RAPAPORT…
The beginning of September proved to be a somewhat confusing
period for the Israeli diamond market, as dealers in Ramat Gan appeared to be
waiting out the volatile trading environment.
“It has been a perplexing time because the change in August
was sharp and dramatic,” said Shmuel Schnitzer, honorary president of the
Israel Diamond Exchange (IDE) and chairman and chief executive officer (CEO) of
S. Schnitzer Diamonds. “Due to the global economic situation, we quickly went
from an atmosphere where the sky was the limit in the first half of the year to
uncertainty.”
Schnitzer stressed, however, that the Israeli industry was
in a strong position, compared with other centers, largely due to its
relatively low bank debt. While local banks have maintained conservative
lending policies since the 2008 downturn, continuing through the period of
growth, Schnitzer noted that this helped the industry when the market turned so
that the liquidity pressures that exist in other centers are not prevalent in
Israel today.
Bank Interest
Yair Sahar, president of IDE and chief executive of Sahar
Atid, stressed in a notice to IDE members that the exchange’s leadership has
been working to maintain a strong relationship with the banks to help move the
industry forward. In light of that effort, he expressed concern that a number
of Israeli banks recently notified clients in the trade that they have raised
the interest rates for lending to the diamond industry.
“This move is problematic, to say the least, especially
since we have in the past few weeks engaged with the producers to buy rough,
and in light of the recent correction in polished prices,” Sahar said. “In such
an environment, it is up to everyone who has an influencing position in the
market to mobilize and lead the industry to calm and stability. Such unilateral
decisions as those made by the banks are difficult to understand.”
Other Concerns
However, most in the bourse were looking beyond Israel’s
domestic banking practices to the effect that tight liquidity in India has had
on the global market. Combined with volatility in the equity markets and slower
growth in the U.S. and Europe, that lack of liquidity undermined overall market
confidence for much of September.
Doron Itzhakov, manager at Hadad Diamond Company, noted it
was too soon to tell whether the downturn represented a temporary correction,
or if the market was still vulnerable to a more sustained downtrend. “We will
see in a month or two whether stability settled in or not,” he said. “If
dealers needed to buy diamonds to prepare for Christmas, they had to do it
around the Hong Kong show because it’s very difficult to predict what will
happen in terms of prices and supply and demand.”
Schnitzer agreed, but stressed that in theory, the fourth
quarter should be okay as Chinese demand remains strong and demand in the U.S.
continues to recover, despite the persistent economic concerns.
Yariv Har, a partner of ADR Kropveld Diamonds, manufacturer
of the Passion Cut, noted that while U.S. polished dealers were cautious, U.S.
retailers show stable demand for goods. Buyers, he noted, have continued to
move toward cheaper goods in response to price increases. “Retailers have to
rethink their portfolios. They cannot replace the stock they had four months
ago on the same budget because they are dealing with different price points
today,” Har said. He observed that retailers are moving toward smaller sizes
and lower qualities and that there has been a rising interest in fancy shapes.
Har added that buyers are currently looking for what they
need and avoid making any projections about market movements. Still, he
remained confident that the Christmas season in the U.S. would be okay, barring
any major global event, and predicted that consumers will focus on value
purchases. “Eventually, this whole cloud of uncertainty will clear, but for
now, it’s all about price points and getting value for money,” Har said.
Mixed Feelings
Most diamantaires who spoke with Rapaport Magazine said
polished inventories were relatively low heading into the fourth quarter, and
that they expect manufacturing to rise in October to fill demand.
Schnitzer explained that dealers have to work day to day to
ensure that their inventories of rough or polished do not become overstated.
However, he added that people do need goods and that there is still reasonable
demand from all over the world. As a result, the atmosphere in the bourse has
been quite mixed, albeit better than in other centers.
Itzhakov agreed and acknowledged that “Overall, people need
to be cautious and both buyers and sellers need to tread cautiously in this
market,” he said. “They need to know their limitations.”
The Marketplace
- Trading is relatively slow as dealers wait for sustained
price stability. - There is a shift toward lower price points.
- Buyers are compromising on size and quality to maximize
their budgets. - Demand is good for .30-carat to .70-carat and 1-carat to
1.5-carat I+, VS-SI, triple Ex goods. - There is growing demand but narrow supply for 1-carat
stones in lower colors and clarities. - Demand is good for cushions and princess fancy shapes.
