RAPAPORT... Traders in the Indian gems and jewelry industry dealing in gold all have reason to smile, as the market for gold has suddenly shot up with the recent price correction. Another reason for the increase in demand for the yellow metal is because the marriage and holiday season is about to begin in this country. For players in the diamond industry, however, what remains constant — and worrisome — is the rise in the price of rough and sluggish demand for diamonds from the U.S. market.
The second Indo-U.S. Jewellery Business Development Conference, held in Mumbai September 7 to 12, received a positive response from the eight U.S. diamond retailers who attended. The conference, organized by the Gems and Jewellery Export Promotion Council (GJEPC), is designed to showcase jewelry manufacturing and design capabilities that exist in India, as well as provide an opportunity for one-on-one conversations between Indian manufacturers and U.S. retailers. Conference organizers said they believe that the retailers were pleasantly surprised at the progress being made by the Indian diamond and diamond jewelry industry in terms of both quality and design. The retailers who attended the conference were: Sterling – the Kay Jewelers and Jared divisions – Reeds, Temple St. Clair, Cardow Jewelers, Leading Jewelers of the World (LJW), Retail Jewelers Organization (RJO) and Fred Meyer Jewelers. Sharing his views on the recent momentum of the diamond industry, John Berglund, group vice president of Fred Meyer Jewelers, said, “Retailers are failing and filing for bankruptcy. We are beginning to see liquidation come through sales and discounts. The economy is suffering and that is impacting everyone’s business.”
Current Market Dynamics“The industry is witnessing a period of stagnation now with no new developments taking place,” said Harsh Arora, chief executive officer (CEO), Angel Jewellery Pvt. Ltd. “The price of rough, as everyone knows, is extremely high and this is affecting the industry to quite an extent. The past six to eight months alone have witnessed the price of rough going up by 40 percent and it will be a good four months minimum until we see a correction in the market.” The majority of industry players seem to share Arora’s opinion of market conditions. They also mention that the price increases by the Diamond Trading Company (DTC) have affected the industry’s ability to recover quickly.
One of India’s best-managed companies, Venus Jewels, shares the opinion that the market condition is not positive. But, according to a Venus partner, Anil D. Shah, this current situation “is not so much of a worry for companies that are professionally managed. We have found that companies that are more organized and systematic in their approach are achieving steady and sound growth and reaping benefits from the current situation. The entire world is moving toward delivering superior-quality products with transparent practices, as well as having a qualitative work culture.”
In terms of demand for particular stones, Arora said better-quality goods are showing strong demand. “SI is available in the market but, then, the biggest consumer of SI, which is the U.S., is not placing orders as per expectations so we have an excess of SI in the market. VVS also is very much in demand but the price for VVS is pretty high.”
Shah said that “Internationally, there is a huge demand for high-end diamonds and consumers are becoming more and more aware that large-size, well-cut diamonds have better luster, along with higher standards of cut, polish and symmetry.” In terms of countries that are showing strong demand, “the U.S. is still a big consumption market, and so are Israel, Dubai, Hong Kong, Australia and Japan,” said Shah. For Arora, based on his experience at the India International Jewellery Show (IIJS) in August, Dubai seems to be the most promising market.
Interest in Branded Gold Jewelry GROWINGAs reported in The Financial Express, a leading English-language daily in Mumbai, sales of branded gold jewelry are stong. Of the estimated $17.5 billion total Indian jewelry market, the branded segment is growing at 40 percent annually, which explains the recent launches of jewelry brands in India. The latest to join the bandwagon is Pranda group from Thailand. Pranda plans to set up its own exclusive retail stores as well as offer its products in other retail jewelry stores such as TBZ.
It is interesting to note that just a couple of months ago, the market for gold was sluggish. The correction seems to have happened fairly quickly. It will be interesting to see if the market experiences another rise in prices of gold following the news of major U.S. banks filing for bankruptcy.
The Marketplace• Local trading activity is quite slow overall owing to soft demand, weakening of the rupee against the dollar and a lot of resistance from buyers, locally as well as across global markets.
• Many Indian companies were gearing up for the Hong Kong Jewellery & Watch Fair and had good expectations for size goods. Overall, Indian participation and presence seem to be stronger in this year’s Hong Kong show, with Indian manufacturers hoping to connect with new dealers and retailers to find alternate selling avenues to the U.S. markets.
• Liquidity problems seem to be continuing in the local market. Big financial failures are expected to further reduce overall demand for luxury items, thus affecting the trade.
Article from the Rapaport Magazine - October 2008. To subscribe click here.