Israel Alliances Strengthen

RAPAPORT… As a land of festivals, India sees a splurge in shopping activities during the time of Diwali, Eid and Christmas. Coincidentally, all three festivals are falling in line one after the other this year and the sale of jewelry has been on the rise, bringing a welcome change for diamond traders and retailers. According to Mehul Choksi, chairman of Gitanjali Gems and Jewelry, “After a lull all through the year, there has been a rebound during this season and it may continue to and through the New Year.”

Strategic Alignment

In talking about trade relations between countries, perhaps the relationship most notable for India is the one it shares with Israel when it comes to diamonds. Diamond trade between the two countries has grown significantly — India is now Israel’s ninth-largest global trading partner and its second largest in Asia. Anil Shah from Venus Jewels said: “Israel enjoys the advantage of being strategically located between India and the U.S. Huge marketing activities are undertaken by Israelis in the U.S. and buyers from across the globe visit Israel to buy diamonds, especially in larger sizes. It can be said that Israel is the marketing arm of India in countries like the U.S., Japan and Europe. Of late, there has been a slowdown in regard to Israel’s manufacturing of large-size diamonds, as India has been emerging in this area. The reason is the expensive labor in Israel compared to India.” In respect to business transactions, Shah said, “During the financial year 2005 – 2006, approximately 29 percent of the total sales of Venus Jewels were made to Israel, making Israel our second-largest export destination of diamonds, second only to the U.S. This is testimony to the enormous trust and confidence in our unique business models.”

For Choksi, “Working with Israel is always a pleasure, as they are very professional and hard working. The Israel diamond business has been strong in the American market for ages and this gives them a unique advantage. However, market equations are now changing. Manufacturing facilities are less affordable in Israel, which is not the case with India. Our manufacturing capabilities, technology and expertise have won the appreciation of the Israelis and now, many of them are buying from India. Big names like Schwartz and Leo Schachter also buy from India.”

Commenting on the market dynamics, Shah said: “Over the past few months, the prices for stones of 2 carats were very high, but after a slight reduction in the overall prices for this size, stones in this range are moving pretty well.” According to Choksi, “Smaller to bigger sizes and stars to full cuts are most in demand and 6.5 to -11 are the most used.” Jai Begani, managing director of Forever Precious, said, “As gold and diamond prices have increased over a period of time, people are opting for diamond jewelry with colored stones as it gives a bigger look at a lower price. Color also adds zest to the product and makes it look more attractive.”

New Developments

The month of October brought with it a few developments for the Indian diamond industry, the most notable of which was the election of Sanjay Kothari as the new chairman of India’s Gem and Jewelry Export Promotion Council (GJEPC). Kothari has taken over the responsibility from Bakul R. Mehta. Vasant Mehta was elected vice chairman of the council. The terms for both men extend to September 2008.

An additional development to promote the diamond industry in India has been the formation of Diamond India with seed capital of $50 million. Formed as a cooperative effort by approximately 60 leading diamond merchants, the main objective of Diamond India is to become a formidable buyer of rough diamonds from across the globe. The company will also explore the possibility of buying diamond mines in Africa and Canada and plans to distribute the rough among its members as well as sell it on the open market. The group’s members contributed to the seed capital in individual amounts ranging from $222,000 to $2.6 million.

To help Surat stake a claim as a manufacturing hub and not just a diamond production unit, the Indian government has announced it will begin work after the Diwali holiday to get Special Economic Zone (SEC) designation for Surat, which would provide various economic and tax advantages that would help the area expand its production capacity of finished diamond jewelry.

Numbers

Indian imports of rough diamonds have shown a decline of 7 percent between April and September 2006 at $4.1 billion in value for 80 million carats compared to 89.3 million carats valued at $4.4 billion during the corresponding period in 2005. India’s total gem and jewelry exports stood at $8.1 billion for April to September 2006 as compared to $8.2 billion in the same period in 2005.

The Marketplace

Markets are generally quiet due to the Diwali vacation break that began October 19.
• Stars and melees are very strong and are selling in all colors — browns, whites and yellows.
• Goods below 0.50 carats in lower piqué categories are moving extremely well.
• 0.70 to 0.99 carats are still very hot and smaller discounts at that level bring their prices closer to the 1-carat range.
• 1 carat+ goods are easily available across the board, but premium sizes for better colors and clarity in I+/VS+ are hard to find.
• Demand for 2 carats is still slow, prices are stable and goods are easily available, except for premium sizes from 2.25 to 2.99 carats, where demand is stronger.
• Very good demand and shortages exist for 3 carats in VVS-VS/H+ goods.
• Fancy shapes from 0.90 to 1.50 carats are very hot, with biggest demand for pears, princess and marquise cuts. SI1+ / I+ matched pairs are hard to find. Demand is also strong for sizes 1/6 to 3/4.
• Fancy color diamonds, especially yellows, are in very good demand in rounds in 1 carat+ sizes.