Rough Trading Remains Slow

RAPAPORT… High rough prices and resulting low demand led to a continued decline in Israel’s rough diamond trading market during the second month of the year. Israeli diamantaires — particularly nonsightholders — attributed the inflated rough prices to recent declarations by De Beers that rough diamond supply during the first half of 2007 would be reduced. Israeli industry leaders have proclaimed their steadfast determination to increase the country’s rough supply in order to retain its position as a global rough diamond trading center.

Rough Stats

Data released by Israel’s Ministry of Industry, Trade and Labor in February revealed that the country’s rough diamond imports in the previous month had continued a decline begun in 2006, dropping 23.7 percent to $268.6 million. By volume, the figure fell 44.1 percent to 768,332 carats. Rough diamond exports also continued to fall, declining 10.1 percent in value and 36 percent in volume.

Convinced that rough imports will continue to decline for the next three months, Simcha Lustig, rough diamond committee chairman of the Israel Diamond Institute (IDI), told RDR that he believes rough imports will rise after conditions are created for greater demand, such as rough shortages in the market. “Israelis will import less rough for a few more months, but once the shortages are felt, I am confident diamantaires will begin importing again,” he said. Lustig maintained that the main challenge facing Israel’s diamond industry is to find additional sources and successfully channel more rough into the country. This, he said, will help Israel maintain its local manufacturing capacity, as well as strengthen the industry’s role in exporting rough diamonds to cheaper production centers abroad.

To achieve this aim, Eli Avidar, IDI’s managing director, announced that plans are well underway for Israel’s Third International Rough Diamond Conference, due to take place in November 2007. “The industry is already investing major effort in order to make this event a success. The conference is expected to bring together all movers of the rough diamond sector, including representatives of mining companies and diamond administrations in relevant governments,” he said.

The conference, which takes place every few years, will deal with global issues regarding rough supply and prices and is designed to provide Israel’s diamond industry with the opportunity to grow direct connections with rough sources and increase the industry’s role in rough trading.

ALROSA

In February, Russia’s state diamond company ALROSA held its first sale in Israel. According to sources in Israel’s diamond industry, the package was smaller than expected and approximated $3 million worth of rough. Most of the goods were immediately sold to the first couple of customers. The company expects to increase the quantity of goods it imports into Israel to approximately $100 million by 2008. The resignation of ALROSA President Alexander Nichiporuk left some in Israel’s diamond industry concerned that the implementation of agreements might be decelerated. However, Lustig said that “I assume the change will not affect ALROSA-Israel business because, at the end of the day, it is in ALROSA’s interest to keep its rough going to producing centers.”

Lower-Quality Rough

In the near future, rough diamond prices will likely increase, noted Izzik Nisanov, president of L&N Nisanov, an Aber sightholder specializing in goods .50 pointers to 3 carats. “De Beers actions affect the entire market; when they offer less goods to the market, it results in high rough prices,” said Nisanov. Diamond dealers maintain that once inventory is reduced and there is less polished on the market, demand for rough is likely to climb. Nisanov added that prices are high and demand is low for the better-quality rough, which is also more difficult to source. Nisanov manufactures goods using G to H stones, which are easier to find and less pricey.

Yoram Dvash, of Y. Dvash diamond manufacturers and exporters specializing in square shapes, believes that in the long term, De Beers holding back of rough goods will actually help bolster the industry. He added that polished prices remain soft in the market, due to lack of demand and increased competition.

While rough trading in Israel’s diamond market has continued to decline, diamantaires are confident that increased shortages will result in increased demand and that higher prices will eventually serve to strengthen the industry. In the meantime, industry leaders continue to increase sources of rough supply and are feverishly working to open new doors and strengthen Israel’s hold on the rough trading market.

The Marketplace

• There is moderate polished trading activity and soft rough trading.
• Rounds are strong in all sizes, clarity and colors.
• Hearts, pears and marquise cuts in
VS-VVS are all in solid demand.
• Demand is strong for VS-VVS in all sizes.
• Princess cuts are in fair demand.
• There is soft demand for radiants,
cushions and emeralds up to 1 carat.
• Demand has increased for radiants in better-quality goods and princesses
1.5 carats+.
• There is fair demand for squares in
1 carat+.
• Shortages exist in top-quality rough.
• Cushions in 2.5 carats+ are in very strong demand.