Market Holds to Status Quo

RAPAPORT… Business in the U.S. wholesale market in February continued to be quiet to moderate for many companies, although most in the industry agreed that trading was nonetheless about even when compared to last year at this time. “For us, 2006 got off to a sluggish start and turned out to be a good year,” said Jeff Fischer of Fischer Diamonds Inc. “The sluggish start this year mimics a year ago and, hopefully, the rest of the year will, too.”

Fischer wasn’t the only one experiencing a bit of déjà vu with the less-than-optimal beginning to the year. “Business is rather quiet now, but is still on a par with last year,” said Marc Knobloch of Aron Knobloch Inc. “But, if you compared business to years past — in the 1970s, ’80s and ’90s — this little blip of activity that we have right now might not have even registered. Now, it gets us excited.”

Of course, not everyone has found business to be slow-going. “It has been not bad at all,” said Ami Koret of Davidoff Diamond Corp. “We are constantly busy.” Alan Rehs of Rehs Co. Inc. commented that January and February had been very strong for him.

In terms of activity, Valentine’s Day did little to stir up any big business — just a little hop — although, according to industry insiders, it rarely does. “That holiday has never been very significant on our radar screen,” said Fischer. Rehs agreed. “I have never found Valentine’s Day to be a major factor in my end of the business,” he said.

Access to Rough

A major factor that does seem to determine a firm’s fate regarding activity is the ability to obtain the right sort of rough, something that is somewhat of a challenge. “It is definitely more time-consuming to get ahold of the rough I need and I think that is due to changes in distribution channels,” said Rehs. “There have been consolidations in the industry, countries are trying to keep diamonds produced within their own borders and globalization makes it easier and more cost efficient to produce elsewhere.

“Business has become tougher, because it is tougher to get ahold of the goods — but once you have them, it is easier to sell them,” Rehs added. “Over the past one and a half to two years, if you own the goods, you are much more in the driver’s seat than in years past.”

Fischer has also been challenged by the availability of rough. “I never would have imagined that I would say that it is tougher to get ahold of the rough, but it is,” he remarked. “Larger, decent rough is extremely expensive compared to the polished market.”

Trends

The market in the United States continues to see uneven trading, with smaller goods experiencing less demand as the bigger stones dominate everyone’s wish list. “We are selling a lot of big stones,” said Koret. “The prices on the big stones are going sky-high, but when we can get the stones, we can sell them.”

Regarding fancy shapes, the square shapes as a whole are seeing mixed demand. While emeralds and radiants are very popular and princesses are steady, Asschers have leveled off somewhat and cushions are decidedly mixed. In the other shapes, pears and ovals are doing well, and hearts are relatively weak. Fancy colors appear to be strong, especially in yellows.

Big Stones Often Pair With Platinum

Another trend worth noting is that as the intense demand for bigger and nicer stones persists, there is a trickle-down effect in terms of the metal those stones are most often matched with — platinum. “When people ask for larger stones, you can almost guess that the next thing they will mention is platinum,” said Knobloch. “With diamond jewelry, people want the metal to match the quality of the diamond, and platinum is seen as the luxury metal. So, diamonds automatically get paired with platinum.”

Rehs agrees that there is a definite prestige assigned to the metal. “Platinum has a certain cachet and name recognition value. White metal has more importance and there is a preference for it — it’s what is in style.”

The Marketplace

• Trading activity continues to be uneven.
• Polished prices are mixed.
• Rough prices are strong.
• Bigger and better goods are still in demand.
• Goods below 1 carat are slower.
• Fancies are even.
• Fancies 4 carats and up in fine makes are still in short supply.
• Princesses hold steady.
• Pears and ovals see improved demand.
• Emeralds and radiants are doing well.
• Asschers have leveled off.
• Cushions are mixed.
• Hearts are relatively weak.
• Fancy colors remain healthy.