RAPAPORT… Israeli diamantaires returned from JCK Las Vegas in a confident mood because buyers in the U.S. appeared willing to meet their pricing demands. While sales at the show were satisfactory, many went with the intention to buy goods as well. This dual buy-sell focus represents a significant development in the market and is further evidence of the strong underlying demand and supply shortages that exist.
“We saw action in Vegas, but the main surprising trend was that Israelis and Indians were also buying goods there,” said Moshe Barzilai, who deals in .90-carat to 5-carat stones. “They went to the U.S. to buy in order to supply their customers in the Far East.” Barzilai noted a similar trend recently in the Israel Diamond Exchange (IDE), where suppliers are looking for polished goods because supply is falling short of the Far East–driven demand.
Back in Hong Kong
After returning from Vegas, Israeli diamantaires turned their attention to the June Hong Kong Jewellery & Gem Fair as they continued their aggressive pursuit of Far East markets. The Israel Diamond Institute Group of Companies (IDI) hosted a pavilion at the June Hong Kong event for the first time, with 60 companies participating. While expectations for the show were high, final results were not yet in, as the show was in progress at press time.
“Economic growth in this region has been vigorous and with this growth comes a greater demand for diamonds and diamond jewelry,” said IDI Chairman Moti Ganz. “We’re happy that the Israeli diamond industry is able to play a major role in supplying this demand.” Ganz noted that dozens of Israeli companies have set up offices in Hong Kong — and elsewhere in the Far East — with many manufacturing diamonds and diamond jewelry there as well. “Asia is clearly a major center for the Israeli diamond industry,” he stressed.
Haim Shininger, president of Paloma Diamonds, a manufacturer of better-quality large diamonds, agreed that the development of the Far East economies, in which he operates, has given the industry access to new consumers who are ready to spend money on diamonds. This has been the major driving force of demand and prices recently, he added.
Prices Rising
Shininger expressed concern, however, that while China and India have driven the fast and sharp increases seen so far in 2011, the market could turn just as quickly. “We prefer a stable market as there must be a limit to the increases,” he cautioned. “But prices continue to rise and I don’t see any sign that they will stop, or that the market will fall, for that matter.”
Feedback from Las Vegas indicated that buyers in the U.S. are also starting to consent to the higher prices. “U.S. buyers are accepting the higher prices because they have no choice if they want the goods,” Barzilai said. “There were people in Vegas who readjusted their prices two or three times during the show.” Such was the upward trend.
The positive mood from the show filtered down to the Ramat Gan bourse, where trade remained strong throughout June. Barzilai noted that people came back from the shows looking to fill both inventories and orders. Shininger added that with the strong local trade, prices in Ramat Gan were generally ahead of other centers. “Often it’s easier, and more profitable, to sell here,” he said.
Tight Profits
Shininger reasoned that the polished market is “fighting for its life” and is under pressure from high rough prices, which make it difficult for diamond manufacturers to reap any kind of profit. He stressed that stability would help ease the strain on manufacturing margins.
Yuval Harary, president of Yuval Harary Diamonds, primarily a manufacturer of fancy shape diamonds and diamond jewelry under the Fourever Concept brand, added that diamond manufacturers consistently work one phase behind the rest of the pipeline and have to assess market conditions and prices accordingly.
Shininger agreed and explained that cutters have to play a waiting game until the price is right to sell their goods — or even to decide to manufacture — in order to assure a profit. “This is not a question of speculation, but what needs to be done in order to stay afloat,” he explained.
Harary was encouraged, however, that most in the industry appear to be on the same page in understanding the current market phenomenon of continuing price increases. As a result, Barzilai expects the trend to continue, as both regular consumer demand for “diamond occasions” and investment demand for better-quality large stones continue to rise.
“The problem is that at the moment we don’t know how to price the goods, as we have to readjust them all the time,” Barzilai said. “And I think this will continue. I expect prices to continue to rise, sharply and quickly.”
The Marketplace
- Polished trading is good in the Israel Diamond Exchange (IDE).
- Demand is good for .30-carat to 3-carat, G-J, VS-SI diamonds, with especially strong demand for excellent cut stones.
- Demand is strong for oversize goods.
- There is a shortage of 1-carat collection VS2-SI1 goods.
- Rough for large-scale polished manufacturing is in short supply.
