RAPAPORT... Weak economic conditions in the United States continue to impact the Israeli diamond market and diamantaires view the upcoming presidential election as a further cause for concern. “In an election year, there is generally uncertainty in the market,” said Doron Itzhakov of Hadad Diamond Company, which focuses on larger stones of 1 to 50 carats in all shapes. “So it will take two years at least, but the U.S. will come back.”
Despite the increased movement of Israeli goods to the Far East, the U.S. remains Israel’s biggest market and accounted for 52 percent of its total polished diamond exports in the first half of 2008. Israel’s polished exports to the U.S. rose 5.5 percent to $4.66 billion in the first six months of the year, while total polished exports grew 6 percent.
Abe Hazen, chief executive officer of SWA Trading, which owns the Trapz brand, noted that people were apprehensive about the coming six months. “The U.S. is in a recession, which I see lasting through 2009, especially if the Democrats win the election, because it takes time for a new administration to settle in,” Hazen said. “People who don’t recognize that we’re in a recession are in denial.”
With inflation and higher gas prices taking their toll, Hazen explained that the U.S. market was playing soft among “middle Americans,” who traditionally buy stones of VS1 clarity and lower, but added that “even the wealthy are prioritizing away from diamonds at the moment.”
GLOBAL VULNERABILITYNir Scolnic, sales manager at L&N Diamonds, a manufacturer of 30 pointers to 10 carats and up, was more upbeat about prospects for the U.S., saying he expected the weakness to last through most of 2008 “until the market wakes up again for Christmas.” Still, Scolnic took comfort from growth in Asia, particularly in India, “where there is a market for all goods from $200 items to the very high end.”
Hazen warned, however, that these markets were also showing signs of economic vulnerability. “India’s stock market is down 40 percent this year and real estate there is also hurting,” Hazen said. “Also, in Hong Kong, people are in vacation mode and the last show there was quiet. So I see a credit crunch developing in the Far East. All these markets are connected to the U.S.”
UPGRADING SERVICESTo help enhance Israel’s competitive edge in foreign markets, the Israel Diamond Institute Group of Companies (IDI) expanded its World Gemological Institute (WGI) laboratory services to the international stage. “We created this service in response to a request from our industry to have a reputable lab in the Israel Diamond Exchange (IDE) complex,” said Eli Avidar, managing director of the IDI and acting managing director of the WGI. “We believe there is a growing awareness of diamonds among consumers and expanding the WGI’s service can help enhance consumer confidence.”
The nonprofit lab was created in 1977 to service members of the Israeli industry but its certificates were never used overseas. With the relaunch and expansion, IDI is pushing to have WGI certificates recognized in international markets for the first time. Avidar said IDI would focus on penetrating the U.S. “because that’s our main market,” but noted that WGI has also launched in Asia. The main advantage, he said, would be the significant time savings for diamantaires in having their stones graded.
While Avidar could not offer a timetable or specific rollout plan for services the lab will be providing, he said these will include consultancy services, educational programs for retailers and enhanced research and development capabilities “in accordance with the high-tech tradition in our country.”
In line with its technology focus, the WGI recently introduced to the market its World Loupe, which provides both a white light component and a UV light for detecting fluorescence in diamonds. Hinting that more developments are on the way, Avidar admitted that the international launch is a work in progress that will take time but that it was necessary for the Israeli industry. “IDI’s goal is to strengthen our position in the market to help our members make more profit,” he said. “The WGI will make a major contribution toward this.”
GOING LOCALIDI also is promoting diamonds more aggressively to the domestic Israeli consumer market, most recently by participating for the first time as a sponsor in the 2008 Jovella International Jewelry Exhibition in Tel Aviv. The show has seen increased international exposure over its five-year history, reflected in the recent rise in Israel’s jewelry exports, which rose 5 percent to $410 million in 2007.
Itzhak Bendor, managing director of the Israel Jewelry Manufacturers Association, said Israel is showing great promise as a jewelry market. “For the time being, the Israeli economy is an island of stability, so it is very important for exhibitors to maintain their local customer base,” Bendor said. “There’s a very strong inflow of tourists at the moment and local consumption is at a peak.”
The Marketplace• Trading is expected to be slow through the summer vacation in U.S. and Israel.
• Most trading is to fulfill existing orders as people don’t want inventory piling up during the summer.
• Demand is focused on good colors in D-F and VS2-and-above clarities.
• In fancy colors, there’s been a shift in demand toward intense and vivid grades. Light fancy colors are considered less desirable.
Article from the Rapaport Magazine - August 2008. To subscribe click here.