Varda Shine, CEO of Diamond Trading Company (DTC), in her recent pronouncements predicted higher prices for rough diamonds saying they were reflective of trends seen in the polished market
According to diamondworld.net, at a Meet & Greet session held in Mumbai on April 11, 2011 Varda Shine CEO, DTC outlined the three big stories for De Beers this year as:
1) A strong Indian market – retail growth for 2010 at 31 %. China also growing well at 25% for same period.
2) The Supply Demand equation being weighted in favour of demand on the back of strong China-India demand, better than expected US performance, and with no new supply in sight.
3) New sightholder list being finalised – to be announced by end 2011, for period between April 2012-March 2015.
Shine also said that based on the good demand, De Beers had dubbed the coming 10 years as “The Diamond Decade”, and expected the strong growth to continue. She said this represented a great opportunity for diamantaires. Shine anticipated that diamond prices, both of rough and polished would remain on the upward graph.
She clarified, that even should the Zimbabwe-KP stand-off be resolved, and Zimbabwe diamonds start coming onto the market, it would not close the gap that De Beers anticipated between Supply and Demand. There would be greater carats coming to the market she said and these would feed the factories in Surat.
In response to a question she affirmed that the De Beers and DTC were very committed to the BPP principles and had in the past taken actions if sightholders were found contravening these, even if such actions were not made public, and would not be made public as there was little point in doing so. There would be third party audits in place with regards to the new sightholders too, and BPP would continue to be strongly followed and upheld.
As to how De Beers viewed the “diamonds as investment” question, she said that De Beers would continue to uphold the message of diamonds as an embodiment of love and continue to base its marketing on spreading the diamond Dream. However, it did recognize that in the past few years there has been a great interest in diamonds as another avenue of investment particularly in times when stock markets and other investment options had proved to be vulnerable as seen in the recent crisis period. To the extent that diamonds were regarded as a storehouse of value, De Beers recognized that it would be an underlying reason for people to purchase diamonds and diamond jewellery especially in markets like India. However, buying and selling it as a commodity was quite another matter, she indicated.
In its turn, the Times of India reported from Surat that Varda Shine, who was in the diamond city to inaugurate the jewellery design and manufacturing institute, 'City Centre', of the Indian Diamond Institute (IDI) at Vesu, told TOI, "There will be a gap between demand and supply of diamonds for the coming 10-15 years as the diamond production world over is fast depleting."
Giving a word of advice to the Indian diamantaires on the effective use of the diamond supply for adding value, Shine said, "Amid the gap between supply and demand, it remains to be seen how the diamantaires use the resources. The future of the industry is not about cutting more diamond carats, but to use the carats that exist out there and create value."
Talking about the increase in the rough diamond prices, Shine said that volatility in the diamond prices is due to the gap in demand and supply. The demand for polished diamond is increasing, especially in India, China and US, and this will further fuel the prices of rough diamonds.
"Actually, the diamond prices are not going up any more than the natural reserves like gold and silver. You can take into account the dollar devaluation and the inflation for that matter to compare the diamond prices," said Shine.
Commenting on the ongoing Zimbabwe diamond issue, Shine said that the De Beers group is the big supporter of Kimberley Process (KP). It is important to see that we do not destroy consumer confidence. The consumers would not spend a lot of money on diamond jewellery, if they know that they are mined in the conflict zones.
Interviewed by Rapaport News, Varda Shine said that rough diamond prices continue to reflect conditions in the market even with the steep increases experienced in the first quarter of 2011. “It’s important to look at the rough market holistically and we see that there are good fundamental reasons why the market is in such a buoyant position,” Shine said. “Our prices are still based on fundamentals.”
Rapaport estimates indicate that DTC prices have increased by an average 15 percent to 20 percent during the first quarter, following a jump of 27 percent through the whole of 2010. Sales increased by 10 percent to approximately $1.75 billion during the three months of this year, according to Rapaport calculations. Shine declined to discuss specific price and sales data.
However, she stressed that the increases were reflective of trends seen in the polished market. “Prices of the Indian polished have gone up by 100 percent since Diwali (November),” she noted. “So the reality is that what we’re doing is very much based on what is happening to polished.” The average asking price of certified diamonds on Rapaport’s RapNet trading platform rose 11.5 percent during the first quarter of the year.
Shine added that consumer demand in China and India, as well as better than expected demand in the U.S. in the fourth quarter of 2010, contributed to the current strong trading environment.
As a result, 2011 started with an under supply of polished so that dealers were either buying rough to manufacture or purchasing polished for inventory, she explained. Shine reported that trends at the Hong Kong and Basel trade shows in March indicated that large watch brands were starting to feel the shortage of polished while Indian cutters continued to struggle to recruit workers since the downturn to manufacture sufficient volume to meet the demand.
“Therefore you do have some indigestion in some places along the pipeline which creates a perception that there is a shortage of polished on certain types of goods,” she said.
In addition, Shine noted that some manufacturers are holding onto rough rather than manufacturing, resulting in increased rough inventories. “We think that some people are now putting rough into their safes, but not a big enough quantity that would jeopardize the market,” she said. “People have seen over the past year that if you hold rough for three or six months, you end up getting more. So they are using it as an investment.”
Shine said she expects a slight slowdown in the current second quarter, while the Indian industry goes on summer vacations, but maintained a positive outlook for the year. Supplementing trends seen in the polished market, she based her confidence on the industry expansion in the East where “thousands of new retail stores will open this year,” and as investment demand for diamonds continues to rise.
“Assuming that the JCK Las Vegas show is at least on the levels of Basel and Hong Kong, I think the third quarter is going to be strong gain,” she added.
