Bumpy road ahead for diamond players

16 08 2010
MUMBAI: The Indian diamond industry is in for rough days. The recent decision of Diamond Trading Company (DTC), the distribution arm of De Beers Group, to remove several Indian companies from its list of sightholders has come as another setback for an industry reeling already under the impact of a stronger rupee.

The exit of several Indian companies from the sightholders’ list will certainly make sourcing of rough diamonds difficult for these companies. This could affect the manufacturing activity.

According to market participants, DTC assured regular supplies of quality roughs at a good price and now the same would have to be sourced from open market where quality and quantity could be an issue. Sightholders are the clients or buyers of DTC and are authorised for bulk purchase of rough diamonds. Though the DTC sightholders list will be official by March, around five to 10 Indian companies have been excluded with a couple of new ones added in the 2008 list.

A prominent player in diamond industry on conditions of anonymity said that in the next five to seven years only 15% to 20% of the current cut and polished diamond business would be left in the country as there would be serious supply problems of rough diamond. “The only option for the Indian companies will be to move their units to Africa,” he said. More than a dozen of Indian companies have already moved their units to Africa, he added.

According to the figures by Gem and Jewellery Export promotion Council (GJEPC) imports of rough diamond are down by over 48% in November 2007 at 96.3 lakh carats valued at $532.4 million as against 185.6 lakh carats valued at $906.2 million in November 2006. The imports between April and November 2007 are down by 3% at 1,085.1 lakh carats valued at $6278.3 million from 1,126.3 lakh carats valued at $5530.4 million in the corresponding period last year.
However, because trading activities gradually shifting from Antwerp to Dubai and India, the exports of cut and polished diamonds have gone up.

Exports of cut and polished diamonds have increased to 30.1 lakh carats in November 2007 valued at $912.1 million as against 22.1 lakh carats in November 2006 valued at $696.9 million, while between April and November 2007, it has gone up to 261 lakh carats valued at $8526.4 million as against 211.5 lakh carats valued at $6,351.1 million between April and November 2006.

According to an official from Livingstones, one of firms to be delisted, there would be problems in sourcing. “We would have to source now from the open market where price is expected to be higher then what we were paying to DTC,” he said. There may also be problems of availability and quality, he added.

DTC recently announced 79 sightholders of which 75 will be offered supply through DTC London and DTC South Africa and rest four will receive sights through new independent joint-venture operations- DTC Botswana and Namibia Diamond Trading Company — selling rough diamonds to clients in Botswana and Namibia for the first time.

During the previous contract period (2005-07), DTC sold all of its rough diamonds to approximately 93 clients entirely through DTC London which offered sights in London and Johannesburg.

According to industry sources around 40% to 50% of rough diamond supplies by DTC come to India and more than 50% of its sightholders are from India.

However, Ashish Goenka from Suashish Diamonds said that supplies from DTC to India would still remain the same. “The cake is still the same, the players have changed. India remains a very important centre for DTC and they have always supported the Indian diamantaires,” Mr Goenka said. He added that DTC has followed a very rigorous and thorough robust process in assessing its customer list. Suashish are the DTC sightholders in India and Botswana.
Mr Goenka said trading aspect of the sector will also pick up along with the manufacturing side.

Exports from the Gem and Jewellery industry fetched $17.1 billion in 2006-07 against $16.6 billion in 2005-06, showing a growth of 26% with diamonds accounting for 64% of the total exports.

A big blow will be to the people who are employed in the industry. According to GJEPC, 150,000 workers have lost their jobs because of rising rupee but traders feel that jobs have also been lost due to crunch in supplies of rough diamonds affecting the manufacturing.

India is the world’s largest diamond processing (cutting and polishing) country with an estimated one million processors handling more than half of the world’s rough diamonds by value. According to industry estimates, 11 out of 12 stones (diamonds) set in jewellery are cut and polished in India.

In terms of carat, India’s share in this sector is about 80% of the world market. Employing over 90% of the global diamond industry workforce, India also accounts for 90 % of the volume of diamonds processed in the world.




%d bloggers like this: