De Beers Diamond Trading Company (De Beers) announced yesterday that it would raise its prices for rough diamonds at the next sight by 5%. The price hike will probably have an adverse effect on Israel's diamond industry.
Israel Diamond Manufacturers Association (IsDMA) chairman Moti Ganz told "Globes" that De Beers' price hike would cause losses to diamond merchants until prices for polished diamonds could be raised in 2-3 months, and even force some diamond merchants out of business altogether.
Industry sources believe that Israeli diamond merchants are liable to be stuck with inventories of polished diamonds from new purchases that are more expensive than polished diamonds purchased from the earlier, cheaper, deliveries. The result will reduce the profitability of diamond transactions, and possibly drive polishers out of business. At this stage, no diamond polishing is expected to take place during the Passover holiday next month.
Diamond prices are expected to rise for 2-3 months, before stabilizing, until inventories of rough diamonds purchased from earlier sights are exhausted.
Israel's diamond industry currently includes 1,800 active members of the Israel Diamond Exchange and 300 diamond cutters. 17% of De Beers' sales, amounting to $5.5 billion a year, are to Israel. These account for 20% of the direct supply of rough diamonds to Israeli sightholders. Another 30-33% of Israeli rough diamond imports, amounting to $2.5-3 billion a year, also come from De Beers through second or third-hand dealers, mostly Belgians.
De Beers used to directly supply 21% of its rough diamonds to Israeli sightholders until last year's cuts. However, even after the cut, De Beers still accounts for the lion's share of rough diamonds in Israel.
Published by Globes [online] - www.globes.co.il - on March 18, 2004