Diamond district life NYC

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Diamond District Life NYC

The Fading World of Middlemen In New York's Diamond District

Like many New Yorkers, I've always been mystified by the block of 47th Street between Fifth and Sixth Avenue, that small section of Manhattan known as the Diamond District.

The Diamond District

By Ilan Kayatsky January 6, 2006 found at http://www.forward.com 

But this seemingly Old World street conceals a prohibitively complicated and global industry that moves $50 billion-a-year in diamond-related goods. By the time a diamond arrives in a New York shop, it already has passed through the hands of numerous middlemen invisible to consumers. It is an intricate pipeline, from mine to traders and cutters to yet more traders. Since the 1950s, the Diamond District has been the bottom of that pipeline, employing thousands within some 2,500 businesses — from one-man polishing desks to sleek, multinational wholesalers. Most traders were once observant Jews operating within a small and close-knit world of shared values, in which a handshake and your word were your bond.

But with the rise of the Internet, globalization of diamond manufacturing and distribution, and top-down challenges to the pipeline itself, the Old World network of middlemen is receding. Before it does, I decided to take a look into that one-block world that has so fascinated me for years.

The Merchants

A lone British woman, small and not especially pushy, looked around for a jeweler who might want to buy her pearl necklace. She was directed to one booth and attempted to communicate with its Bukharan Jewish vendor, who claimed to speak not a word of English. He shouted across the aisle in heavily accented Hebrew to an Israeli jeweler, who yelled, "He says that his wife will come in 15 minutes and she can look at your necklace."

Sensing a distinct lack of urgency to buy her piece, the woman gently threatened, "Well, tell him maybe I'll come back if I don't find someone else who's interested by then."

A few feet away, 58-year-old Yitzchok Fleischer, a Hasidic jewelry maker and vendor, stood behind a small case of jewelry, displaying mostly watches, bracelets and earrings. Fleischer is also a self-described leader in Brooklyn's Boro Park community who, while we spoke, fielded a constant stream of phone calls regarding non-diamond affairs.

"It's like every business," Fleischer explained in Yiddish-inflected English. "My father was in the business 40 years, manufacturing jewelry... I am a jeweler by trade. I worked eight years in a factory, putting together earrings, pins, engraving... everything. [Later] I took over the booth from my brother."

Born in Argentina, Fleischer speaks Spanish, Hebrew, Yiddish and English. He has worked the booth for 30 years and firmly believes in the unwritten code of dealers. "There's a lot of trust between the Orthodox.... This street is based on honesty," he said. "You shake hands with somebody, you make a business. Your word over here is the word of God."

Observing the changes on 47th Street recently, he noted that methods are shifting and trust is diminishing: "There are hustlers — Russians, Middle Eastern. It's not my type, but what can you do?"

The Dealers

As I entered an office building at the corner of 47th Street and Fifth Avenue, I walked through the sort of security typical of corporate lobbies, with the addition of a metal detector and an X-ray machine. Fourteen flights up, I found the plush office of a midsized dealer — a business that seemed eons newer than the ones visible from the street. A spacious lobby with multiple aquariums led the way into a room with flat-screened computers, conference tables, executive bathrooms and aerial photographs of Jerusalem adorning the walls. Attractive young women in revealing outfits laughed casually, while Orthodox Jews worked in nearby cubicles.

My host was the busy but cordial Nissan Perla, 47, a dashing Orthodox Israeli of modern appearance. The son of a Jerusalem rabbi, Perla co-founded the business 21 years ago with an American partner, Shlomo Fastag, who works in Ramat Gan, Israel. With a staff of 40 split between New York and Ramat Gan, the company manufactures and deals diamonds to retailers and exclusive clients. Fastag purchases the diamonds from other dealers in Antwerp, Belgium, a major center for rough diamonds, then has the rough manufactured (cut and polished) in Israel.

New York is the gateway to the American market, and "about half of all diamond jewelry worldwide is sold in the United States," asserted Martin Hochbaum, managing director of the Diamond Dealers Club. But on the whole, New York is a secondary market for diamond trade. Most of its diamonds already have been traded down from sightholders to manufacturers and dealers abroad. Much of the supply arrives through the DDC and its members. Founded in 1931, the DDC is New York's only diamond bourse, an old-fashioned club that abides by the rules of the World Federation of Diamond Bourses.

"A trading bourse is essentially an organization of diamond dealers," said Russell Shor, senior industry analyst at the Gemological Institute of America. "It's like a legislative body for their own trade, so that if there is a disagreement between the dealers, they settle through the clubs rather than go to the court."

More than 90% of "polished trading" — cut and finished diamonds — is done within that bourse system, Shor noted. But "rough diamonds are a whole different ballgame and not that much of a New York deal."

After the rough passes through a round or two of middlemen, it must be cut and polished. New York City is a very small manufacturing center, one that is focused mainly on big and important diamonds. Antwerp and Tel Aviv are both considerably larger. And for smaller diamonds, Bombay is giving both a run for their money; as Matthew Hart writes in his book, "Diamond: The History of a Cold-Blooded Love Affair" (Penguin, 2002): "[I]n only a few decades, Indian manufacturers have reduced the older cutting centers of Antwerp and Tel Aviv into shells of what they were."

The Sightholders

They buy in London every five weeks in a highly structured, almost ceremonial process at the headquarters of the Diamond Trading Company, De Beers's own syndicate for sorting and selling its bottomless supply of rough. The rest of the bunch, Hart writes, "rake about in Antwerp and Tel Aviv and Bombay to buy loose rough sold outside the De Beers cartel, or rough resold by those who have bought it from the DTC."

The Cartel

Formed in South Africa during the late 19th century, De Beers revolutionized the diamond industry and achieved its Godzilla-like status through legendarily cutthroat means. Before the South African discovery of diamonds in 1859, the stones had long been the province of India and, for a short spell in the 18th and 19th centuries, Brazil.

These days, 47th Street is only one small window into a multicultural, international industry, with producers and traders on six continents. The block's busy Jewish middlemen are still connected to every link on the chain — layers of dealers, sightholders, manufacturers, De Beers and other miners. However, as a stroll down the street now shows, diamonds may be forever, but the world of these middlemen is not.

Ilan Kayatsky is a freelance writer based in Brooklyn. He has previously written for the Jerusalem Post, Architectural Record, New York Post and Mother Jones.

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