Wholesalers in the U.S. say they are not seeing any price resistance, which they attribute to a number of reasons. Avi Simkhai of Kanton Diamonds, located in New York City, said that American businesses are taking memo rather than purchasing any inventory. “You can’t complain what the price is when you aren’t buying,” he said. Moises Mareyna Rosenberg, president of M&M Diamonds, located in Houston, Texas, agreed, noting that retailers are not stocking. “It’s just couples getting married and wealthy people who are buying,” he said.
Doron Rozen, president of Doron Diamond Merchants, located in Memphis, Tennessee, believes that people are more willing to compromise on the quality of a stone for a cheaper price. “I think that diamond buying has changed. Since prices went up, people are willing to purchase stones with lower clarities,” he said. “In the past, demand was for SI1 and demand is now strictly for I1.”
But Sam Frank, president of Leo Frank & Sons, located in Troy, Michigan, said that his customers are willing to pay for better-quality goods. “If you want to buy a diamond that doesn’t have any black imperfections in it, it costs 10 percent to 20 percent more than one that does. People are still showing resistance to these imperfections — a customer will buy a diamond that has a white inclusion on the side instead of a stone with a center black imperfection, even if it’s 15 percent more expensive.”
Credit Gets Tightened
Because retailers are relying exclusively on memo to stock their cases, many wholesalers are becoming less lenient with their credit. “We are very strict with credit,” Rozen said. “I spoke with a few jewelers who told me that on orders of $10,000 or more, they are taking half of the money up front before they show the customer the diamond.”
Ran Amiel, owner of Globe Diamonds, located in New York City, said that he is not pushing anyone to buy. “Usually after Christmas, a few clients disappear. Even if they sell a lot of holiday merchandise, they keep the money for themselves and pay it back very slowly. Sometimes I won’t get the money until the middle of the year.”
Some wholesalers have stopped extending credit altogether, like Rosenberg. “If they want to buy, they have to have the money up front,” he said. Frank agreed. “The people who pay badly are getting slowly weeded out of our system. Our risk tolerance has gone down but our receivables have gotten better.”
Overseas Buyers Push Prices
Although there is little price resistance, prices are definitely rising and some say it’s because of the overseas markets. Rozen recently returned from Antwerp, where he was looking to purchase 2-carat stones and larger, but he could not find what he wanted. “I didn’t see many goods there, but what I saw was extremely high priced. I think Antwerp cutters and diamond companies are holding back.” He added that a colleague who had just gotten back from Russia saw goods that also were very high priced — and being bought by Indians. “I think the Chinese and the Indians are buying everything and that is raising the prices,” he said.
Rozen believes that rumors are affecting prices. He feels that even before the syndicates hold their monthly sights, there are rumors within the market that the prices are going to be raised. “So, before the goods even hit the market, the prices are up because of the rumors,” he explained.
Amiel feels that prices are too high compared with the demand. “If the price was high with high demand, that’s okay. But there is no demand; prices should not be so high.”
Unemployment Affects Sales
U.S. wholesalers agree that the stagnant jobless rate is affecting the industry. “The job numbers are hurting us,” Rozen noted.“With the boom in India and China, the U.S. is just a big question mark. I am hoping our market will come back in the first half of 2011.”
Frank agreed, noting that bigger stones are moving well, probably due to stock market increases. “I see glimmers of hope going forward. We are definitely getting better results and the economy seems to be getting better. But the inexpensive merchandise is not gaining momentum because employment is not going up.”
Simkhai, who predicts a “very quiet” start to the year, had a slightly different take. “People are still hesitant and it has nothing to do with diamonds and prices — they don’t want to spend money. I think it’s due to the feeling of insecurity. Even if something bad didn’t happen to them personally, if a contact close to them loses a job, they are afraid it will happen to them as well,” he said.
Amiel didn’t mince words. “I believe in G-d, I hope for the better, but I don’t know what’s going to happen next year — it’s like gambling,” he concluded.
The Marketplace
• Demand is strong for 0.75 carats to 1.25 carats and over 2 carats.
• Rounds are selling best, followed by princess and marquise. Cushions are making a comeback.
• Pear, heart and Asscher cuts, as well as emeralds over 2 carats, are not selling.
• F-H colors are moving but anything below J is not selling.
Article from the Rapaport Magazine - January 2011. To subscribe click here.