Rapaport Magazine

Bombs Hit Diamond District

India Market Report

By Zainab A. Morbiwala
It seems to be a never-ending struggle for survival for the Indian gems and jewelry industry, especially the diamond industry. As if the woes surrounding the shortage of rough and skilled manpower weren’t enough, the latest blasts — literally — to hit the industry were the three coordinated bomb explosions in Mumbai  on July 13. Two of the bombs struck at the heart of the city’s diamond district — one near the Opera House and the other at the diamond and jewelry market at Zaveri Bazaar.

“It is an act of cowardice by terrorists to target innocent lives and add an element of fear in the minds and hearts of people, but we are determined not to let them succeed in doing so,” said Sanjay Kothari, vice chairman of the Gem and Jewellery Export Promotion Council (GJEPC).“In no way are we going to step back and let the terrorists succeed in jeopardizing the growth of the industry, which is a strong revenue earner for the Indian economy.”

Diamond District Targeted

Without a doubt, the three explosions were carefully planned, with the gems and jewelry industry especially targeted. Zaveri Bazaar houses an estimated 5,000 bullion and jewelry shops and offices, according to the Federation of Indian Chambers of Commerce & Industy (FICCI). Blast damage to the bazaar is expected to exceed $110 million, including the loss of business from its temporary closing. Businesses located in and around Zaveri Bazaar clock an estimated annual turnover in excess of $110 billion.

The diamond hubs of the Pancharatna Building and Prasad Chamber, both located near Opera House, trade annual diamond exports in excess of $34 billion. Sending a message to his industry colleagues, Ariez Tata, managing director, Nascent Jewellery Private Ltd., said, “People have to emerge stronger and more aware from these instances of terror. The diamond industry bounced back and reopened trading on the fourth day following the blast. But we have to learn from events like these. We have to protect and be fully aware of the surroundings in which we operate. We cannot continue to think that we are secure within our home offices; we have to also take ownership of the area outside, the surroundings and the community we live in and we have to make them safe and secure.”

Kothari, too, feels that it is time for security to be beefed up. “GJEPC is putting together a charter of demands to the government requesting security in the area that is a stronghold of the diamond industry. We will ask the government to have these areas converted into nonhawking zones and keep them free from illegal parking. Additionally, we shall gear up to move diamond houses at the earliest possible time to the recently opened Bharat Diamond Bourse (BDB) at the Bandra Kurla Complex (BKC).”

On the positive side, Kalpesh D. Vaghani, partner in Kapu Gems, said he thought “this blast will reunite the people of the diamond industry and more effective security measures will be put in place to restore the confidence of our customers and suppliers. GJPEC, India and all Indian diamantaires should jointly pursue initiatives to strengthen the security measures. I feel BDB is an apt answer as far as security goes because, as a new building with the latest technology, it will definitely be more secure than the existing infrastructure.”

Eager to Move Quickly

Following the attack, it was believed that more companies would speed up their moves to the new location. One of them was Hitesh Khandelwal from Shree Ramkrishna Export, who said, “To reinstate our customers’ confidence, we are planning to move our office to BDB at BKC very shortly. The world’s largest diamond bourse will provide us with better security, amenities and services to our customers.”

Commenting on the adverse impact the bombing could have on the industry as a whole, Vaghani said, “Of course, this incident will create some fears among our overseas customers and could affect trade. But we need to adopt appropriate and effective security measures ensuring the safety of everyone. Only then will we have the confidence of the international arena.”

Zimbabwe Issue

The industry is hopeful that it will soon see some of its long-embargoed Zimbabwe diamond orders since the Kimberley Process (KP) lifted its export ban June 24. “There might be positive news soon with regard to the containers from Dubai reaching India,” said Kothari. Added Tata, “If the rough comes in, it will surely ease the pressure over the current shortages. There are millions of carats of rough in Zimbabwe, stockpiled over the past two to three years, and those goods would certainly ease what feels like a 25 percent to 35 percent shortage right now.”

Not everyone agrees on the shortages. Sanjay Shah, director of Gold Star Diamond Private Ltd., said that “I feel there are sufficient goods, but too much speculation. A few dealers are holding the goods and creating artificial shortages.” Vaghani agreed with Shah that “A proper and organized channel of rough supply will ensure less speculation in the prices of rough diamonds and will begin to bring the prices of diamonds to normal levels.”

The Marketplace

• The Mumbai bomb blast halted trade for three business days.

After the peak in polished prices in June, July witnessed some softness.

July saw a drop in overall demand and slightly slowed activity compared to previous months.

Rough prices continue to remain very strong.

Expectations are high for IIJS in Mumbai in early August.

Article from the Rapaport Magazine - August 2011. To subscribe click here.

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