RAPAPORT... It is going to be a long wait before the diamond industry in India shows any signs of improvement. The scarcity in raw materials has caused prices for better-quality goods to increase by 15 percent to 40 percent in the past few months. Between April 2007 and May 2008, the price of a 3-carat diamond rose almost 40 percent and diamonds of 5 carats plus have gone up by as much as 70 percent.
FICCI Study Report
The Federation of Indian Chambers of Commerce and Industry (FICCI) recently reported that the country’s domestic gems and jewelry industry, which currently accounts for exports worth approximately $18 billion annually, has the potential to more than double to $37 billion worth of exports by 2015. But FICCI cautioned that this would happen only if the sector is transformed from the current family-owned model to a professionally managed system of business. In addition, FICCI advised, the gems and jewelry industry needs to access new markets and adopt the latest technologies if it wants to grow to its full potential. The federation also suggested that the direct supply of rough diamonds from Angola, Canada and other diamond-mining countries should be facilitated.
The study further called for ensuring easy access to dollar loans and for establishing rupee loans at a uniform interest rate to make the diamond industry more competitive internationally. In noting that the margins in the diamond industry presently are very low and the entire emphasis is on large volumes, the study suggested there is a need to devise ways and means of taking the entire industry up the value chain.
In Bangkok, during the FICCI Global Forum, big names from the gems and jewelry industry in both India and Thailand came together to discuss the huge, untapped trade potential between the two countries. India presently exports only 2 percent of its jewelry to Thailand. The forum was held to move the two countries forward on bilateral trade promotion activities that would benefit the gems and jewelry sector in both nations.
Market Dynamics and JCKCommenting on market dynamics and the overall experience at the JCK show, Harsh Arora, chief executive officer (CEO), Angel Jewellery Pvt. Ltd., said: “We did not exhibit at the JCK show, but we did visit and the show was not at all up to the mark. This does not leave a good impression for the times ahead for the American economy. I do not see the American market moving for the next year or so. America is the biggest consumer of SI goods and these goods just seem to be piling up. I think the demand for VVS goods is still at a peak but there isn’t sufficient supply. I think India will be the booming market for the times to come. The North India market is really consuming most of the goods presently. As for an overview of the market, I believe the industry is not going to show any rapid signs of improvement and will remain stagnant for the near future.”
Like Arora, Mehul Choksi, chairman, Gitanjali Group, did not have many positive things to say about the JCK show, noting that, to him, participation seemed to be down by half from 2007. “This does not send out good signals for the future of the diamond industry across the globe, especially in the American market,” said Choksi.
Reiterating views of North India as a strong consumer market, Anil D. Shah, director, Venus Jewels, said, “Regions in Northern India are doing pretty well and goods that are in demand follow current market dynamics — larger sizes above 0.50 carats in VS to SI range in G to I colors.” For the international perspective, Shah added, “Due to high prices for round brilliants, customers have now shifted their buying pattern to fancy shapes — in diamonds especially — like emeralds, cushions, princesses and other round-edged as well as straight-edged fancy shapes in sizes from 1 to 3 carats. Many retailers are liquidating their lower-end goods and moving toward high-end products where people prefer SI2 and above goods.”
Taking a futuristic view on market development, Shah said, “We feel the U.S. will still be on top, followed by India and the European nations. We also feel that, due to the sudden rise in crude oil prices, there will be more demand from Middle East markets with respect to high-end premium diamonds.” Shah is hoping to see an improvement in the American market by the last quarter of 2008 but for that to happen, he suggests that America should depend less on third-party grading certification and practice perfect “self-finance management,” in which prompt payment will increase the liquidity in the market and reduce the bad debts. Choksi, too, seems very pessimistic about any short-term improvement in the American market and said it will be a situation of “wait and watch” until conditions improve.
The Marketplace
• After a quiet Vegas show, Indians were hoping for a better response in the June Hong Kong show.
• The liquidity crunch in the local market continues to affect trading. The dollar’s rise against the rupee throughout June increased trading activity.
• There is a shortage of goods across the board in better qualities ranging from VS+/ I+ for sizes smaller than 0.90 carats.
• 1 carat+ collection goods continue to remain hot with supply shortages.
• Demand for 2 carats+ is stable, with good availability.
• Demand is excellent for 3 carats+ and shortages persist.
• Demand has increased for fancy color diamonds, especially for yellows and pinks.
• Demand is good for fancies smaller than ½ carat and there are shortages for well-made goods.
Article from the Rapaport Magazine - July 2008. To subscribe click here.