Although this is neither the first, nor the most serious, crisis our industry has faced, what makes this crisis different is the inexplicable speed of developments, asserts Dilip Mehta, CEO Rosy Blue Group.
As the result of the crisis his company has limited operations in the indian manufacturing centre of Surat and has shut both our South Africa and Moscow factories.
Meanwhile, says Mehta, if there is a positive outcome from the global financial crisis in the context of the diamond industry, it would be the industry’s restructuring and consolidationustry, where there are fewer, but more sustainable players, and profitability is restored.
"We need people on the wholesale level who understand and work together with retailers. That’s the key to a win-win situation for both wholesalers and retailers", indicates Mehta.
On his opinion, another outcome of the crisis will be a smaller retail market, with the global retail market shrinking by 10 to 12 percent, once the crisis that started in 2008, which was already about 7 percent down, ends. Data from De Beers reveals a similar trend: retail in the United States will be down by 22 percent while global retail will be down 15 percent. Companies will be cautious about opening new stores over the next few years, and will focus on managing their inventories.
"I believe that the industry should put in more efforts in promoting itself, investing in marketing and advertising, and building up consumer confidence", Mehta says.
On his words, the wholesale diamond industry suffered a bigger impact than the retail sector. As the stocks of retailers are now being depleted due to destocking, the reversal of demand has come more vigorously. That said, the industry will see retailer demand come into line with supply by the end of 2009.
Mehta affirms that jewellery sales move fairly consistently with GDP. However, when GDP growth accelerates over, say 5 percent, then jewellery sales grow at almost twice the rate or more, such as in China, India, the Middle East and Russia. In times of mild recession, the impact on retail jewellery sales remains limited. However, in a deep recession, retail sales suffer a comparatively bigger drop.
In the United States which was the first market to be the retail confidence is now improving, Mehta is сonfident: "We saw that polished prices fell sharply, but have now recovered and are trading at about 15 percent below the peak levels of last year, while rough prices are at about 25 percent below peak".
The most important measures for the diamond industry to adopt are to exercise self discipline and conduct business responsibly, Mehta believes. This means that the industry should buy rough diamonds based on real needs, pay fair market price instead of making speculative purchases at unsustainable prices, and make sensible decisions when selling.
"We should have the courage to blame ourselves for the eagerness to overpay for rough", - says CEO Rosy Blue Group.
He pointed out that the global economy of the 21st century is creating new economic opportunities and that in times when rough production diminishes due to an insufficient number of new mines being discovered and existing ones becoming depleted, diamonds are sure to remain an excellent store of value.
Alex Shishlo, Editor of the Rough&Polished European Bureau in Brussels
