 "Indian diamond processors at crossroads")
The moderate re-stocking by retailers, coupled with poor consumer demand, has raised the inventory level to abnormally high level of an average five to six months against the normal level of four to five months. High inventory level, therefore, has blocked retailers' liquidity, which was already squeezed because of banks' cautiously lending to the jewellery sector after the Winsome Diamonds' Rs 4,000-crore default.
As a consequence, diamond processors failed to pass on the average six per cent increase in rough diamond prices, as announced by De Beers, to consumers. This led to polished diamond prices remaining flat in India so far this year. “All these issues are set to affect jewellery sector’s bottom line, going forward,” said Vipul Shah, chairman of All India Gems & Jewellery Export Promotion Council (GJEPC).
Indian jewellers, however, hope that the India International Jewellery Show (IIJW), which is set to be held during August 4-8, 2013, may revive jewellery demand due to the large confluence of major global jewellery players.
This year's IIJW has attracted 32 jewellery designers from various institutes as against 24 last year. Meanwhile, rough diamond has become costlier due to the depreciating rupee. The currency has declined 10 per cent so far this year from the level of 54 against the dollar in January to 59 now. However, export has not proportionately picked up.
In fact, gems and jewellery exports fell by 11.13 per cent in rupee terms and 13.19 per cent in dollar terms to Rs 47,422.85 crore and $8.5 billion, respectively, for the quarter ended June 2013. “Similar is the case in domestic market, which constitutes around 20 per cent of diamond polished in India. Due to the lack of festivals and any other reasons, polished diamond sales have been somewhat lower in India as well,” said Shah. In contrast, import of rough diamonds shot up 28.39 per cent to 461.37 million carats between April and June 2013 from 359.36 million carats in the corresponding quarter of the last year. This indicates domestic jewellers are stuck with huge inventory and waiting for opportune time to release the same.
"High cutting centre stock, tight midstream liquidity and a weakening rupee continued to create challenges for the rough market," said Philippe Meillier, CEO of De Beers Group said while announcing the group's first half financial performance of the company in London on Friday.
With the overall economy on recovery line, the US exhibited encouraging growth in the first half of 2013. Growth in China continued, albeit at a slower pace, and was somewhat patchy.
De Beers, therefore, expects moderate growth in diamond jewellery demand in the second half of 2013, supported by improving sentiment in the US market and continued growth in China.
Conditions in India and Japan remain more uncertain due, in part, to the continuing volatility of their currencies, which is expected to affect growth in US dollar terms. Overall, despite the fragility of the global economic recovery, macro-economic conditions are generally supportive of global growth in the polished diamond market in 2013 at levels slightly above 2012, Meillier added.
De Beers, one of the world's largest diamond miners, posted a 6.29 per cent increase in its rough diamond production in the first half of the current calendar year. The total rough diamond output of De Beers, a unit of global mining giant Anglo American, shot up to 14.3 million carats during the first half of 2013 compared to 13.4 million carats in the comparable period of 2012.