Diamond Industry in Israel

Diamonds are Israel’s largest export market and account for 18.1 percent of its overall exports. Israel is the world’s fourth-largest diamond exporter and has a 9.25 percent share of a global market worth $116 billion a year.

The United States (67.3 percent) and India are the two major destinations for Israel’s diamond exports (8.98 percent). There are ample opportunities for SMEs in Israel for export of both Rough and Polished Diamond.

Definition / Scope
Market Overview
Market Risks
Market Drivers
Market Restraints
Industry Challenges
Technology Trends
Other Key Market Trends
Impact of COVID-19
Market Size and Forecast
Market Outlook
Technology Roadmap
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Further Reading
Appendix

Definition / Scope

Israel is one of the leading centers of the diamond world, a hub for both the trade and production of polished diamonds. Israeli diamond companies supply the stones that decorate a large amount of the diamond jewelry sold worldwide by processing a large amount of the world’s gem-quality rough in dollar terms.

The local diamond industry is based on a long tradition of the cutting and polishing of diamonds. This has a very useful background in polishing big and costly stones. That is why Israeli manufacturing companies specialize in the cutting and polishing of any form of large and medium-sized diamonds. Over the past decade, several new styles of diamond cuts have been introduced by Israeli diamond cutters.

Diamonds are Israel’s largest export market and account for 18.1 percent of its overall exports. Israel is the world’s fourth-largest diamond exporter and has a 9.3 percent share of a global market worth $116 billion a year.

The United States (43 percent) and India (8.98 percent) are the two major destinations for Israel’s diamond exports. There are ample opportunities for SMEs in Israel for export of both Rough and Polished Diamond.

Market Overview

Israel’s diamond industry is a important global player in the wholesale processing of cut diamonds. Israel became the Chair of the Qualification Scheme for the Kimberley Process in 2010. As of 2020, cut diamonds accounted for 18.1% of Israel’s overall exports and were the nation’s largest export commodity, accounting for 11% of the world’s production.

Israel was one of the world’s three main centres for polished diamonds at the beginning of the 21st century, alongside Belgium and India. Israel finished 2020 with $2.37 billion in polished diamond shipments for the year.

The industry is based in the “Diamond District” in the Tel Aviv District of Ramat Gan. Four houses, interconnected with walkways, make up the complex. In this complex, the entire trade process takes place The Diamond Tower in the district has the largest diamond trading floor in the world.

A non-profit industry body, the Israel Diamond Institute, is sponsored by Israel’s government to represent organizations and institutions active in the Israeli diamond industry.

In 2020, The volume of exports dropped 23 percent to 1.1 million carats, with an average price dropping 9 percent to $2,195 per carat.

Polished diamond imports slumped 37% to $1.53 billion for the year. Imports of rough diamonds dropped 40 percent to $1.07 billion, while Israel’s rough diamond exports also declined 40 percent to $859.1 million.

Market Risks

The major risk posing as threat to the growth of the Diamond Industry in Israel are

Fragmented Market

The Israeli Diamond Industry is highly fragmented with lots of companies entering into the business ranging from larger established companies to startups. The market has lower barrier for entry as it involves lower investment.

There exist a large number of local players in the market and they offer products to the local markets at a much lower price when compared to the organized international players. The factors leading to the fragmentation of the Diamond Industry are no economies of scale and strong competition in the market.

Top Market Opportunities

The top opportunities for SMEs and Startups in the Diamond Industry in Israel are

e-commerce

The diamond industry in Israel has benefited from e-commerce. The diamond industry that was once limited to family-owned or proprietor-run companies is evolving and aligning itself with the advancing corporate culture and technology by leaps and bounds.

Thanks to e-commerce websites and apps, there is a proliferation of retail outlets and franchisee shops, along with a rise in the presence of online players. Customers purchased diamond online for a small ticket size.

This ticket size has risen in the last 2 – 3 years with the rise of e-commerce and is expected to expand as the customer’s journey matures.

Export opportunities

Market Drivers

The Key factors driving the growth of the Diamond Industry in Israel are

Know-How and Expert Craftsmanship

Israel’s diamond polishing factories, considered the world’s most advanced, are equipped with advanced diamond processing technologies, many of which have been locally produced.

Throughout the global diamond industry, Israeli technical advancements such as lasers for diamond cutting, brutting machines, automated polishing machines and computer assisted design systems are used today.

The experienced diamond polishers from Israel rely on a rich heritage of know-how and professional craftsmanship. In polishing larger and more costly stones, their expertise is invaluable. That is why diamond manufacturing facilities in Israel specialize in polishing of large and medium-sized diamonds, of all shapes and cuts.

Safe Investment

Diamonds have performance and works of art as well as one of the very few items that are good for investment. Although customers may wear their diamonds as jewelry, diamonds symbolize their most stable assets at the same time.

