RAPAPORT... The beginning of 2009 has not managed to bring any positive news for the sulking diamond industry in India. The players are still very much skeptical of any positive signs of recovery coming anytime soon as demand globally has fallen off. In fact, the industry witnessed a 20 percent fall in demand for diamond and diamond jewelry this holiday season as compared with 2007.
Current Market Demand
“The demand for better-quality goods is showing a sharp decline. It is now about low colors and low quality. It is no longer just a world for better goods,” observed Mehul Choksi, chairman, Gitanjali Group. Choksi feels that the fact that lower-quality goods are generating more interest now is in sync with the current market, which is in recession. Commenting on Gitanjali’s sales this Christmas, Choksi shared, “Overall, it was down by a difference of 15 percent. As for any recovery in the diamond industry, I think we can expect to see some change by mid-2009.”
Ashi Diamonds Pvt. Ltd., with a jewelry sales office in New York, also took a hit this holiday season. Vikrant Patni, director of Ashi Diamonds (India) Pvt. Ltd., said, “Business at present is extremely bad. When we talk about sales of diamond jewelry this Christmas season, for us, they were down by almost 35 percent.”
In terms of demand specifications, Patni feels “50 points down is what is in demand as of now. Demand from the U.S. market is almost negligible at this point in time. The only thing that is selling is the center stone used for wedding rings. Cheaper goods are doing well, as expected.”
Vasant Mehta, chairman, Gems and Jewellery Export Promotion Council (GJEPC), explained that “After Christmas, the retailers tend to either order new designs or fill up the stock that has been sold. This year, that business is almost nonexistent. It has to do with the backlog of the existing stock the retailers have. This has hit exports as well. Based on reports of slow sales to the retailer levels in the U.S., demand in the first quarter will not be very encouraging. However, in the second quarter, we will see a better time. This will be because of the response by production to match the demand.”
Gujarat Diamond Woes
The worst-hit market in the diamond industry crisis is perhaps Surat. To bail out the city from its current woes, the Gujarat government appealed to the central Indian government. Initially, Narendra Modi, chief minister of Gujarat, reportedly refused any help to the industry but apparently changed his mind later and appealed to the central government to provide a “relief package” to the diamond industry. In a presentation to Prime Minister Manmohan Singh, Modi said it was the responsibility of the central government to “bring the industry out of the economic morass.” One of the suggestions put forth by Modi was for the central government to allow the state’s Hindustan Diamond Company to provide raw materials to Surat manufacturers to help get their factories working again. In addition, Modi also urged the central government to adopt a liberal credit policy that would ensure the flow of credit and to provide a “deferred payment option” of two years on service taxes.
Import Embargo Halted
The month-long ban on rough diamond imports into India ended December 26. GJEPC said the one-month “breather” gave the industry time to bring in overseas experts to brief council members and bankers on the economic situation and how it affects the industry, and to enter into dialog with the government on specific assistance measures that could be implemented. Council members also used the opportunity to discuss the fall in global demand for rough and polished diamonds with their workers, who will bear much of the burden that will be caused by the inevitable contraction of the diamond business for the foreseeable future.
Market Dynamics
According to a report in Economic Times, Rio Tinto has found a diamond deposit in the Chhatarpur district of Madhya Pradesh (MP). The company reportedly is expecting the deposit to contain 30 million carats of diamonds and the state government is hopeful of getting $20 million in royalties from the project’s commercial production. According to the report, Rio Tinto has invested around $25 million in discovering and exploring the diamond deposit.
The Marketplace
• Domestic market demand is good for VVS-VS in G-J colors in 0.30- to 2-carat round shapes and in D-H colors in 0.30- to 1-carat oval, marquise, pear, heart and princess shapes.
• Demand is strong for pointers from 0.30 to 0.90 carats and 1 to 1.49 carats in VVS-SI goods.
• U.S. market demand is for ideal and excellent cuts from G to J in VVS-SI round shapes.
Article from the Rapaport Magazine - February 2009. To subscribe click here.