If there is one diamond center that can host a conference titled “International Diamond Conference - Mines to Market,” it is India, www.diamonds.net writes. Discussions at the so-named event in Mumbai left little doubt that the country impacts all aspects of the diamond trade through its dominant manufacturing sector, trading activity, retail growth and burgeoning mining presence.
It is little wonder that rough producers are clamoring to sell their goods to India, leaving its competitors in Israel and Belgium facing increasing pressure to find their niches in the market. It is India that sets the demand and price trends for rough and polished diamonds today.
None of this is new. However, the conference provided a stern reminder that India emerged from the financial crisis as a diamond superpower. It also outlined some of the challenges facing the industry and highlighted some concerns that Indians are feeling.
Rajiv Jain, the new chairman of the Gem & Jewellery Export Promotion Council (GJEPC), claimed that 14 of 15 diamonds in the global market are now manufactured in India, updating the 11 out of 12 figure previously used. Whether this claim is accurate or not, few will argue with the following intimidating numbers: There are more than 6,000 diamond cutting factories operating in India today, employing around 800,000 people. In the first eight months of 2010, India’s polished exports increased 71 percent year on year to $14.8 billion, its polished imports rose 43 percent to $9.1 billion and its rough imports grew 88 percent to $7.5 billion.
At retail, India is the second-strongest growth market after China. De Beers estimates that India accounted for 8 percent of global polished wholesale purchases in 2009, which will grow to 11 percent in 2016, versus just 3 percent in 1999. When Rio Tinto launches its Bunder mine at Madhya Pradesh in 2014, the stones will have the “quality of Diavik, color of Argyle and sizes of Murowa,” according to the company’s diamond sales and marketing manager, Jean-Marc Lieberherr. The full production will be beneficiated in India, he assured the conference attendees.
Sourcing rough remains the Indian industry’s number one concern. While the volumes from Bunder are not likely to be on the scale of Argyle or Diavik, the mine will provide another, much needed, source of rough diamonds for Surat. It needs more, even if the conference illustrated the importance with which miners and the major producing countries view India. De Beers, ALROSA, Rio Tinto and Botswana all stressed their commitment to supplying rough diamonds to Surat.
Despite their efforts, the establishment of Surat Rough Diamond Sourcing Limited (SRDS) as a means to purchase rough for distribution to its shareholders is aiming to counter the shortage of rough supply, the high costs involved in making indirect purchases and the competition posed by the beneficiation industry in southern Africa.
To achieve that, India is also clearly focused on Zimbabwe. SRDS requested that the African nation supply it with $100 million worth of rough per month to help sustain the Surat industry when its mining minister, Obert Mpofu, visited Surat this week. Whether or not such volumes are realistic, Surat is, and will be, the main beneficiary if — or when — Marange diamonds are approved for export by the Kimberley Process (KP). And the Indian diamond industry clearly echoes Mpofu's intimations that the KP has no choice but to continue to endorse Marange stones. It does not appear to be concerned about the reputational issues associated with this.
The Zimbabwe issue has not gone away yet, however. India’s U.S. partners cannot legally buy polished cut from Marange rough, Indian or otherwise. Any negative factor introduced to the U.S. consumer is not good for the industry because, as one conference speaker stressed, the U.S. is still the most important market. It was noted that a 1 percent drop in U.S. sales requires a 5 percent boost in sales transacted in the East to compensate. The industry’s European banks, ABN Amro and the Antwerp Diamond Bank told the Indian delegates they will not finance Marange purchases, and insurers are equally concerned.
Manufacturers appear to be more concerned with the threat posed to their businesses by synthetic and treated diamonds, even if the synthetic market has not penetrated the natural diamond market as has been expected over the past five years. They also seem deeply concerned about the lack of a coordinated marketing effort on behalf of the global industry, after the failure of the International Diamond Board (IDB) in this regard.
The rough shortage is also having a negative impact on efforts to attract employment to the local sector. A number of speakers lamented the ageing skill base in India and the lack of fresh talent being recruited to the industry. It appears that Indian diamantaires have not been successful in bringing back the workers that left the industry during the downturn and is struggling to compete with other sectors for the country’s youngest and brightest.
India should not take its position in the market for granted. Given the ethical, employment and synthetic challenges, it is not too big not to fail. As quickly as it rose to the top, India can still fall. No one is irreplaceable and India should be mindful of China’s growth not only as a consumer market but as a competitive, low-cost manufacturing center.
Still, the impression gleaned from this weeks’ conference was that the Indian industry is indeed mindful of these challenges and threats. Under the guidance of the Gem & Jewellery Export Promotion Council (GJEPC), it came across as savvy, knowledgeable and aware. Considering the diamond pipeline extends from mine to market, it appears that India may have only scratched the surface.
