When the going gets tough, the tough get going goes the saying and that’s precisely what the Indian diamond industry is doing at present. India’s diamond industry, especially the manufacturing sector has been going through tough times. The pressures facing diamond manufacturers and dealers are unprecedented, leaving the market in a state of chaos. But, for the resilient Indian industry, which has gone through worse situations in the past, panicking was not an option.
Not long ago, top Indian diamantaires associated with trade organizations like Gem & Jewellery Export Promotion Council (GJEPC), Bharat Diamond Bourse (BDB), Mumbai Diamond Manufacturers Association (MDMA) met in Mumbai to take stock of the situation. During the discussion, a consensus was arrived on the steps to be taken to get the industry on track. Besides assessing the current situation, diamantaires looked for possible ways and means to solve the many issues being faced by the industry.
Unanimously agreeing that the market has been going through tough times, the industry members decided that there was a need to take short-term, as well as long-term measures to address the issues. To begin with, they deferred their decision to put an embargo on import of rough diamonds as they had done in November 2008, when the industry faced the similar situation. Instead, they advocated and encouraged self-discipline by the traders in rough imports; and suggested members to purchase rough diamonds based on their inventory; as well as taking into consideration the prevalent polished diamonds. According to analysts, there is a 10 to 15 per cent drop in profitability at present compared to last year’s figures; and they feel it is wiser to source lesser quantities of rough diamonds from the miners. Less demand is predicted in the July-September quarter also that in the same period last fiscal year.
Like the global diamond industry, the Indian industry too has been going through a slow period. Diminished polished demand, absence of profitability in diamond manufacturing, bank finance becoming increasingly costly is just a few of the many major problems faced by the industry. Also, the pricing of rough and polished diamonds not in tandem is causing a severe strain on the players, mainly in the mid-segment of the diamond value chain.
Rightly enough, around 15 Member Committee comprised of business people from all associations such as GJEPC, BDB, MDMA and Surat Diamond Association (SDA) representing big, medium and small manufacturers, traders, and sightholders was formed. Now, a delegation of the nominated representatives will meet the miners to review the situation; and another delegation will meet with the bankers for increasing bank finance. And to increase the demand for diamond jewellery, efforts are being put in place to come up with promotional campaigns along with miners and other segments of the industry.
The Indian diamond industry leaders have come down heavily on diversification of funds to other businesses by some of the companies, They also took serious note of bankruptcies, mixing lab grown diamonds and other misdeeds which have eroded the credibility of the industry and affected the availability of bank finance.
It is a well-known fact that diamond off take is passing through a lean phase globally although the demand from the United States is said to be stable. Demand from Europe, China, Japan & even Middle East is slow but India has faced this situation even in the past. The Indian domestic market is a sustenance that the diamond industry has banked on for regular demand of polished goods, given that demand for diamond jewellery has been on the rise pan India in recent times. According market sources, there is a shortage of fine-quality diamonds and selective buyers are paying firm prices for these goods to fill existing orders. However, there is a lot of excess inventory of lower-quality diamonds in the market and flexible buyers are getting good deals.
The slowdown in demand in consuming centres overseas has reflected in India’s export performance for many months now. In June’15, the country’s cut and polished exports for June ’15 declined by 2.22 percent recording $1853.99 million as against $1896.01 million in June ’14. Rough imports recorded $1509.22 million for June ’15 as against $1609.71 million in June’14, registering a decline of 10.73 percent. However, instead of working themselves into frenzy due to negative and panicky Media reports, the Indian industry members can well do to start with setting their houses in order. In other words, first and foremost each company in the diamond industry should do whatever it takes to strengthen their company’s fundamentals, as it is an internal step and possible to tackle. Once individual companies put their priorities in order; maintain their core strengths and run their business legitimately and fall in order, so will the industry on the whole. A strong industry can effectively handle other external problems, which are more due to the result of market forces at play. Price disparities in rough and polished stones or the low polished demand situation will fall in place by taking the right steps of mining companies and manufacturers having a proper understanding of the market situation. And low polished / jewellery demand can also be injected life by being more aggressive in promotional activities. As for bank finances deficiencies, hopefully it can be rectified by better communications with diamond financing banks, and other threats like ‘lab grown diamonds’, etc., can be appropriately managed. Besides, which industry or business does not have ups and downs? And more so, the diamond industry, which is in a luxury product space, will surely be the first to get affected due to any sign of slowdown in the global economies.
Obviously, in the current scenario, a shake-out in the Indian diamond industry is inevitable, as the players weak in fundamentals will be forced to leave the industry, and the strong and well-organized players will emerge winners, helping to retain stability in the market. And slowdowns are nothing new for the Indian diamond industry as it has weathered many a storm in the past. Now, regaining confidence from a successful IIJS – 2015, the Indian industry looks forward to bouncing back to better times.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
