Diamond industry struggles to sparkle

Polished diamonds exports are down 58.3 percent compared with last year.

diamonds 88 298 (photo credit: )
diamonds 88 298
(photo credit: )
The Israeli diamond industry has struggled in the first half of 2009, with polished diamonds exports down 58.3 percent compared with last year. Due in a large part to the global economic crisis, exports, which were $2,175 million at the beginning of 2008, dropped to $1,580m. When it comes to unpolished diamonds, the decreases are even more dramatic, with exports down 63.4%, from $2,175m. in 2008 to $797m. this year. In late May, leaders of the Israeli diamond industry appealed to Industry, Trade and Labor Minister Binyamin Ben-Eliezer to assist the industry with NIS 1.6 billion in credit guarantees, following a 56% drop in the export of polished diamonds in the first quarter of 2009. "Israeli companies' ability to deal with the crisis has been seriously damaged because the banks have choked off credit," said Eli Avidar, director-general of the Israel Diamond Institute. The Israeli diamond industry employs about 15,000 people, the majority of whom work at the diamond exchange buildings in Ramat Gan and are involved in the cutting, polishing and trade of the valuable gems. According to diamond controller Shmuel Mordechai, the diamond industry pumps $2b. a year into the Israeli economy and generates NIS 1b. in taxes. The American market, where 51% of Israeli diamonds are eventually sold, is importing less than half the volume of polished diamonds compared with a year ago. Israel's other trading partners are: Hong Kong, 23%; Switzerland, 9%; Belgium, 7%; England, 2%; and the rest of the world, 8%. "People who relied solely on the American market have been hit hard," said Raphael Adler, of Zvi Adler Diamonds, an Israeli diamond-trading company. "When you talk to people in America on the phone, they promise to send a check, but the check is like a yo-yo." Over the last few months, Adler said, many people in the industry have lost their jobs and some businesses have gone totally inactive. He said the people who manufacture diamonds are the worst off, because even before the recession they were competing with producers from developing countries and couldn't contend with their low labor costs. Avidar said the crisis in the Israeli diamond industry could have been much worse. "We were prepared for the decrease in demand well ahead of time, and companies arranged themselves in such a way as to minimize the effects of the global economic recession," he said. Part of the money the industry leaders are asking for is meant to finance an aggressive marketing campaign organized by IDI on behalf of its members. The group has launched a strategic program called "Together Works" to boost the industry's presence on the market and draw in additional clients. The seven-part plan, which is being implemented throughout the year, includes opening a new service center for Asian buyers, increased presence in trade shows, a toll-free hot line that alerts Israeli diamond companies to customer demands, a new industry blog and the introduction of a "buyers' week" to help introduce foreign buyers to available business opportunities. While exports have been seriously stymied, the local market appears to be doing just fine. Gabriel Kashi, of J. Kashi Jewelers, said the recession has not influenced sales at the Kashi chain of stores; on the contrary, they have even registered an increase from last year. Kashi suggested the reason for the continued success was that those who are in the practice of buying jewelry have not lost the will or the ability to do so. Adler said he was quite optimistic. "People still need engagement rings," he said. "Also, sometimes a piece of jewelry can make a great gift to calm down a person who is anxious about the economy." Zvi Adler, Raphael's father, said after 40 years in the industry, he was more pessimistic than his son. He said in the family-orientated diamond industry, companies that employ several generations were more likely to do well in times of crisis than the, supposedly business-savvy young people, whose businesses are the first to falter.