Diamond loses glitter on slack demand, higher prices

The sharp fall in demand for polished diamonds and increase in rough diamond prices have taken a heavy toll on the Indian cut and polish industry which survives largely on exports.

Anoop Mehta, President, Bharat Diamond Bourse, said industry players have expressed concern over weak demand for finished products across the globe including China, West Asia, Russia and Europe even as demand in US is slowing picking up.

“Production is already down 25-30 per cent. Exports have not been that great, so far. I believe they have to be more careful to whom they export rather than pushing it out blindly,” he added.

China, the major driver of demand for diamond, has cut back on its luxury spends following their Government’s anti-graft campaign.

Xi Jinping, President of China, is driving the toughest campaign against corruption targeting both high-level elites and people in less powerful positions to curb a culture of bribery that’s seen as threatening growth.

Pankaj Parekh, former Vice-Chairman, Gem and Jewellery Export Promotion Council said the margins of diamond traders in India has shrunk with the rough diamond prices rising while that of finished product -- cut and polished diamond -- falling due to weak demand.

“The self-imposed restraint on rough imports by traders in India will put pressure on miners and bring down prices as India is the largest buyers of roughs in the world,” he added.

Exporters of roughs have reduced the credit period from 180 days to 60 days.

The Antwerp Diamond Bank closed its operation on June 30 while ABN Amro bank has reduced loan exposure to diamond companies considerably.

Harsha Sodhani, Senior Analyst, India Ratings & Research, said the cut down on rough imports will help the diamond industry in the short term as it has an inventory of 3-4 months, but it needs to chalk out a long term solution to deal with this kind of crisis.

“There is a huge liquidity crunch in the industry with banks cutting down on their exposure to the sector and export bill receivables getting delayed by 30-60 days.

However, the diamond industry may not add to banks’ NPA as the cash crunch is limited to a small segment of the trade,” she said.

The rough diamond imports declined 24 per cent in value terms and 13 per cent in volume terms during the April–May period.

While in value terms, rough imports stood at $2,693 million between April and May as against $3,528 million in the corresponding period last year.

Cut and polish diamond export was down 10 per cent in the first two months of this fiscal to $3.37 billion.

In 2014-15, India imported $16 billion worth of rough diamonds in 2014-15 and exported polished diamonds worth $23 billion.

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