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The Indian diamond industry is looking forward for better days

15 july 2014

The Indian diamond industry is looking forward for better days after a rather sluggish Q1. According the Gems and Jewellery Export Promotion Council (GJEPC), India’s polished diamond exports dropped by 8 per cent during the April-May period to 5.41 million carats against 5.9 million carats in same period last year.

While trading in rough diamonds was quite good during the month, a certain amount of slackness in demand has also put pressure on rough diamond prices, which are likely to fall by 3-4 per cent in the coming days. In the past four months or so, rough diamond prices increased in the range of 7-8 per cent. Rough trading is also stable following the De Beers Sight and ALROSA sale in June.

The cutting and polishing sector has been hit hard as costly rough diamonds and costly imports have squeezed profit margins in the past few months. But this current fiscal promises to be better where market watchers see a growth of close to 10 per cent in the business.

Polished diamond trading was better than usual. Overseas demand was good and the currency rates have turned favourable for diamond exporters. Not many overseas buyers were seen as most of them closed deals with the Indian suppliers at the Hong Kong Show. Traders have started getting orders for the Christmas season. Demand for polished goods fr om the domestic market is high, too, for all goods.

However, working capital and liquidity has been a major challenge for diamantaires as the banks kept a cautious stand for the sector. To facilitate the diamond industry and engage with bankers and resolve the issues regarding working capital, the GJEPC organised the ‘Banking Summit-2014’ in Mumbai on June 28, 2014. Several issues were debated and discussed but the takeaway was not very pro-industry. The bankers remained cautious and demanded better running of the business with transparency, suggesting corporatisation of businesses.

During the month of June the diamond market was agog with the news of more than two dozen diamond manufacturers and traders losing around Rs 5 crore, after a diamond merchant went bust in Surat. Such incidents damage the reputation of the industry, causing banks to become extra cautious while dealing with the diamond sector.

In a step towards increasing direct rough imports, the GJEPC of India, in a pre-budget presentation urged the central government to establish Special Notified Zones (SNZ), wh ere global diamond mining companies could set up their trading offices and bring their rough diamond supplies for the direct trading to Indian companies.

There is strong demand for 0.30-carat to 0.69-carat sizes from overseas, apart from smalls from China in particular. Local demand is improving in caraters, as well as in smalls. The jewellery sector is busy with preparation for the India International Jewellery Show (IIJS) in July. The IIJW & IIJS is a forerunner to improved jewellery demand for Diwali. In addition, confidence is slowly returning to the jewellers as the rupee has strengthened and stabilized. Gold prices have also softened after the new government has taken over.

Synthetics have been a cause for concern in the Indian industry and to ensure confidence of the international trade and also to eliminate undisclosed mixing, the Natural Diamond Monitoring Committee (NDMC) contribution in organising a study has been welcomed by the industry players.

The gold sector was most disappointed when the Finance Minister remained reluctant to give any assurance on the existing gold import's 80-20 rule, which allows only nominated agencies to import gold on the condition that 20 per cent of the imported shipment will be exported. According to Vipul Shah, Chairman, GJEPC, “The Finance Minister didn't give any assurance to look into the gold import issue. According to him, any change in that would create adverse impact on the rupee. Hence, we did not get any positive response from him on this.”

In a news, which has brought cheer to diamantaires in Surat, Chief Minister of Gujarat (India) Anandiben Patel has reportedly accepted the demand for allotting nearly two lakh sq m government land close to the airport for the proposed Surat Diamond Bourse.

Recently, the Surat Diamond Association had received complaints from more than 300 diamantaires from the SME sector who were facing problems with the banks in India and Antwerp for not making the payments to their overseas sellers of rough diamonds within the stipulated time frame of 90 days. Following this, the SDA has urged the Reserve Bank of India (RBI) to permit the Indian banks to approve suppliers and buyers credit for the import of rough and polished diamonds beyond 90 days from the date of shipment for the SMEs. The cutting and polishing sector looks forward for RBI’s move to ease problems faced by SMEs.

A novel initiative announced by the GJEPC of India at a Press Conference in Las Vegas on 31/5/2014 is a multi-level business development campaign, focused on the U.S., Canadian and South American markets. The campaign will strengthen and expand GJEPC’s business development efforts and build trusted relationships between India’s key jewellery companies and their counterparts in the above mentioned markets. This has been appreciated both by the Indian gems and jewellery businessmen, as well as their overseas counterparts.

And lastly, GJEPC welcomed RBI’s decision to liberalize gold import norms under the 80:20 rule, saying that it will boost the gold jewellery export from the country.

RBI has allowed the star and premier export houses to import gold, while banks and nominated agencies have been allowed to provide gold for domestic use as loans to jewellers and bullion traders. This surely has brought cheers to the jewellery community.

The demand/supply situation during the month of June 2014 was as follows:

POLISHED

Rounds

0.005-0.15 cts, F-J / SI+, movingwell.

1/5, H-J / VS, good demand, moving well, less goods in market.

1/4-3/8, selling well 1/4-3/4, D-J / SI+, less goods.

1/2-3/4, white / pique, selling well, shortage of goods.

0.80-0.90 cts, selling well; F-J / VVS goods, less goods in market.

1.00-3.00 cts, D-K / SI to pique, selling well, good demand, shortage of goods reported.

1.00-3.00 cts, H-J / SI1+high demand for good makes.

4.00+ cts, H-M / VS+ selling ok, but less goods available.

Fancy Cuts

Emeralds and Stabbes (wide baguettes), 0.25-1.00 cts, good demand D-J / VS+, moving well.

Marquises 0.25-5.00 cts, F-J / VS+, good demand, selling well.

Princesses, Pears and Emeralds, 2.00-5.00 cts, good demand for H-K / VS, moving well, good demand.

ROUGH

Makeables: good demand; shortage of goods.

1-5 point: fair demand: makeables; very good demand for OW TTLB & TTLC. Shortage of goods.

6-20 point: v. good demand: crystals/makeables. Shortage reported.

Fancies:

21-50 point: very good demand, shortage of goods.

0.51-1.00 carat: good demand: makeables; crystals.

1.01-2.00 carat: very good demand: rounds; crystals, all fancy shapes. Shortage of goods.

2.01-3.00 carat: good demand.

5.00 carat+: very good demand: $1,000+ makeables, crystals & all fancy shapes, less goods available.

Mixed lot: v. good demand.

Aruna Gaitonde, Rough&Polished, India