Surat-based diamantaires have all the reasons to smile as profits rise with rough diamond prices showing sharp decline in recent weeks. In addition to that, the diamantaires are looking at improved earnings during the ensuing festive season.
The rough diamond prices, which had increased by about 50-60 per cent in the first half of the current year, have fallen by 20-22 per cent in past couple of weeks. The decline in prices is considered as a fallout of the declaration made by the diamond mining companies for not raising prices for remaining part of the year.
The move came as a boost for the ailing diamond industry, which was facing pressure on margins amid high costs of rough diamonds and low demand. Increase in rough diamond prices prompted diamantaires to pass the burden on consumers, which led to a slowdown in demand.
"The time has come to make profits now. Rough diamond prices have fallen and festive season is approaching. We are hopeful for robust demand during Diwali and Christmas and rough diamond prices have also come under control now. This is a profitable proposition for diamond industry," said Dinesh Navadia, president, Surat Diamond Association.
However, he mentioned that the prices of polished diamonds too have shown a downward correction but not as much as that of rough diamond. The polished diamonds prices have come down by about 15 per cent in past couple of weeks.
Industry insiders believe that a fall in the rough diamond prices would provide an opportunity to the diamond players to make handsome profits, which they could not make in past nine months due to sharp increase in the rough diamond prices.
According to experts, sales may start improving once again after a period of lull. Some of the diamantaires are likely to build an inventory by stocking cheap rough diamonds. But many of them may avoid stocking due to lack of liquidity. "Stocking of rough diamonds at lower prices makes a good business sense. But not many traders have such high liquidity to pile up huge inventories," added Navadia.
However, the diamantaires are positive to make good profits as costs have fallen and demand is expected to stay firm during peak season, i.e. October to December. The three months are believed to generate nearly 30 per cent of the total annual sales for the diamond industry.