Diamond traders defer decision to put an embargo on import of rough diamonds
Diamond traders have deferred their decision to put an embargo on import of rough diamonds as they had done in November 2008.
Following a significant drop in profitability in the quarter to June, the traders have decided to keep a close watch on the scenario for a month and initiate talks with diamond miners such Rio Tinto, De Beers and Alrosa to come up with suitable measures.
The traders unanimously decided to defer the option of voluntary closure, or embargo, on import of rough diamonds for the time being. "We are encouraging self-discipline by the traders in import and purchase of rough diamonds based on their inventory and demand for polished diamonds," said Vipul Shah, chairman of Gem & Jewellery Export Promotion Council.The traders also decided that a delegation of their nominated representatives will meet the miners to review the situation and also the bankers for increasing bank finance. They feel that efforts should be made to come up with promotional campaigns along with miners and other segments of the industry to increase the demand for diamond jewellery.Mavji Patel, managing director of Kiran Gems, said diamond traders in the country saw a 10%-15% drop in their profitability compared to the year-ago figures. "We are sourcing lesser quantities of rough diamonds from the miners. We do not see much of a demand in the July-September quarter also. It will be 10%-15% less than that in the same period last fiscal year."Traders said diamond offtake is passing through a lean phase globally although the demand from the United States is stable.
In India, mid-level traders are hit because of diminished demand for polished diamonds coupled with a lack of profitability in diamond manufacturing due to costlier bank finance, and inability to price rough and polished diamonds in a sustainable proportion. Miners have not reduced the prices of rough diamonds, though. "Instead, prices have gone up 0.5-1% even though the offtake is less. The miners are not forcing us to take goods from them," said Patel.According to Rapaport reports, there is a shortage of fine-quality diamonds and selective buyers are paying firm prices for these goods to fill existing orders. However, there is a lot of excess inventory of lower-quality diamonds in the market and flexible buyers are getting good deals.
Producers of rough diamonds, as per the report, prefer to reduce supply rather than prices in the current weak market. Prices of rough diamonds have remained relatively stable in the second quarter of the calendar year, after slipping 5-7% in the first three months of the year, the report said.
Source : economictimes.indiatimes.com
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