Gloomy days for the diamond industry in India continue, as evidenced by the negative response to the JCK show held in New Delhi and the death of a diamond worker during a strike in Surat. In addition, the Diamond Trading Company (DTC) price rise of approximately 5 percent has not gone down too well with the industry players. Looking at each matter individually… Surat Fiasco
Tensions in Surat and some other parts of Gujarat erupted when the Surat Diamond Industry Association failed to keep its promise to increase wages of diamond workers. This led to a strike by more than 200,000 workers and incidents of stone-throwing in Surat, Ahmedabad and Bhavnagar. In Bhavnagar, clashes between the workers and security personnel at one of the factories resulted in the death of one worker. Though the dispute has been resolved, the death left a deep scar on the otherwise peaceful industry that employs an estimated 700,000 Indian workers at 25,000 diamond processing units.
Sharing his comments on the event, Sanjay Kothari, chairman, Gem and Jewellery Export Promotion Council (GJEPC), said, “No doubt this has been an unfortunate incident but, when we look at the increase in the cost of living due to inflation, the workers’ demands cannot be considered unjustified.” The workers have not had a wage increase for more than ten years. Kothari did criticize the timing of the workers’ strike “considering the slack that is being faced by the diamond industry at present.”
In the strike’s aftermath, industry associations in different centers agreed to raise wages by approximately 20 percent. Surat has the world’s largest concentration of diamond processing units and employs an estimated 400,000 workers so it became mandatory for the industry to resolve the dispute not only amicably, but also quickly. JCK Show, New Delhi
In a change from past years, the various exhibitions and shows that are being held to promote the gem and jewelry trade are not going too well for the industry players. After experiencing a not-so-good response from the JCK show held in Las Vegas in June, industry players in India likewise did not have too many good experiences to report from the JCK show held in New Delhi in July. Apurva Gandhi from Diam Circle Manufacturing Pvt. Ltd. said, “The show was average. Foot traffic was low and the visitors present did not have an appetite to buy on the spot.”
Noting that the company was disappointed in its results at the 2007 show in New Delhi, Shilang Mehta from Ankit Gems decided to pass on participating in the show this year. “It was not what we expected,” he said. “The JCK show in New Delhi had not given us a good response and, after the first year, we decided not to be a part of it again. The problem is the poor advertising done for the show, so few people know about it. That results in very low traffic; in fact, even the locals are not present at the show. This led us to decide to quit and hence we are not present at any of the JCK shows held in India.”
The same was true for Excel Overseas, which was a New Delhi show participant for two consecutive years. The company also decided not to be a part of the show in 2008. Sachin Jain from Excel echoed Mehta’s complaints about poor advertising and marketing of the show and low traffic. DTC Price Rise
Another reason to worry about the slowdown in the diamond industry is DTC’s move in July to boost rough diamond prices by an average of 5 percent. This will definitely affect the Indian diamond industry. With prices of rough already so high, this additional increase will make it difficult for small and mid-sized players to procure rough for their polishing business. “This price rise will have a direct impact on the polished price,” said Jain, “and I will not be surprised if Rapaport prices also increase in the next few weeks for stones above 1.5 carats.”
Gandhi commented that, although he had expected a price increase, “this kind of steep rise is difficult to digest and will lead to the trading activity becoming weak for some time.” Kothari, too, feels that the price rise will work against the short-term progress of the industry in India. Market Dynamics
With recession in the U.S. and inflation in India, the recovery of the diamond industry will be tough. In terms of demand, it is only the better-quality goods that are moving, even though their prices are “going crazy” according to Jain. He added that “Presently, the major markets for us are Hong Kong and India and also the Middle East to some extent. The U.S. is completely out for now.” According to Gandhi, “The U.S. is not that good right now and we have almost ceased doing business with them. SI in 1 carat plus is doing very well while pointers in VVS are doing very well.”
The industry is upbeat about conditions improving in October, when it is festival season in India and preparations are underway for the Christmas holiday season in the U.S. The Marketplace
• Activities were mixed in July, with the
overall market a bit slow. There were few financial failures in the local market but the news that two brokers had fled with goods made the overall market cautious.
• Prices remained strong through July for polished goods across the board due to the rough price hike by DTC.
• Diamond cutters in India were on strike for most of July, demanding — and winning — an increase in their wages.
The strike stopped production in the cutting centers of Surat and Gujarat.
• The liquidity crunch persists in the local market.
Article from the Rapaport Magazine - August 2008. To subscribe click here.