The mood in the Israel Diamond Exchange (IDE) warmed somewhat in February, compared to the preceding months, as reports trickled in of a more stable market and a relatively busier trade.
“It’s difficult to define a trend in this market environment but the mood has improved a bit, and rough buyers are starting to look for goods again,” said Simeon Loon, senior manager at Waldman Diamond Company Israel, which operates a rough sourcing and polishing business.
Loon reasoned that the market seems to have adapted to the new prices and adjustments that took place. “People have realized that if you want to sell goods, you have to do so at the new prices,” he added.
Similarly, Eli Sadeh, owner of Eli Sadeh Diamonds, which specializes in rounds, princess cuts and emeralds of 1/3 up to 3 carats, observed that customers and the end consumer are starting to buy again.
Medium-Size MovementSadeh maintained that the U.S. market, which accounts for almost half of Israel’s polished diamond exports, would be the first market to emerge from the crisis. “It will take a few years to grow, but the U.S. is at least showing signs of stability,” he said.
Loon noted that companies that sell to the retail market were better equipped to cope with current conditions than those that sell just to the trade, and stressed the need to keep inventories up to date and in line with demand. He predicted that in the short to medium term of four months to a year, demand will be stronger in the VS and SI goods, with some movement in the 1- to 2-carat sizes.
Sadeh agreed, reporting that 50-pointers up to 2 carats are the only goods that are selling at the moment, while the larger stones are still very quiet. “People who deal only in bigger stones are the ones who hurt most in the crisis, but a majority of the Israeli market deals in medium sizes. So, on the whole, we will come out okay,” he said.
Even in the past few months, Sadeh added, although there were job cuts, “bankruptcies have been few and bank debt has been reduced, so we see the strength of the industry.”
Buying Opportunity
Diamantaires were also encouraged by the presence of more foreign buyers in the bourse. One New York–based dealer, who asked to remain anonymous, stressed that it was an opportune time to replenish depleted stock. “Inventory in the better range of goods was down because when we sold goods, we didn’t replace them as the prices were too high,” he said. “Goods have now become much cheaper so there is an opportunity to balance things out.”
Despite the more positive attitude, diamantaires stressed that their outlook should be viewed in the context of the economic environment. “This is not a normal situation and it is still difficult to find stones,” said Nir Goldman, sales manager at Avlas Diamonds, which specializes in high-end fancy shapes. “We still have a strong inventory, but for companies without stock, it’s very difficult to find the goods.”
Goldman reported that most of the work currently being done is in 25- to 75-pointers, with Western Europe the strongest of the three markets in which Avlas operates. The Asia-Pacific region is not great after the catastrophic Macau show and, in the U.S., “we are getting more quotes, but not necessarily orders,” he reported.
A Colorful Alternative“The color enhancement sector has been much less affected by the crisis than others in the industry,” Amnon Barak, president of Briza Color Diamonds, said. “We’ve continued to supply major, quality diamond companies in the past four months, even more than usual. More customers are looking for cheaper jewelry so companies are taking lower-quality diamonds and using color enhancement to make a better product.”
To capitalize on this trend, Briza recently hosted three seminars in the diamond exchange to inform manufacturers that there is an alternative method to deplete their inventory. “When they get calls for color diamonds, manufacturers don’t have to go out and buy new stones. They can use their existing inventory to enhance the color according to their customer’s needs,” he explained. “This provides a new and less expensive avenue for them.” The company is planning to host similar miniseminars daily at the Hong Kong show, and is hoping to do the same at other shows and at other diamond centers.
The Marketplace • Trade is showing signs of improvement as markets stabilize.
• Rough buyers are starting to look for goods again, but at prices 35 percent to 40 percent less than before the crisis.
• Some shortages are being reported in 1-carat princess and 0.5-carat low colors with certs.
• Collection VVS goods are weak due to high prices.
• Smaller to medium-size goods of 50-pointers to 1.5 carats, VS, SI, medium to low colors are moving in the U.S.
• The market for larger stones is still very weak. High-caraters are selling at up to 40 percent less compared with 2008.
Article from the Rapaport Magazine - March 2009. To subscribe click here.