Rapaport Magazine

Market Faces Challenges

India Market Report

By Zainab Morbiwala
RAPAPORT... Diamond trade across the globe seems to be bearing the consequences of the negative movements in the U.S. economy. Apart from low demand, Indian traders are also facing a tough time collecting on payments due. The trade taking place in the past month is getting mixed reviews from the players. Some maintain that the market already is showing signs of a slow recovery, whereas others feel that the market will definitely show signs of improvement in the coming season.

Prices of Rough Up

Rajiv Shah, director, D. Naresh Kumar, said: “From the side of rough, for the moment, the prices have really gone very high. People are neither happy with the way prices are going up nor by the way trade is taking place. Polished prices have been dropping vigorously and rough is going high. The demand-supply mechanism is facing a very negative situation right now.” Commenting on the reasons for the rough price increases, he added, “For the moment, I think it is a big artificial rise. People have incurred a lot of losses in the past and the market is volatile overall so everyone is trying to recover their money and trying to sell rough at the higher price [because the demand is there]. Also, there is a big financial crunch in the market, which is keeping traders from doing business with people who do not pay on time.”

Sharing his explanation for the rising rough prices, Bhuvan Khimji, general manager of sales for Rosy Blue, said, “There is no new mining activity taking place, hence, there is a stable production with no increase for current consumption and demand, which is primarily in the better-quality range. This has caused the increase in rough prices.” Khimji said that the prices of stones in the 5-carat and larger category have significantly escalated for many of the same reasons. “Rough supply of larger stones has always been scarce. Demand for 5-carat stones has gone up but the availability of the rough has not increased. There is also an increase in the consumer spending power.”

Polished Demand

Siddharth Kedia, vice president of marketing, Suashish Diamonds Ltd. said: “Presently, polished prices are not going up. I think the market is not bullish. The moment the prices of rough go up, polished will show negative signs in terms of demand and growth.”

Khimji disagreed, noting that “Demand for polished is constantly increasing, especially in the better category. The industry is going through a good time. People have started stocking a lot of goods for the season from September 2007 to April 2008. I expect a 20 to 25 percent growth for the next season in terms of diamond trade and consumption.”

On the subject of demand for polished, Shah said: “There is a demand for polished but people are not finding the kind of merchandise that they are looking for. There is a demand for big-size stones but the supplies in that area are very difficult. The demand is for 3-carat to 5-carat stones, which are really selling very well, and anyone who has them is selling at whatever price he asks. Some are even demanding higher prices than what others are asking because there are so few stones of that kind available in the market.”

Lower Margins

Another factor that is affecting traders in India is the issue of lower margins. Khimji explained: “As we produce goods, not everything gets sold off immediately. Better-quality goods and goods that are in demand sell much faster. Eventually, to balance out [what is selling and what isn’t], margins have to be adjusted. Also, the number of small manufacturers in the industry has mushroomed, which is leading to lower margins for big players.”

Commenting on more buyers from the Middle East and Israel as compared to the U.S., Shah said: “The U.S. is in a weak position right now. There is no demand from the U.S. and people are afraid of selling to Americans. There are more buyers from Israel coming to India now. I think the economy of America has been hit very badly and there are a lot of bankruptcy cases showing up. Everyone is having a tough time getting payments from America.” Kedia said Suashish is focusing its activities on the Middle East market rather than the U.S. for the same reasons.

What is Selling in India

According to Khimji, India has predominantly been a market for round diamonds, which are used in studded jewelry, but the demand for certified solitaires is steadily increasing as well.

The Marketplace

• Overall, the polished market is improving. Good trading activity observed for small goods, due to Indian buyers from Antwerp.
• -0.01 carats continues to be the pick of the season, as compared to other categories.
• Demand is good for brown goods, particularly in stars and melee.
• Activity is strong for -2 carats, with shortages across the board, especially for -0 sieve and 1/200.
• Movement is average for stars for I1+ goods.
• Activity is good in melee sizes, especially for I2+ whites and SI1+ browns.
• 0.08 to 0.18 carats are slow overall, except for collection goods and low-quality I1 – I2 goods.
• Activity is good for 1/5 in SI1+.
• 1/4 and 1/3 are slow.
• 1/2 is seeing good activity in VS+/I+ and I1-I2.
• 0.70 to 0.99 carats are stable, with good demand only for collection goods, mainly 0.75 carats+. Shortages exist in 0.80 carats+.
• Demand is very good for 1-carat in VS+/I+, with shortages for premium sizes.
• Demand is slightly improved for
2 carats in collection goods but other areas are weak.
• Demand for 3 carats is strong, with shortages in supply.

Article from the Rapaport Magazine - September 2007. To subscribe click here.

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