RAPAPORT... Israel’s diamond establishment stepped up its efforts to boost trade in the Ramat Gan bourse and help diamantaires compete in the current recessionary environment. “We know this is a very difficult period and are doing everything we can to assist our members to get through it,” said Alissa Goren, chief marketing officer of the Israel Diamond Institute Group of Companies (IDI).
As part of that strategy, IDI has begun sponsoring up to four nights accommodation at the Sheraton City Towers hotel in Ramat Gan for foreign diamond buyers coming to Israel to do business in the bourse. In response to shrinking credit lines, Israel Diamond Manufacturers Association (IsDMA) President Moti Ganz proposed that the Bank of Israel create a $2.2 billion fund from the bank’s surplus reserves, from which banks could draw in order to lend to the industry.
“This would substitute for the commercial banks’ costs inraising money to lend to the diamond industry, while the industry would continue to pay its own individual risk margins on its debts to the banks. Such a fund would assist the diamond industry very much,” an IsDMA spokesperson explained.
The initiatives were welcomed in the bourse. Most members reported weak business activity through December, which some are viewing as a necessary correction period for the industry.
Selling at a Loss
“Our business in the fourth quarter of 2008 is expected to be down by 70 to 80 percent compared to the same period in 2007,” said Israel Atzmon, owner of Ajami Diamonds, which specializes in larger stones of 1carat plus in the higher qualities, and sells mainly to the Far East. “But the current conditions are making people more careful in their businesses, tightening credit conditions in the market and, ultimately, causing people to trade in what they can afford. So, at the moment, the market is cleaning itself of the weaker players -- which could mean potential bankruptcies -- and will eventually come back stronger.”
Atzmon reported some movement in better goods where stock is limited and where there isn’t new production, such as 2- to 3-carat oversize high-color items. “The collection clean goods that are in surplus on the market are at suicide prices, and the larger stones that had such high demand earlier in 2008 are still not moving,” Atzmon added.
Haim Katz, owner of Haim Katz Diamonds, which buys diamonds of 0.3 carats and up from Indian partners to sell in the U.S. and the Far East, stressed that the market was not completely dead. “There are sales happening, but you have to be prepared to take a loss at the moment,” he said. “There are lower volumes and lower prices, but what’s important is that there are sales. People who are holding stock because they are scared to sell at a loss are making a big mistake.”
Katz noted that his business has seen stronger sales in the U.S. than in the Far East in the past four months, reporting that 1-caraters and down, VS, in lower colors are selling in the Asian markets, while, in the U.S., stones up to 2-caraters are selling, with some small movement in VVS clarities.
Less TravelWith the lull in trade, businesses have become more prudent in their spending and are becoming pickier as to which trade shows they participate in. Goren noted that the Israel pavilion at the Macau show in January would be smaller than in 2008 as many companies had cancelled their bookings.
Philippe Frey, owner of Frey Diamonds, said he had initially intended to go to Macau based on the previous year’s successes there, but decided against it because of the economic situation. “It’s not just Macau, we’ve cancelled a few trips, including a visit to the U.S. in November, because a number of our very good customers told us they aren’t buying at the moment,” he said.
Frey said he doesn’t expect a high volume of buyers at Macau. Others echoed that sentiment, especially in light of the Chinese government’s new visa restrictions that allow residents of Mainland China only one visit to Macau every three months. Katz, who is planning to go to all his regular show dates in the first half of 2009, maintained it was important to go “just to see what’s happening there and get a feel for the market.”
Marketing Plan
Goren said IDI’s presence at the Vicenzaoro winter show in Vicenza, Italy, in January, though generally a smaller pavilion than at other shows, would be about the same as 2008, while Israelis would be out in full force at the March Hong Kong International Jewellery Show with its largest-ever pavilion. “That’s in keeping with our strategy of the past two years to focus on the Far East. Not to say that we’ve abandoned the U.S., but the East is where we still see our growth potential,” she said.
As part of its 2009 plan, Goren explained that IDI would continue to focus on its activities at the trade shows, evolve its marketing strategy by putting greater effort into IDI’s online presence and work to strengthen the IDI brand.
The Marketplace
• Christmas sales were disappointing and significantly down from 2007.
• There were some cancellations for the Macau show as diamantaires look to
cut expenses.
• The market for VS goods is showing movement, while the VVS market is
very slow.
• SI and VS goods in H-K colors are trading better than other goods.
• Better-quality VVS stones of D-F colors and large stones of 3 carats+ are still not selling.
Article from the Rapaport Magazine - January 2009. To subscribe click here.