RAPAPORT… Capitalizing on the current seller’s market, trading in Ramat Gan remained upbeat in the weeks preceding the JCK Las Vegas show. The event brought Israel’s focus back on the United States, if it ever drifted. But while the U.S. still provides the backbone for the Israeli industry, accounting for approximately 40 percent of its polished exports, many note the diminishing impact the U.S. is having on the global market.
“There is real demand out there, especially from the growing consumer numbers in China and India, as well as in the U.S.,” said Jeremy Medding, a partner at EMA Diamonds, which specializes in .10-carat to 3-carat stones in all colors and clarities. “But the U.S. is being left behind by markets in the East regarding price levels. The U.S. doesn’t have a real ability to influence prices.”
Yair Sahar, vice president of the Israel Diamond Exchange (IDE) and chief executive officer (CEO) of Sahar Atid, a specialist in cutting square-shaped diamonds, agreed, noting that the U.S. lags behind the Far East in absorbing the new prices emanating from the world’s cutting centers.
Sahar added that at the start of the recent strong polished price uptrend, there was some concern that buyers in the U.S. would not follow the rest of the world in adjusting prices, but they have slowly come around. “In the past few months, we have realized that whereas the U.S. used to lead the market in price trends, it is now following the Far East in absorbing new prices,” Sahar said. “But the U.S. is still the largest and a very important market.”
Right Stone at the Right Price
Medding expects that some surprises may be in store for U.S. buyers when they realize that prices are higher than they anticipated. Given the current market environment, he expects that the strong trading environment will continue, driven by buyers in the Far East. “We are in a market where it is difficult to find the right goods at the right price,” Medding explained. “People are scrounging for goods.”
Ory Vogel, of Dor Diamonds, a supplier of commercial and high-end diamonds, explained that the shortage of goods is limited to specific articles, particularly premium cut goods. “Generally, you can’t find large quantities even if you are prepared to pay premium prices,” he added. Vogel stressed, however, that there has been a good level of buying from customers in all markets, including the U.S., despite the prevailing price resistance.
In addition, Vogel reported a rising demand for diamonds as an investment tool, which Dor Diamonds is encouraging among its private clients and funds. “Initially, the idea was to focus on high-end goods, but we have been trying to convince investors to purchase more commercial goods,” he explained. “These are the main engine of activity today and they have done well in the past few months.”
Seeking Stabilization
While polished prices have shown strong increases so far in 2011, Medding noted concern that the business-to-business trade is pricing its product out of the market, which will eventually impact sales to the end consumer. “There seems to be a never-ending cycle of rising prices, which influences higher manufacturing costs, which influences higher polished and retail prices,” he explained. “So the question is how long it can last.” Medding questioned whether the industry has the self-discipline to prevent high prices from affecting demand, or if some outside force might bring stability to the market.
Yaki De Levi, of Belami Ltd., a maker of fancy shape diamonds, pointed to a “crazy” atmosphere in the rough market and noted that rough dealers appear willing to pay prices that are unreasonable for cutters. As a result, while cutters generally buy rough with the hope that polished prices will increase by the time the goods are polished, they are opting to wait for some rough stabilization or for further polished increases. “Manufacturing is very difficult at current rough prices,” he added.
Stronger Trading Center
Still, as diamond markets continue to improve, Israel appears to have emerged from the crisis as an even more significant polished trading center. “There is an energy here that you don’t see anywhere else that was not evident before,” Sahar explained. “And the market here is being driven by a young, new generation.”
The Marketplace
- Polished trading was strong in May as the industry prepared for JCK Las Vegas.
- Demand is good for .30-carat to 3-carat VS-SI goods in all colors.
- Demand is strong for oversize stones.
- It is difficult to find excellent cut diamonds, especially in 1-carat VS-SI goods around the $7,500 price point.
- Demand for larger goods above 5 carats is relatively weak.
- Cutting margins are under pressure as rough prices continue to rise.
