Double whammy for diamond traders

Diamond traders of Surat, the country's largest diamond cutting and polishing centre that accounts for almost 90 per cent of India's total trade, are facing a double whammy.

They are yet to recover the losses they had suffered following the one-month production halt in August during the devastating rains. The decline of 3-5 per cent in prices in the aftermath was a serious blow to them. Then there has been a slowdown in demand for both rough and polished diamonds, particularly from the US.

Inventories have been piling up and prices "� mainly of polished diamond "� have been falling.

However, the domestic industry is divided on the implications of the July-August floods "� their relation to the diamond price movement.

According to Pravin Nanavati, president of South Gujarat Chamber of Commerce & Industry, the current price decline is more because of about 10 per cent lower demand for rough and polished diamond for the forthcoming Christmas festival.

"Christmas demand from the US determines the balance sheet of diamond traders across the globe, including Indian traders. This year, the diamond season is passing through a rough weather for unknown reasons," Nanavati said.

Besides, the industry is facing a shortage of raw materials owing to lower supplies from Israel and South Africa, the world's largest rough diamond miners. In India, Diamond Trading Company (DTC) sightholders were large users of imported rough diamonds for their captive consumption, which led to a supply crisis for cutting and polishing diamonds in the Surat region, he said.

Nanavati demanded that the government set up an adequate infrastructure for the upcoming Surat Diamond Park, including a world-class airport which would be able to attract global diamond traders to the country. Otherwise, "we would lose our potential business to the neighbouring countries such as China and Pakistan," he said.

Siddharth Kedia, general manager "� marketing, Suashish Diamonds, however, is considering the Surat flood "a blessing in disguise", which helped him clear the inventory. "Had not it happened, the diamond sector would have witnessed its worst-ever days by now," he said.

Although both Nanavati and Kedia agreed the price decline in the range of 3-5 per cent in the aftermath of the Surat flood must have dented diamond traders' business, they denied any alarming inventory pile-up thereafter.

"Pricing in the diamond business depends upon the negotiating capability of a buyer. The order size, coupled with payment terms, determines the pricing of diamonds and diamond jewellery. But, in the most recent past, the sector has witnessed about $50 a carat of rough and finished diamonds," said Anaggh Desai, CEO - India project, Damas, a new entrant in B2C diamond jewellery retailing in India.

The country's exports of cut and polished diamonds declined 13.24 per cent to 214.546 lakh carats, valued at Rs 28,744.30 crore, in the first seven months of the current financial year compared with 293.85 lakh carats, valued at Rs 33,129.19 crore, in the same period last year. Imports of rough diamonds also fell 7.11 per cent to 940.6877 lakh carats, valued Rs 21,356.44 crore in the first seven months of this year from 1,024.71 lakh carats, valued Rs 23,071.88 crore in the same period last year.

Kedia attributes the drop in exports to a rising demand for synthetic (lab-made) diamond jewellery.

While Sanjay Kothari, chairman of Gems & Jewellery Exports Promotion Council, confirmed the 2-3 per cent decline in diamond prices, which he attributes to the volatility in gold and the 2-3 per cent fall in rough diamond prices. While he is upbeat on the outlook of gold jewellery, Kothari is a bit sceptical about diamond jewellery.

"The real course of action can be decided only after January 15 on seeing the Christmas sales," he said.

Sources said the film 'Blood Diamond' had a negative impact on the sentiment of diamond trade throughout the world. The world diamond industry fears that the film would skew opinion against diamonds during Christmas "� the highest purchasing season.

The movie depicts the role diamonds played in funding the war in Sierra Leone during the 1990s. However, DTC assures that film will not have any adverse impact on the Christmas diamond.