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DW Special: The Israeli Diamond Industry
Opening Windows of Opportunity despite the Crisis
By: By Rachel Lieberman, Content Manager, Israel Diamond Institute Portal
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Jan 30 2009 6:25PM
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Reference: 3494  

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The crisis currently plaguing the Israeli Diamond Industry is not the result of any overextension within the industry itself, but rather the consequence of a worldwide economic “tsunami.” Unfortunately, little comfort lies in that fact.

Much like other diamond industries worldwide, the Israeli Diamond Industry is currently facing a credit crunch, dropping diamond prices, a sharp turndown in demand for rough, and buyers who are biding their time – a lethal combination.

The facts and figures speak for themselves: Polished diamond exports from Israel decreased by 11.8% from $7.1 billion in 2007 to $6.2 billion in 2008. In volume the decline came to about 23%. Rough exports decreased by about 2% in value from $3.4 billion in 2007 to $3.3 billion in 2008.

Polished diamond imports recorded a 3.9% decline from $4.6 billion in 2007 to approximately $4.4 billion in 2008. In terms of volume, the slump reached 13.7% to 3.1 million carats. Rough diamond imports declined by 11.9% from $5.1 billion in 2007 to $4.5 billion in 2008. There was a 14.9% decline in terms of volume to 15 million carats in 2008.

Despite the less than heartening statistics, the final figures for 2008 regarding the level of debt of Israeli diamond companies reflect the industry’s financial stability. In 2008, the average debt level stood at $2.3 billion, a slight increase in comparison to 2007, when the average debt reached $2.1 billion. At the end of 2008, the numbers dropped back to $2.1 billion due to the decline in exports.

There are obstacles that must be overcome - the Israeli Diamond Industry has had to cope with reduced bank credit, a rise in the banks’ LIBOR interest rate, greater risk margins on bank credit, demands for increased collateral and other problems.

Nevertheless, Eli Avidar, Managing Director of the Israel Diamond Institute, notes that the Israeli Diamond Industry was not taken by surprise when the crisis began. “We anticipated the crisis already in 2007. For this reason, the Israeli Diamond Industry shifted some of its focus to China and India. This is also why we established a representative office for the Israeli Diamond Industry in Hong Kong.”

Avidar continues: “The Israeli Diamond Industry is strong. It will withstand the difficulties and overcome the obstacles. A crisis of this kind must take its normal course. Some companies will go out of business due to conditions that existed prior to the crisis. Some players will disappear and new ones will take their place. This is the normal life cycle which has always existed in the past and will prevail today. Nevertheless, the Israeli Diamond Industry will emerge as viable and active as before and will continue to play its key role as a major trading center.”

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