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31 august 2020

excl_31082020_xx.pngWebinars being the order of the day due to COVID-19 crisis, the Gem & Jewellery Export Promotion Council (GJEPC) of India organized a virtual meeting under its UNCUT 2020 Webinar series on 17 August 2020, inviting all stakeholders to discuss possible demand-driven decisions, which could help the global diamond industry to end months of stalemate in the market.

The diamond mining sector was represented by Paul Rowley, Executive Vice-President, Diamond Trading De Beers Group from London and Evgeny Agureev, Deputy CEO, ALROSA from Moscow. The participants from India, the world’s major diamond manufacturing hub, included Mrs. Rupa Dutta, Economic Adviser, Ministry of Commerce & Industry, Government of India from Delhi and Sanjay Shah, Convener, Diamond Panel Committee, GJEPC from Mumbai, with Colin Shah, Chairman, GJEPC moderating the hour-long discussion.

The timing of the discussion was apt as after months of disruptions due to COVID-19, the Indian diamond industry had begun showing signs of a recovery in the diamond cutting centres and jewellery units in SEZs. Globally, demand was also gradually picked up in consumer markets. With confidence returning to the resilient Indian diamond industry, the Industry leaders took it upon themselves to bring the industry back to its former position as the world’s diamond manufacturing and trading hub.

Numerous issues faced by the diamond industry were discussed to find solutions collectively. GJEPC Chairman Colin Shah spearheaded the discussion and began by seeking cooperation from the major mining giants De Beers and ALROSA, who are the major suppliers of rough diamonds to India.

Addressing both mining companies’ officials, Paul Rowley, Executive Vice-President, Diamond Trading De Beers Group and Evgeny Agureev, Deputy CEO, ALROSA asking them the steps their companies intend to take in terms of easing their clients’ purchasing terms during the current challenging times. Offering support to the Indian clients, Paul Rowley of De Beers expressed his company's readiness to give necessary help. Paul Rowley highlighted De Beers' measures to restructure its mines and expansion in jewellery and sales overhaul.

ALROSA’s Evgeny Agureev too agreed that his company is well aware of the situation and will go all out to support rough buyers in all possible way. Talking about the numerous measures ALROSA had taken to cut costs in 2020, Evgeny Agureev said: “ALROSA had decided to be flexible with dates for its rough diamond trading sessions in July and August, to help the Indian industry that cuts and polishes nearly 85% of our company’s rough diamonds.”

Colin Shah also asked for the Indian government’s support to Mrs Rupa Dutta, Economic Adviser, Ministry of Commerce & Industry, Government of India by providing a clear picture of the present financial strain on the diamantaires, especially the MSMEs as banks financing had dried up. He also pointed out the voluntary ceasing of rough imports by the industry members to bring balance to the overall inventory of rough and polished stones.

Colin Shah also requested Mrs Rupa Dutta to look into the matter of the current tax structure that was impeding miners to execute direct supply through SNZs; as well as the depletion of bank finance to the industry members.

Mrs Rupa Dutta appreciated and encouraged diamond mining companies for their support to the Indian industry during the troubled times at present. While promising all support from the Indian government to find a solution to the issues, Mrs Dutta, however, reminded that as the industry/product come under luxury sector, the diamond industry should also work with integrity and exercise self-prudence and transparency in doing business.

Next Colin Shah asked Sanjay Shah, convener, Diamond Panel for his views on the Indian diamond industry. Sanjay gave a clear picture of the low demand situation as well as the price pattern in the market right now, adding that demand would dip by 30 to 40 per cent during the coming festive season in India as gold demand is always higher than diamond. Sanjay Shah said: “But, the Indian diamond industry has shown enormous maturity during the pandemic when it was hard hit. The country’s overall gems and jewellery exports fell in July due to disruptions in shipping procedures due to lockdown. Also, demand for diamonds plummeted during the pandemic.”

The GJEPC, however, expressed satisfaction and announced in a statement that it is pleased that the diamond industry has responded very well across the pipeline amidst the crisis. Markets are opening up, demand is picking up a little, and the actual market is in a much better position, thus allowing all to breathe a little easier, and operate into a new normal.

GJEPC cites the following as take-ways from the discussion with the stakeholders: ALROSA and De Beers allowed customers to defer buying and avoid excessive stocking, thus giving maximum flexibility to customers as a responsible approach; the midstream will greatly restock in 2021, provided end consumer demand continues to recover; retailers will have to start to restock by the year end, although the magnitude will not be sizeable; the Indian industry has seen improvement in demand for certain types of inventory, and there are shortages in some select categories; China may see a 20% uptick in retail demand and B2B sales could pick up from September to January, but the Christmas wholesale business will be down by 30-40%; manufacturing should be a reflection of true consumer demand and the industry has the maturity to operate its own demand-supply mechanism; the Indian industry acknowledges the full flexibility that De Beers and ALROSA offered to their clients ; there is no guarantee that a rough price reduction will bring margins to the midstream; COVID-19 has improved the financial compliance and bank debt has reduced to less than half, from a high of $13-14 bn in the last decade; and direct sales of rough from the two Indian Special Notified Zones will be a game-changer for the industry.

Colin Shah concluded the discussion saying: “Even though the pandemic has cut everyone off physically from each other, it has only intensified the bonds between loved ones. Once the world emerges from this unusual crisis, there will be a renewed focus on personal relationships, and diamonds will once again play a crucial role not only as of the ultimate expression of love but a celebration of life itself!"

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished