RAPAPORT... Rough
diamond prices need to come down by 15 percent but the market needs to stabilize
first, Maxim Shkadov, president of the International Diamond Manufacturers Association
(IDMA) told Rapaport News.
“Rough
prices need to come down to represent a fair value compared to polished but the
concern is that if they go down in one shot, polished prices will go down again
and the cycle will never stop,” he said in a phone interview on October 27. “We need to have
stabilization in the market because people need to understand where the trend
is going.”
Shkadov, who
is also the chief executive officer of Moscow-based manufacturer Kristall
Smolensk, estimated that rough prices have declined by about 15 percent since
the beginning of the year and that they need to drop another 15 percent to
enable manufacturers a reasonable profit. However, he stressed that a more
gradual approach was required to pricing while he endorsed recent moves to reduce
the quantity of rough brought to the market.
De Beers and
ALROSA have enabled their clients to defer large volumes of supply in recent
months with De Beers notifying sightholders they can defer their entire
November allocations at this week’s sight to December.
There is
still a lot of polished inventory available in the market which is putting
downward pressure on polished prices, Shkadov noted. He explained that easy
bank credit in India enabled miners to sell a lot of rough in 2013 and 2014 at
high prices which led to the current situation of excess stock in the
midstream. Manufacturers have responded by reducing factory output by about 40
percent this year, he estimated.
Shkadov
expects manufacturing to start to recover only in the second half of 2016 as
the market seeks stabilization after the holiday shopping period.
“It should
take another two to three months after the season for the market to stabilize,”
he said. “Then, once we start to prepare for the new season demand will start
to rise again and we can start to increase production.”
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