RAPAPORT... Manufacturers in Israel enjoyed their three-week vacation during August, satisfied that the market was showing signs of stability. After a strong first half of the year, during which the country’s trade in polished and rough diamonds nearly doubled, many were confident the uptrend would continue, but at a slightly slower rate.
“There is a balance between buyers and sellers at the moment,” said Arnon Juwal, vice president of S. Juwal & Company, a manufacturer of 30-pointer to 3 carat-plus diamonds in all shapes and qualities. “There is no excess of goods in either rough or polished. It’s the best possible situation for the industry at the moment.”
Juwal added that he expects the stability experienced in the past few months to continue in the near term as the U.S. is showing signs of slight improvement, while the Far East and India are operating at “normal” levels. He attributed the increase in business to the fact that retail clients have depleted their inventory levels and are starting to restock. He further explained that many suppliers left the industry during the downturn, allowing those who remain to achieve an easier balance between supply and demand.
In addition, Juwal noted there was a lot of retail buyback from consumers through the downturn, which undercut the trade sellers, and that this trend was now coming to an end, easing the situation for manufacturers.
Ready to Work
Yacob Mor, a manufacturer specializing in ideal cut with hearts and arrows, agreed that the market has stabilized and will continue to edge upward. “If economic trends continue at the same pace, and things remain the way they are, there’s no reason we shouldn’t do business,” he said. “People are ready to work after the crisis and everyone wants to move forward.”
Mor noted that the polished market has improved at a healthy rate, while rough prices remained out of proportion. Juwal agreed that even though rough prices were stable, they remain high, making it difficult to make profits on the rough.
The improvement in trade was reflected in the July data published by Israel’s Central Bureau of Statistics (CBS) that reported polished diamond exports rose 14 percent year on year to $456.4 million for the month. Between January and July, polished exports increased 75 percent year on year to $3.5 billion, CBS reported.
While August was a quiet month, as is traditionally the case, with core bourse services closed for the summer vacation period, vendors were expecting to be more aggressive in September, ahead of the fourth quarter. Many were focused on the September Hong Kong Jewellery & Gem Fair to provide the sales boost they seek.
Economic Trends
The rise in exports is not limited to the diamond industry, as an overall increase in overseas shipments stimulated economic growth more than expected so far this year. Israel’s gross domestic product (GDP) rose an annualized 4.7 percent in the second quarter of 2010, after growing by a revised 3.6 percent in the first quarter, according to CBS. The second-quarter growth is the fastest rate of expansion seen in more than two years.
Second-quarter activity was stimulated by exports, which account for about half of Israel’s GDP, and by a rise in consumer spending. A separate CBS report showed that sales abroad, excluding ships, aircraft and polished diamonds, increased to $3.8 billion in July, its highest level since 2008.
Bank of Israel Governor Stanley Fischer has forecasted economic growth of about 3.7 percent through 2010. He noted, however, that the depreciation of the euro is likely to hurt sales to Europe and exports that compete with European products. He also cautioned that while most indicators present a positive picture, some suggest the possibility of slowed growth in the second half.
In a note explaining the bank’s increase of its August interest rate by 25 points, Fischer wrote, “There are growing signs that the pace of the global recovery is slowing.” He explained that this was caused by weaker-than-expected macroeconomic data from the U.S., the ending of government rescue programs and contractionary measures taken in the Chinese economy, as well as continuing uncertainty over the fiscal crisis in some European countries and policies to reduce deficits in those countries.
“Forecasts this month tended to predict lower levels of global growth than forecasts earlier in the year,” Fischer said. “Nonetheless, global growth is expected to continue in the next few months, mainly due to the very low interest environment and continued rapid growth in East Asia.”
Politically Speaking
Israel continued to play a central role on industry bodies with Avi Paz, president of the Israel Diamond Exchange (IDE), elected to a second term as president of the World Federation of Diamond Bourses (WFDB). In addition, Moti Ganz, chairman of the Israel Diamond Manufacturers Association (IsDMA) was re-elected chairman of the International Diamond Manufacturers Association (IDMA).
The Marketplace
• Trading was quiet through summer vacations.
• Hopes were high for the September Hong Kong show.
• Polished and rough prices are stable, although profit margins are slim.
• Shortages exist in oversize stones.
• Demand is good for VS-SI goods.
Article from the Rapaport Magazine - September 2010. To subscribe click here.