High demand – a high possibility expected to increase the market price of diamonds in the forecast period. Although most other deluxe items, such as furniture, automobiles, furs, etc., lose their value over a period of time, because of their unbreakable/durable nature, this does not happen in the case of diamonds.

New product launches to flourish the market

The diamond jewelry segment for men is an evolving and potential consumer segment where more jewelry variations such as rings, bracelets, and chains are available. With imaginative designs to choose from, they are available. A section for daily wear is also emerging, where designs for daily wear are made delicate.

A recent concept that has penetrated this business segment is customized diamond jewelry. Women will now be able to customize the jewelry style that best fits their personality, making them special and confident.

Market Restraints

The Primary Factors hindering the growth of the Diamond Industry in Israel are

Lab-grown diamonds

Making of lab-grown diamonds has become cheaper than ever with technological advances. Lab-growns are, in truth, diamonds in every way – chemically and structurally – unlike imitation diamonds.

The decreased cost of processing laboratory-grown diamonds offers retailers new price points for comparable goods. A $5,000 diamond ring can be a very difficult investment for buyers, whereas the same ring is much more affordable with a laboratory-grown diamond of similar parameters and grades. The purchasing of a diamond is thus no longer a “purchase of luxury”

Lab-grown diamonds, which have been used for decades for industrial purposes, are now shaking up the consumer market of $87 billion as cheaper alternatives to mined gemstones. posing as a threat to the Diamond Industry in Israel. More than 50% of all LGDs are now produced in China. In 2020, China became the largest producer of lab-grown diamonds in the world.

A Bain report sponsored by AWDC and quoted in Rough & Polished reports that in 2020, China became the world’s largest producer of lab-grown diamonds (LGD). According to the report, in 2020, LGD production reached 6-7 million carats, with 50 to 60 percent of it produced in China. This poses as a serious threat for the growth of the natural diamonds segment of Israel.

Softer demand for polished diamonds

In 2020, short-term difficulties in Israel caused mining and midstream revenues to drop by 25 percent and 10 percent, respectively. At the beginning of 2020, near record high rough diamond production was followed by lower-than anticipated demand for polished diamonds, creating a ripple effect across the supply chain.

Two key factors were driven by softer demand for polished diamonds: geopolitical and macroeconomic stress reduced consumer trust and thus demand, and a rise in e-commerce generated efficiencies in the supply chain that reduced the need for stock on hand.

Industry Challenges

The major challenges faced by the Players in the Diamond Industry in Israel are

Reduced financing

There are currently only three banks in Israel that fund the diamond industry.

Because of the increased regulations against money laundering worldwide (which – sadly – the diamond industry is considered to be linked to), driven by the US banking industry, Israeli banks are moving away from the diamond market in large part. Capital shortages contribute to a decline in cash flow, which is a big problem facing Israel’s diamond industry today.

Diamond merchants must be capable of keeping a stock of diamonds, and when there are cash flow problems, this is very difficult to do.

Lower levels of demand for rough and polished diamonds

As trade transitions to lower levels of demand for rough and polished diamonds, the diamond market in Industry is under rising pressure. Excess inventory and accumulation of polished diamonds at retail, wholesale and dealer pipeline levels has depleted the financial capital of the trade and significantly diminished the liquidity of the market.

Retailers and wholesalers have postponed their purchasing of new items until current inventory is sold off, disrupting the daily flow of diamonds from suppliers to distributors. Although there is high demand and short supply for certain select types and grades of diamonds, large stocks of items that are more difficult to sell have built up in the cutting centers.

Technology Trends

The emergence of Digital technologies has significantly influenced the growth of the Diamond Industry in Israel, some of the key technologies shaping the emergence of Diamond Industry in Israel are

3D printing

It is likely that fine jewelry companies will make use of this technology to provide samples to consumers as 3D printing becomes more popular with declining costs. This means that before they make a commitment, a customer will be able to try out the piece in their everyday life, determining size, comfort, and wear.

This also makes it possible to properly incorporate the emotional aspect of the buying process into the e-commerce shopping process, enabling the consumer to interact with a specific piece before he or she buys it.

XRT technology

Diamond mining companies use X-Ray Transmission (XRT) technology to improve productivity in their activities in the worldwide diamond mining industry.

A mineral concentrate is passed through sensors under this technology, which bombard each stone with X-rays, and measure the absorption of each stone. XRT technology is increasingly becoming the industry norm, as new mines are beginning to use it and older mines are transitioning to it.

Pricing Trends

Due to the sudden impact of COVID-19, all commodity classes including diamonds faced price decreases in March, but gold and silver eventually gained from their safe haven status.

The concept is that these precious metals are cushions against inflation for market fluctuations and hedges. Usually, diamonds, which are seen as a luxury commodity, do not gain as widely from the demand for safe haven.

