Diamond traders eye China

The country's gem and jewellery export industry, in a bid to sustain growth, is actively looking at China as a prospective market, according to Sanjay Kothari, chairman of Gem and Jewellery Export Promotion Council (GJEPC).

"China is a major market. As of now there are no exports to China because of high duties," Kothari said.

The industry, which had a muted growth in 2006-07, is likely to see a 10 per cent growth in 2007-08 on expectations of improved offtake of diamonds and jewellery this year. China was a relatively unknown market, but seemingly a major market, Kothari said.

"We plan to conduct a market study and then explore possibilities of selling jewellery in China," he said.

The GJEPC is planning to have a buyer-seller meet in China this year to promote sales of diamonds and studded jewellery.

According to him, the recent lifting of preferential treatment by the US on the country's gold jewellery exports could impact exports to an otherwise saturated market.

"The impact of 6.7 per cent duty after the lifting of preferential treatment will be felt more on exports of large diamond jewellery products rather than on smaller ones," Kothari said. This change could affect exports to the extent of 10-20 per cent, he said.

Therefore, the industry is prompted to look at other markets including China. At present, 50 per cent of the country's jewellery exports are headed to the US.

The country's jewellery export industry is not unduly perturbed by this development, as China and Thailand also do not have the US Generalised System of Preferences benefits.

The country's gem and jewellery export industry has grown consistently for the last 30 years following a strong demand in the US.

"We are now in a period of consolidation, but we could see 10 per cent growth this year," Kothari said.

In 2006-07, cut and polished diamond exports rose by a mere 2 per cent to Rs 7,375 crore mainly due to sluggish demand from the world's leading market, the US.

Cut and polished diamond segments account for 80 per cent of the country's gem and jewellery exports, followed by gold jewellery and coloured gemstones.

"Much depends on how the season will unfold from September onwards in the Western countries," Kothari said.

According to him, jewellery sales worldwide have been faced with stringent competition from electronic segment.

"We cannot depend on the US and therefore have been looking at other markets to keep the growth momentum going," he said.

The GJEPC has been actively looking at markets such as Japan and Commonwealth of Independent States (CIS).

Japan, he said, was a high-value market where finely finished jewellery was sought after.

The GJEPC entered into a tie-up with a Japanese company asking it to choose jewellery for that market from companies in India.

"The Japanese company chose eight Indian jewellery manufacturers to source jewellery products. Overall, the results have been encouraging," Kothari said.

The CIS is another major market for gold jewellery with annual purchases averaging around $6-7 billion.

However, China was another new market the industry planned to focus on to grow its business, he said.

The rupee's firmness against the dollar is not a major dampener to this industry as India imports its entire requirement of rough diamonds. The rupee's strength does have a marginal impact on the value addition in exports.

"We do lose out on the value addition that we provide in diamonds and jewellery. To that extent, our profit margins are impacted," Kothari said.

At present, the industry is faced with the prospect of rising prices of rough diamonds.

The country's gem and jewellery export industry imports rough diamonds from trading centres of Antwerp in Belgium, London and Israel.

In order to ensure uninterrupted supplies of rough diamonds, the industry has been looking at tie-ups with diamond mines for direct supply.

Direct supply of rough diamonds also help jewellery companies to mitigate the impact of rising prices of roughs as well as the rupee's appreciation against the dollar.