The Indian diamond industry saw many ups and downs during the month of June. While the cutting centres attempted to restart after the holidays, they were faced with rough shortage problems, especially the small and medium units. Media reports that diamond workers were laid off from work also made the news, citing the drastic fall in the Indian Rupee against the US$ as the reason; and the resulting inability of small and medium sized units to keep their factories running due to high cost of rough. Suggestions have also come in from some sections of the business to all related people to do all business transaction in rough and polished in US$ terms, which will hedge any fluctuations in the Indian currency in the future. If this will be taken up and followed seriously by the Indian industry is left to be seen.
However, the larger players with deeper pockets and those who had invested in roughs (when the price was lower) had their inventory of rough to fall back on and feed their factories. So, it pays to speculate and think ahead. Or so it seems, at least in the diamond cutting centres in India.
News of payment defaults did the rounds too, creating an atmosphere of uncertainty; and there was cautiousness among the industry members ... a rare atmosphere, given that the Indian industry runs on trust, more than documents. Trading in polished and rough during the beginning of the month was sluggish but shortages of many sizes and cuts were reported. The industry, which was already going through a liquidity crisis and cash crunch for the past few months, had to struggle to keep its head above water.
However, diamond production in the cutting centres saw good pick-up after the holidays, but rough shortage and high prices continue to be the hurdles in the smooth running of the medium and small units, who could not absorb the high prices. Small units, numbering up to 2,500 in Surat alone, had to buy rough diamond at a premium from the open market, which ate into their profit margins. To make matters worse, the freefalling Indian Rupee did not do much to boost the morale of the industry too, as import of rough was affected due to high price, and resulted in much lower imports than the previous months.
Towards the second week or so of June, rough diamonds prices fell in the secondary market, but at the retail level polished prices did not come down. The fall was due to pressure from the retail end and prices of rough did go down to an extent. But because of rupee dollar fluctuation, the benefit could not be passed on to the consumer. On the whole, the month saw shortage of roughs go through a bad period. High rough prices did not see any corresponding rise in polished prices, thereby reducing profit margins to wafer-thin. Though domestic demand for polished stones was good, the deterrent was prices. The expected price correction was nowhere to be seen; and overseas buyers felt the asking prices were too high to make a deal. In other words, off-take of polished goods was down, thanks to Rupee fluctuation/shortage of rough.
Overseas demand, especially from the US, was good but not as much as one would have expected, given that the US economy is said to be looking up. However, good demand for diamond jewellery from US, UAE and other consuming markets did bring some cheer to the diamantaires. As it is during this time of year, trading in the diamond market in Mumbai was average but overseas buyers’ activity was reportedly picking up, a case of ‘Early Birds’. Has Christmas Shopping for polished diamonds begun already?
The fairly good overseas demand for diamond jewellery has brought the smile back on the manufacturers but the diamond jewellery exporters are ready to make do with the small margins they would eventually make. This is because, the deals were booked much earlier and as such they cannot now pass on the high prices of diamonds to the foreign buyers. But they are depending on the volumes to make a sizable profit margin, especially from the US market. As mentioned in my earlier reports, US still remains the biggest market for finished jewellery from India, as the mass produced diamond jewellery from India is well received in that part of the world. The jewellery sector looks forward with expectations of a bigger off take of diamond jewellery starting late next month and also during month of August. Incidentally, this is the time when domestic retailers start ‘stocking up’ for the oncoming festivals in India. Also, overseas buyers’ Christmas shopping for finished jewellery will also peak during these months, a time when Indian jewellery manufacturers’ are the busiest.
During the month of June, 2013, the demand and supply of polished and rough were as follows:
POLISHED
Rounds
0.005-0.15 cts, F-J, SI+, good demand, moved well; v. good demand for 1/5, HJ, VS
1/4-3/8, sold well, v. good demand
1/4-3/4, D-J / SI+, selling well, moving fast but shortage of goods
1/2-3/4, white / pique, moved well
0.80-0.90 cts, good demand; F-J / VVS goods - shortage of goods reported
1.00-3.00 cts, D-K / SI to pique, selling well, very good demand, shortage of goods
1.00-3.00 cts, H-J / SI1+ strong demand, again shortage of goods
4.00+ cts, H-M / VS+ good movement
Fancy Cuts
Emeralds and Stabbes (wide baguettes), 0.25-1.00 cts, fair demand D-J / VS+, selling OK
Marquises 0.25-5.00 cts, F-J / VS+, good demand
Princesses, Pears and Emeralds, 2.00-5.00 cts, good demand; H-K / VS, good demand
ROUGH:
Makeables: high demand, shortage of goods
1-5 point: very good demand for OW TTLB & TTLC makeables
6-20 point: fair demand for crystals/makeables
Good demand for fancy shapes, shortage
21-50 point: fancy shapes - fair demand/shortage reported
0.51-1.00 carat: v. good demand for makeables, crystals
1.01-2.00 carat: high demand for rounds, crystals, clivage; all fancy shapes.
2.01-3.00 carat: good demand, but shortage
5.00 carat+: good demand for $1,000+ makeables, crystals & all fancy shapes
Mixed Lot: v. good demand
Aruna Gaitonde, Rough&Polished, Mumbai