Even so, because of their mobility, steady value, appreciation and tangibility, diamond industry participants have long touted diamonds as a safe haven. however, it is difficult to know whether there has been a rise in that particular demand segment during 2020.

As demand slipped, so did rates. Between January and July, wholesale polished diamond prices fell 9.3 percent the diamond researcher and analyst told INN. However, they rose 7.3 percent by the end of December, making a near complete recovery.

With an average price falling 9% to $2,195 per carat. In 2020, rough diamond prices dropped 12 to 15 percent and have started to rebound in recent months. The current price uptick is due to the sale of backed-up inventory by diamond polishers and the start of the rough diamond buying process.

There was a resurgence in some diamond purchasing in the second half of 2020, when lockdowns began to lift, particularly during the holiday season from November to December, and a strong increase in demand was reported. This continued through the year’s end and through the new year.

Other Key Market Trends

In the near term, four trends have the greatest potential to affect the industry: rapid growth of online distribution platforms, increased marketing investment to promote the natural diamond industry, advances in laboratory-grown diamonds, and increased environmental and sustainability focus.

At just 5% to 10%, the proportion of online sales of diamond jewelry in Israel lags behind other consumer goods. E-commerce, however, is accelerating, and major diamond jewelry retailers have increased their online sales to 13% and 11% respectively in the US and China.

This trend is soon to be witnessed in Israel. Greater transparency in prices and optimization of retail stocks caused by e-commerce would have a huge effect on demand and prices for polished diamonds

Impact of COVID-19

In 2020, Israel diamond production fell by more than 35 percent to about 12 million carats due to planned decreases in production by major producers and significant industry-wide pandemic-related suspensions and curtailments.

Global demand for diamond jewelry has been significantly impacted by the coronavirus pandemic and related economic fallout, growing at a low-to-mid single digit percentage in recent years, and is likely to be felt well beyond 2020.

While much uncertainty remains about the ultimate severity and duration of the current situation, global demand for diamond jewelry has dropped by as much as 25 percent in 2020, possibly not recovering until 2022 or 2023 to pre-pandemic levels.

These are not times that are common. And consumer behavior is also not ordinary or predictable in the shadow of a global pandemic and a turbulent economy. There are, however, strong signs pointing to the diamond industry’s healthy recovery, based on sustained customer acceptance of the diamond’s emotional symbolism, a slow but steady return to production, and an increased focus on digital innovations that have powered the industry in new ways.

Market Size and Forecast

The Market size of the Diamond Industry in Israel is estimated to be US$ 6.8 Billion in 2020 and is poised to grow at a CAGR of 10.8% to reach a market size of US$ 11.4 Billion in 2025.

Due to the outbreak of the COVID-19 Pandemic, the Israel’s polished-diamond exports fell 37% year on year to $1.9 billion in the first 10 months of 2020, according to figures the government released.

In August, when the global diamond demand picked up, the decrease, reflecting the effects of the pandemic, eased marginally, with polished exports down 3 percent year on year for that month. In September, however, orders dropped 10 percent and plummeted 52 percent in October, the data showed.

It is not shocking to see that, as a result of the global effects of Covid-19, 2020 saw a sharp decline in Israel’s diamond trade relative to 2019. For the March-to-May period, Israel’s diamond sector faced “collapse” in the midst of an 80% drop in exports.

Parameter	January-October 2020	Year-on-Year Change
Polished exports	$1.9B	-37%
Polished imports	$1.11B	-45%
Net polished exports	$787M	-22%
Rough imports	$757M	-48%
Rough exports	$592M	-50%
Net rough imports	$165M	-35%
Net diamond account	$622M	-18%

Polished exports by volume	874,597 carats	-30%
Average price of polished exports	$2,174/carat	-10%

Israel ended 2020 with $2.37 billion of polished diamond shipments for the year, down from $3.41 billion in 2019, announced last week by the Ministry of Economy and Industry. Export volume fell 23% to 1.1 million carats, with an average price falling 9% to $2,195 per carat.

For the year, polished diamond imports slumped 37% to $1.53 billion. Rough diamond imports fell 40 percent to $1.07 billion, while at $859.1 million, rough diamonds exports in Israel also declined 40 percent.

The diamond industry in Israel is expected to witness a bounce back in demand and will achieve a growth rate of around 16% over the next 3 years and is expected to see growth in exports as it will achieve total export value of rough diamonds is expected to reach US$ 3.28 Billion in 2023.

Market Outlook

The diamond industry in Israel is expected to witness a bounce back in demand and will achieve a growth rate of around 5.2% over the next 5 years to reach market size of US$ 13.8 Billion in 2025.

The Outlook from the Industry experts for the Diamond Industry in Israel is cautiously optimistic as these are not times that are common. And consumer behavior is also not standard or predictable in the shadow of a global pandemic and a turbulent economy.

