RAPAPORT... As demand creeps up and shortages for rough diamonds become more widespread, Israeli diamantaires are maintaining an optimistic outlook for the diamond industry. Trade levels are still far below those seen a year ago, but the general trend is positive and confidence is growing.
“People see the supply issues again in diamonds,” explained Yuval Ben-Yona, managing director of Ben Yona Diamonds, which manufactures diamonds of 0.20- to 5-carat sizes. “There is no rough out there. Whereas in February, there was a shortage in only a few items, now the shortage is more widespread.”
Ben-Yona noted some scarcity in 2- to 3-carat diamonds and less so in the 4-carat stones, “which you can still find.” He expressed bigger concern for the 1.25- to 2-carat range of stones, I to K colors, VVS to VS1 clarities, for which “we are getting calls but are battling to find the goods.” Similar trends were reported by Alex Daniel, owner of Alex Daniel Diamonds, who said 1-carat stones are moving well, while 2- to 5-carat diamonds are less in demand.
Among 5-carat diamonds, Ben-Yona explained that there is a big discrepancy in prices between VS2 and SI1 goods that is affecting demand. “The VS goods are too expensive and the SI goods are considered cheap, and that’s how demand plays out,” he said. Demand in the 2- to 5-carat range in the U.S. is stronger for SI1, while in Europe and the Far East, there is greater interest in VS goods.
Selling at the Right PriceYair Saada, executive director of Julius Klein–Eliaz Diamonds Ltd., whose inventory includes round and fancy shape diamonds from 0.10 to 20 carats, stressed that conditions have improved, but only in areas where sellers are willing to sell at the “new and right” prices. “Dealers realize there is a new game and that if they follow the new market prices, they will sell their goods,” Saada said. He noted there are some dealers who are asking old, higher prices because they are still counting their losses and trying to replenish some margin on their stock. Saada nevertheless added that, on the whole, sellers are more confident about price stability and more accepting of current prices.
Eli Traub, vice president at A.B.T. Diamonds, which specializes in ideal cuts, agreed, noting that “there seem to be more serious sellers left in the market as trade volumes rise, manufacturing increases and diamantaires start to do business again.”
Opportunity BuyingSaada noted two types of buyers that have emerged in the current environment: opportunity buyers, who feel there is a shortage in some goods, consider these goods cheap and are buying them up, and those who are buying simply to fill orders. “It is difficult to find anyone who is buying to build up inventory at the moment,” he explained.
While Saada agreed that these “opportunity buyers” may indicate the beginning of a stronger investment market for diamonds, Ben-Yona noted a similar trend through April when there was “crazy demand” for 1- to 2-carat flawless, D to F, VVS stones. Diamantaires also reported more requests for stones above 10 carats. “These are high-end diamonds and indicate the emergence of diamonds as an investment tool,” Ben-Yona said. “This makes sense when you consider that the banks are giving no interest and no one wants to touch real estate.” He added that overall, diamonds showed a smaller loss than both financial and real estate markets through all the volatility of the past year.
Keeping ConfidentSaada emphasized, however, that it is still difficult to state that demand is strong, given the current market conditions. “I’d rather say that if you have the right network and are selling at the right prices, there are buyers,” he stressed, adding that Israelis were doing a great job in reaching out to former clients and strengthening their relationships with them.
Israelis as a whole also are maintaining a confident outlook and that is enhancing the mood and trade in the diamond exchange. “In the bourse today, people are more optimistic — they are buying more rough and cutting more stones than in December and January,” Ben-Yona reported. He also noted the difference in atmosphere between the Hong Kong and Basel shows in March, adding that “There is a much more positive atmosphere in the Far East and this has influenced people to do business.”
All agreed that the mood in Ramat Gan was much improved from the panic-stricken days of December and January. “Customers feel that their money is worth a lot more than before and that there are opportunities to buy in the market,” said Saada. “They have confidence in the diamond business again and are looking for those opportunities.”
The Marketplace• Shortages in rough are more widespread and apparent than previously.
• 0.80 to 0.90 carats are moving well, especially the D-F colors in VS2+ clarities.
• Stronger demand and resulting shortages exist in cushions in 1.25 to 2 carats,
I-K colors, VVS-VS1 clarity.
• Demand for high-end goods in 1 to 2 carat, flawless, D-F colors in VVS clarity
is picking up, especially for 1 carat, internally flawless, D, VVS1.
• Demand is improved for 5 carat, SI1-2, but less so for VS2.
• On the whole, 5 to 10 carats are moving slowly.
• Demand is improved for 10 carats+, indicating more investment buying.
Article from the Rapaport Magazine - May 2009. To subscribe click here.