequently, he said, there’s rising concern that Israel is losing its place in the market.

Pockets of Demand
   That’s not to say orders aren’t coming in. It’s just that the level of trading continues to drop by about 20 percent each year, Mandler estimated, which makes it very difficult to turn a profit. Data published by Israel’s Economy Ministry showed polished exports from Israel dropped 14 percent to $2.61 billion in the first six months of 2016, while the volume of exports slumped 20 percent. Mandler reported that buyers are very picky and looking for the perfect stone and any imperfection significantly affects the price.
   Similarly, there are pockets of good demand with fancy color diamonds seemingly outperforming the regular market, said Rami Seren, a partner at Seren Diamond Ltd., a supplier of fancy color diamonds. Seren noted blues and pinks continued to strengthen this year while demand for the more commercial-quality yellow diamonds has softened.
   He attributed the weakness in yellow diamonds to the sluggish economy and expects some confidence to be restored after the U.S. elections. However, overall strength in fancy colors is being stimulated by both investment buying and consumer demand. Seren observed that more dealers are shifting to fancy color diamonds since they see better opportunities to profit from that segment than with white goods.

Profit Margins Squeezed
   Overall, profit has been squeezed due to high rough prices relative to polished, which has affected both the regular market and the fancy color diamond segment, Seren said. Mandler added that rough prices on the auction and tender circuit have come down a bit in the past month, but not enough to influence the market — or improve profit margins. “The problem is you have to bid higher than everyone else to get the rough and you have to offer higher discounts to sell the polished,” he said. “It’s very difficult to operate in these conditions. Diamantaires need to build inventory but the value of our stock keeps declining as prices are softening. We need stability to restore confidence,” he concluded.

Special Fairs
   The IDE changed the format of its flagship International Diamond Week in Israel (IDWI) event to attract more participants from overseas. The event will take place from February 13 to 16, 2017, with the final day dedicated to individual meetings rather than trading on the bourse floor. Yoram Dvash, IDE’s president, said the exchange will work with the World Federation of Diamond Bourses (WFDB) to bring members of other affiliated bourses to the event.
   IDE also extended an invitation to overseas buyers to participate in this month’s Blue & White Fair, since many foreign dealers visit the bourse during that time, explained Dvash. The monthly fair was initially intended as an internal event presenting a different platform for local Israeli vendors to trade among themselves.
   “The fair is an excellent opportunity for local diamantaires to do business outside of the online network,” Dvash said. “With all of the technology that has been introduced into the trading process, nothing replaces personal connections and this is what we are striving for.” 

Article from the Rapaport Magazine - August 2016. To subscribe click here.

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