There are, however, strong signs pointing to the diamond industry’s healthy recovery, based on sustained customer acceptance of the diamond’s emotional symbolism, a slow but steady return to production, and an increased focus on digital innovations that have powered the industry in new ways.

The Israel diamond industry, in 2020, witnessed a fall in consolidated rough diamond prices between 5% and 10%, followed by a high single-digit percentage recovery in 2021 and a corresponding marginal decrease in 2022, as some supplies return to the market and a significant growth is expected over the next five years from 2021 to 2025.

Technology Roadmap

All parts of the value chain in the diamond industry in Israel are impacted by evolving and maturing digital technologies, the report says, allowing diamond producers, midstream players and retailers to improve efficiencies within their operations.

The blockchain projects introduced this year are a clear example of this pattern, promising to help customers determine the origin of their diamonds confidently. The most notable, “Tracr,” also saw two giants, De Beers and Alrosa, join forces to test a pilot testing the technology-based blockchain network.

Distribution Chain Analysis

The supply chain components of the Diamond Industry is as in the below image

Competitive Landscape

The Israeli diamond market is characterized by many small to medium-sized players serving a specific area and a few large players serving the global market, such as De Beers Group, ALROSA and Rio Tinto.

The big players in the upstream industry are also active. Owing to the involvement of existing players, it is difficult to join the upstream market.

Competitive Factors

The major players in the Israel Diamond industry are involved in implementing new concepts of trade and technology such as adoption of digital technologies and research and development (R&D) of lab-grown diamonds.

For instance, De Beers announced the launch of their new Lightbox Jewelry business, which is specifically designed to market various laboratory-grown diamond jewellery brands. At less price and with high quality, they will sell new deigns. Blue, pink and white-grown diamonds will be sold to clients through this new venture.

Lightbox will be transparent to consumers about what lab-grown diamonds are and will have easy pricing in line with the actual price of production.

Key Market Players

Key Market Players in the Israeli Diamond Industry include

MID House of Diamonds is a global corporation among the world’s 10 largest producers and suppliers of polished diamonds with the ability to meet the comprehensive requirements of its customers in the retail and jewelry manufacturing sectors. Headquartered in Israel, MID operates an international factory network with distribution offices in Antwerp, New York, Los Angeles, Hong Kong, Shanghai, London and Tokyo, manufacturing high-quality polished diamonds in all shapes and colors, in sizes as low as 10 points to plus-10-carat stones.

Niru Diamonds Israel Ltd. provides mining services. The Company offers precious stones, diamonds, and jewelry parts. Niru ranked as Israel’s third-largest exporter of polished diamonds in 2017, with shipments valued at $116 million, according to the country’s Ministry of Economy and Industry.

Anita Diamonds is one of the market’s leading suppliers of large diamonds. Founded in 2010 by Chirag Shah and Chinar Shah, the company’s worldwide markets are based in Belgium, Israel, Dubai, and Hong Kong. For over a decade, the brand presents most of the rarest stones in the industry.

Yoshfe Diamonds International Ltd. was founded in 2009. The company’s line of business includes the operation of nonclassifiable establishments.

Leo Schachter Diamonds, a leading supplier of America’s major retail jewelry chains, was founded in 1952 in New York and became Israel’s leading diamond exporter for over four decades. Operating in eight locations on five continents, the Leo Schachter Group employs over 1,000 men and women from a variety of cultures in processing, product creation and marketing.

Company	Net exports in millions of $ in 2020
M.I.D House of Diamonds	196
Niru Diamonds Israel (1987)	134
Anita Diamonds	93
Yoshfe Diamonds International	84
Leo Schachter Diamonds	75
Rosy Blue Sales	67
Kimchi Diam	57
Andre Mesika	56
Kuperman Bros Diamonds	42
Pinkusovich Diamond Traders	33
Oren Diamonds	26
Shlomo Bichachi Diamonds 25	25
DMG International	24
Nirs Diamonds	23
Wertheimer Fruchter Diamonds	21

Strategic Conclusion

The Israeli Diamond Industry makes an annual contribution of around $800 million to Israel’s balance of payments. Through the Israeli Diamond Industry, over 20,000 families earn their livelihood directly. In addition, annually, nearly 330,000 tourists and international buyers visit the complex.

The Israeli diamond industry contributes indirectly to other branches of the economy, such as tourism, banking, aviation, communications and defense, in addition to its 20,000 directly employed employees, and is responsible for creating several more job opportunities. The Israeli diamond industry has also played a crucial role in the urban and economic growth of Israel.

References

Appendix

SMEs – Small & Medium Enterprises
R&D – Research & Development
e-Commerce – Electronic Commerce
XRT – X-Ray Transmission
IoT – Internet of Things