Rapaport Magazine


By Zainab Morbiwala
Roller-Coaster Ride

The Indian gems and jewelry industry seems to be on a never-ending roller-coaster ride. There might be an upbeat mood one month, followed by challenges the next month related to gold prices or some other unexpected economic disruption. In June, the worrisome factors appeared to be the weakening of the rupee against the dollar and the supply and price of rough.
   The upbeat news was the general consensus, as evidenced by a successful JCK Las Vegas show, that the U.S. market is well on its way to recovery. Indian exhibitors also said they were pleased with orders placed by Chinese buyers at the show.
   Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), described the mood at JCK as “very robust. From what I have learned, the participants from India had a lot of inquiries and on-the-spot orders as well. I see a lot of demand coming in from the U.S. market and this is a very good sign for all of us.”
   The Las Vegas show also received a thumbs-up from Nitin Shah, head of marketing for Euroshine Jewellery. “The show was well executed and there were good footfalls,” he said. “From the sentiments expressed at the show, I expect that the season ahead will be good in terms of demand from the American market.”

Currency Concerns
   The recent weakening of the rupee against the dollar was widely discussed in the industry. The rupee, which has appreciated by 4 percent since the beginning of 2013, hit a record low in June. While neither Nitin Shah nor Vipul Shah sees it having an adverse impact on exports, Vipul Shah acknowledged that “The weakening of the rupee is a concern for the domestic market. It is affecting the sales within the country because people are skeptical of buying jewelry at such expensive prices.”
   Nitin Shah said there is “good news for the industry in that there is a lot of business flowing in from China. The companies who were opting to manufacture their jewelry in China are now moving at least some of that manufacturing to India since recent salaries in China have increased by almost two and a half times.”
   Vipul Shah welcomed the new business. He told Rapaport Magazine that “India has a robust manufacturing capacity and can easily absorb an increase of more than 30 percent of its current output. If work from China is pouring in, it will be well-handled and -executed.”

Rough Prices
   Nitin Shah predicted that the sourcing of rough could become an issue considering there is no new mining going on. “I also envision that there could be a slowdown in manufacturing if the prices of rough are not stabilized. The manufacturers are not as willing to pay high prices for rough as they were in the past. When rough is bought at expensive prices, this invariably then increases the price of the polished. The people who deal with rough are not too concerned with the prevalent economic conditions so the prices of rough are not based on the viability of the economy.” If manufacturers don’t get bullied into spending more on rough, Nitin Shah said he would see it as a good sign that eventually there would be a much-needed correction in the prices of rough.
   Vipul Shah also expressed his concern over the availability of rough and the current price it is commanding. “The price of rough from direct sources like Diamond Trading Company (DTC) is proving to be a challenge,” he explained to Rapaport Magazine. “Things need to be streamlined and a correction needs to be made. Manufacturing will take a hit if things continue the way they are. It needs to be noted that if goods are available at better rates from secondary sources, then it is natural for the players to opt for sourcing from these secondary sources instead of their usual direct sources.”
   Rough prices are such a concern, said Vipul Shah, that the GJEPC has been “meeting with the direct sources and explaining to them that they need to regulate their prices because manufacturers are not making money and eventually this will affect the overall industry dynamics.”

New Competition
   Surat, long the center of diamond cutting and polishing activities in India, could soon have competition from its neighboring state, Madhya Pradesh, which is positioning itself to become one of the largest centers for cutting and polishing diamonds in the country. The ministry of Madhya Pradesh has launched various initiatives to attract diamond companies to open their manufacturing units in Indore, the largest city in Madhya Pradesh. The Chhatarpur district in Madhya Pradesh will also benefit from the fact that Rio Tinto’s Bunder diamond mine project will become operational there in 2017.

Article from the Rapaport Magazine - July 2013. To subscribe click here.

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