RAPAPORT...
India’s Election Commission Halts Diamond Worker Bailout
The Election Commission (EC) put a hold on the implementation of the Gujarat government’s bailout package for 15,000 jobless diamond workers in the state until the country’s general elections are completed, on the grounds that it could be used for propaganda during electioneering, Business Standard reported. United News of India (UNI) estimated there are about 500,000 jobless diamond workers in the state. The following week, C. P. Vanani, president of the Surat Diamond Association, told the Economic Times that the Indian diamond industry is looking to hire about 50,000 people due to a 20 percent increase in demand for polished stones from the U.S., Europe and Asia.*
Demand Improves Slightly at DTC’s April SightReports from the Diamond Trading Company’s (DTC) April sight indicated an increase in demand for De Beers rough diamonds, as diamantaires responded to an apparent shortage in the market. The third sight of the calendar year, which ran from March 30 through April 3, was valued at an estimated $200 million, double the average value of the previous three sights, but still only about one-third the value of the corresponding March 2008 sale.
Louise Prior, DTC spokesperson, agreed that there was stronger demand for certain goods and a more generally positive mood at the recent sight. Sightholders reported stable to better demand for most goods and strong requests for rough yielding polished sizes of 1 to 1.5 carats.
Participants at the sight reported little change in either prices or the assortment of goods presented at the April sight. Prior stated that DTC would continue to offer smaller sights “until demand picks up at the consumer level.”
In related news, Varda Shine, managing director of the Diamond Trading Company (DTC), told the Business Standard that diamond demand at the retail counter should experience a drop of between 5 and 10 percent this year, but the fall in supplies will be much larger, leading to improved stability in the industry. *
ALROSA to Sell Rough Via Antwerp The Antwerp World Diamond Centre (AWDC) announced that ALROSA reached a distribution deal with the Antwerp diamond industry. The Russian mining company will sell $500 million in rough to 15 Antwerp-based companies through 2009 and the deal could be extended on a long-term basis, according to a statement from AWDC. The terms were welcomed by the industry following January’s reduction in rough supplies, AWDC said.
In related news,VTB, a leading Russian bank, opened a credit facility of $100 million for working capital for ALROSA, World News Connection reported, citing an ALROSA statement. In December 2008, VTB had provided ALROSA with $1.3 billion (RUB 44.2 billion) in 600-day funding to refinance short-term debt on loans issued by Russian and foreign investors.
Days after ALROSA’s new credit facility was reported, Standard & Poor’s Ratings Services suspended its “BB-” long-term and “B” short-term corporate credit ratings on the company. Andrey Nikolaev, Standard & Poor’s credit analyst, wrote in a research update that the suspension was due to a continuing lack of information on ALROSA’s sales volumes in the fourth quarter of 2008 and first quarter of 2009, as well as on the details of its agreement with state-owned Gokhran of Russia to which the company is reportedly selling diamonds. Nikolaev warned that if Standard & Poor’s doesn’t receive the necessary information within two months, the firm will consider withdrawing its ratings.
JA Fights LIFO RepealJewelers of America (JA), the national trade association for businesses serving the fine jewelry retail market, initiated a campaign to aggressively oppose a repeal of the last-in, first-out (LIFO) inventory accounting method, which President Barack Obama has proposed in his fiscal year 2010 budget. Matthew A. Runci, JA’s president and chief executive officer (CEO), stated that repealing LIFO would negatively impact many retailers, jewelry manufacturers and diamond, gem and watch distributors.
Jewelry businesses that use the LIFO inventory accounting method are able to record the sale of their most expensive inventory first, thereby decreasing profits and reducing taxes. LIFO is also a useful accounting method when the costs of inventory are rising, according to JA.
JA will serve on the steering committee for the LIFO Coalition based in Washington, D.C., a partnership of associations and businesses that oppose LIFO’s repeal. The association is also providing information and materials to assist the American Gem Society (AGS), the Jewelers Board of Trade (JBT) and the Manufacturing Jewelers and Suppliers of America (MJSA) in fighting the repeal.
Emeralds Fund Pakistani TalibanT
he prized emeralds of Pakistan’s Swat Valley are now under the control of the Taliban, World News reported. In a span of four months, the group has occupied two of the largest mines in Swat and started round-the-clock mining operations, with the Taliban taking up to 50 percent of their daily finds, according to World News. Most emeralds mined there range from just under 1 carat to larger than 5 carats and fetch anywhere from $1,000 to more than $100,000 in the international market, World News noted.
— Additional reporting by Acquire Media.
Collectors Universe Sells AGL and GCAL Christopher Smith, the former vice president and chief gemologist of American Gemological Laboratories (AGL), agreed to buy the lab from its owner, Collectors Universe, Inc. AGL will retain most of its original team and continue to operate from its New York location, Smith said. Smith has worked at AGL for the past two years.
Meanwhile, the Palmieri Group, led by Donald A. Palmieri, concluded its acquisition of Gem Certification & Assurance Lab, Inc. (GCAL) and other assets that had previously been sold to Collectors Universe in 2005. Don and Pam Palmieri founded GCAL in 2001.
The deals follow Collectors Universe’s March announcement that it would
discontinue its business in authenticating and grading diamonds and colored
gemstones and close the lab. The value of these sales was not disclosed.
Crisil Downgrades Ten Indian ManufacturersRating agency Crisil downgraded its bank loan rating (BLR) for ten Indian diamond and jewelry manufacturing companies and reaffirmed its rating on 14 others. Crisil’s statement explained that the ratings reflect its opinion of the likelihood of timely payment on certain obligations.
The companies that were downgraded include: Shreeji Jewellery, Shreeji Jewellery Designs, Fine Jewellery Manufacturing, D.A. Jhaveri, Kama-Schachter Jewellery, M. Suresh Company, M. Suresh Jewellery, Mohit Diamonds, Rosy Blue (India) and S. Narendra. The jewelry manufacturers whose ratings were reaffirmed include: Tribhuvandas Bhimji Zaveri, Joy Alukkas Traders, Su-Raj Diamond Industries, Su-Raj Diamond and Jewellery, S. Vindokumar Diamonds, Star Rays, Radium Creation, PC Jewellers, Jasubhai Jewellers, H. Dipak & Co, Forever Precious Jewellery and Diamonds, Blue Star Diamonds, Aurostar Jewellery and Arjav Diamonds.
*Additional reporting by Acquire Media.
Article from the Rapaport Magazine - May 2009. To subscribe click here.