World Diamond Producers Convene in Israel

August 1998

Professional Insider:In The Industry

World Diamond Producers Convene in Israel

Changes in the diamond trade are both worrisome and a cause for optimism

Consider this statistic: Israel mines not a single diamond on its small wedge-shaped territory, yet it facets 60% of the diamonds likely to be sold in your store, at least in terms of value.

Israel is the world's largest diamond center and wants to maintain or even increase that status. Prime Minister Benjamin Netanyahu's government has eliminated taxes on imports of rough diamonds and exports of faceted diamonds. "People come here because of the human element but also because of the government policies and free trade. Israel's diamond trade is the freest in the world," said Netanyahu, keynote speaker at Israel's Rough Diamond Conference and tribute to Israel's 50th anniversary.

Despite policies designed to nurture the trade, exports of polished diamonds from Israel have fallen 8% since last year, the most dramatic downturn in a decade-long decline. Israel's diamond trade once supported 14,000 workers, but new technology and the migration of part of the cutting industry to cheap-labor nations has cut that number in half.

But it's the Asian economic collapse last year that killed a very large market for Israeli cut goods. "Ours is an industry in the midst of change," said Israeli diamantaire Charlie Hollander. "It's also the speed of change we will have to adapt to."

While the mood of Israel's diamond trade is one of crisis, not all is somber. Said Moshe Schnitzer, a founding father of the Israeli diamond trade: "I'm an optimist. I have seen a lot of ups and downs. But overall, demand has never decreased; it has only increased."

Supply & Demand
Much of the conference focused on supply and demand. Here's a look at how these issues affect U.S. retailers.

Supply: Independent producers now supply about 40% of the world's rough diamonds, quite a change from the days when De Beers strictly controlled supplies through its so-called single-channel pipeline. Israel, the largest buyer of rough diamonds, hopes to control much of the new material from Canada, Indonesia, Finland, Russia, South America and Namibia.

But for anyone who patronizes independent producers, De Beers' Anthony Oppenheimer sounded this warning: "Clients cannot rely on [De Beers] to sustain the market and at the same time work to undermine the system which sustains them and the market itself. The lesson is that everyone hangs together or they will all be hanged separately."

What it means to you: Many of the new supplies aren't on-line yet, and De Beers will continue tighter supplies. So supplies of some diamonds will be tight, perhaps well into 1999. Some tips:

  • Buy diamonds for stock (memo business will tighten) as soon as possible to avoid shortages later.
  • If you do custom work, take your designer to Israel, where good buys can be found on some diamonds.
  • Make your products unique to differentiate them from your competitors'.

Demand: As long as consumers feel secure about diamond's value, demand will be strong, said trade experts. De Beers spends $200 million annually to promote diamonds and has seen demand grow 150% in the past 15 years. "The diamond dream is alive and well in America," said Stephen Lussier, director of the De Beers' Consumer Marketing Division. De Beers also is developing a "powerful marketing program" for the millennium, he said.

What it means to you: Demand will grow as the world economy strengthens, which means you can expect more competition and higher prices for the available diamonds.

– by Robert Weldon, G.G.

Copyright © 1998 by Bond Communications.


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