If the happenings during the last few weeks can be re-called, the action-filled excitement was surely unforgettable. The usually peaceful and supposedly united Indian diamond market was agog with the sudden rise of revolt - a rebellion-of-sorts - by a group of Surat-based diamantaires. Without any doubt, it’s not wrong to say that the diamond market here in Mumbai saw more drama during the month of May, 2014 than it has ever seen in the past many decades.
Slogan-shouting diamond traders mirrored India’s volatile atmosphere of the time (due to election campaigns), asking their Mumbai counterparts to leave Mumbai and set up larger and cheaper office in the proposed Surat Diamond Bourse. Application Forms were distributed with claims that most of the Mumbai diamantaires were interested to shift to Surat. As expected, mixed reactions by different sections followed quickly to douse the fire, as it was considered a detrimental approach to the whole industry.
The Gems and Jewellery Export Promotion Council (GJEPC), apex body of the gems and jewellery industry in India, came on strongly criticizing the move by some diamantaires in Surat to shift their Mumbai operations to the proposed Surat Diamond Bourse (SDA). Vipul Shah, Chairman GJEPC said that it was not the prerogative of a few diamantaires to decide and win over others to shift. He said that all members of GJEPC should be consulted, and moreover, Mumbai is the financial centre of India and a gateway for trade and commerce and a group of 30 people cannot decide the fate of the $43 billion industry. The Bharat Diamond Bourse (BDB) in Mumbai too convened a meeting of its members on May 23, 2014 to take stock of the situation. With prices going ‘North’ in many areas, the Surat diamantaires are believed to have also invited overseas traders to buy office space in the proposed Bourse.
The Surat diamantaires even went to the extent of trying to convince the world's leading diamond miners like De Beers, ALROSA and Rio Tinto to open their offices at the proposed bourse. Industry experts, however, said that the mining companies could not set up sales offices in India and import rough diamonds on consignment basis, due to regulations by the Government of India.
Despite the above mentioned brouhaha, there was sufficient trading activity in the diamond market, so much so there were more deals during the month, which is otherwise an off-season. With the De Beers May Sight closing with an estimated value of $560 million, the rough market was quite steady. Though the prices on some boxes were adjusted slightly, Sightholders said that on average, prices and assortments basically remained the same as the last Sight. For the manufacturers, however, profit margins were hard to come by, though polished goods were moving well and demand was quite good. Rough trading on the on the secondary market was good, but there was a slow down with boxes selling at premiums of about 5% with credit terms. This decline in demand is attributed to De Beers raising prices in the earlier Sights. In fact, rough prices have increased by between 7 to 10 percent since the beginning of the year and the news that De Beers will increase prices by 5% has done nothing to boost the already troubled industry, which is surviving on low margins.
ALROSA has cut overall supply significantly (20 to 25 %) and supply may remain constrained until September. The reason for the limited supply may have to do with a recent drop in production, but demand for the goods is started improving. This year, production at the ALROSA group is expected to be slightly down on the 2013 figure to 36.03 million carats, while rough prices are expected to rise by 1-4 percent annually through till 2017. How this will translate in terms of manufacturing, planning and profits to the Indian rough buyers is left to be seen.
Understanding that multiple rough suppliers are good for the industry, Indian diamantaires are now looking at Cote d'Ivoire for rough diamond imports. Rough diamonds mined in Cote d'Ivoire are said to be of gem quality and command higher price in the global market. It would be the right time for Indian diamantaires to explore further opportunities to import ‘rough’ directly to India.
The GJEPC of India intends to contact the government in Cote d'Ivoire to procure rough diamonds.
Trading in polished diamond was rather normal, despite it being a low season for export demand. Overseas buyers who want to benefit as early birds made a bee line to the market, some even actively making Christmas purchases... a bit too early, you can say. The demand from the domestic market was more than anticipated, with some attributing the excess demand to the preparations by jewellery manufacturers for the IIJS and IIJW 2014, which is just round the corner.
Besides, the manufacturing sector both diamond and jewellery was in full swing for the oncoming Jewellery Show, the Reserve Bank of India easing gold import norms on 21st May 2014, by allowing select trading houses, in addition to already permitted banks, to procure the precious metal, was a shot in the arm for the jewellery manufacturers, exporters as well as retailers. Now they look forward for custom duty to be lowered for gold imports, which might bring back the smile on their faces.
On the flip side, the Mumbai market witnessed the investigation wing of the Indian Income-Tax Department descended on the diamond companies in the Bharat Diamond Bourse (BDB), at Mumbai's Bandra-Kurla Complex (BKC) on 5/5/2014. TheI-T Department swooped down on more than 17 diamond companies located at BDB. The search and seizure operation was extended to Mahidharpura diamond market in Surat as the diamond firms in Mumbai have their offices and units in Surat. This I-T raid in Mumbai shook the Surat cutting and polishing centre as well, as most of the Indian diamond companies have their manufacturing factories in Surat.
When the GJEPC of India announced the annual performance for the Indian gem and jewellery sector for the FY2013-14 in the beginning of the month, declaring a contribution of US$ 34,746.90 million to India's foreign exchange earnings, but with a decline of 11 percent as compared to the last year figures, the dip was attributed to the stringent gold import policy. However, for the fiscal April ‘13 – March ’14, the overall export of cut and polished diamonds at US$ 19,635.04 million, showing a growth of 12.65% as compared to US$ 17,430.20 million of the previous year, brought some cheer. However, overall imports of cut and polished diamonds at US$ 6,540.90 million showed a growth of 17.65% as compared to US$ 5,559.56 million of the previous year, which is a disturbing aspect as the Government has been taking steps to curb polished imports, but in vain.
The demand/supply situation during the month of May 2014 was as follows:-
POLISHED:Rounds
0.005-0.15 cts, F-J / SI+, moving well
1/5, H-J / VS, good demand, selling well
1/4-3/8, selling well 1/4-3/4, D-J / SI+, less goods
1/2-3/4, white / pique, selling well, shortage of goods
0.80-0.90 cts, selling well; F-J / VVS goods, less goods in market
1.00-3.00 cts, D-K / SI to pique, selling well, good demand, less goods available
1.00-3.00 cts, H-J / SI1+high demand for good makes
4.00+ cts, H-M / VS+ sellingok, but less goods available
Fancy Cuts
Emeralds and Stabbes (wide baguettes), 0.25-1.00 cts, good demand D-J / VS+, selling well
Marquises0.25-5.00 cts, F-J / VS+, good demand, selling well
Princesses, Pears and Emeralds, 2.00-5.00 cts, good demand forH-K / VS, moving well, good demand
ROUGH:
Makeables: good demand; shortage of goods
1-5 point: fair demand: makeables; very good demand for OW TTLB & TTLC; shortage of goods
6-20 point: v. good demand: crystals/makeables; shortage reported
Fancies:
21-50 point: very good demand, less goods
0.51-1.00 carat: good demand: makeables; crystals
1.01-2.00 carat: very good demand for rounds; crystals, all fancy shapes; shortage of goods
2.01-3.00 carat: good demand
5.00 carat+: good demand: $1,000+ makeables, crystals & all fancy shapes
Mixed lot: v. good demand
Aruna Gaitonde, Rough&Polished, India
