RAPAPORT... With the marriage season underway in India, the demand for gold is gradually stabilizing, especially since the drop in gold prices in recent weeks. The same cannot be said about diamonds, though. Demand for diamond jewelry has not yet picked up any momentum and the diamond industry is still stagnant under the pressure of the global economic downturn.
ASSOCHAM Report
A new report released by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) predicts that the size of India’s gems and jewelry market segment will shrink by 3.9 percent to $22.3 billion in 2009, compared with the $23.43 billion recorded in 2008. The report noted that the sector is expected to face considerable challenges in 2009, owing to the decline in demand for gold and diamonds in the domestic market, as well as the global economic conditions. Also forecast was a decline in exports of gems and jewelry to $20.06 billion in 2009, compared with a $21.20 billion total in 2008.
Sajjan Jindal, president of ASSOCHAM, reiterated the challenge that the industry faces within the luxury goods market. “Spending by higher-income consumers is particularly weak,” he said, “which has resulted in demand for gold and diamond jewelry shifting to other luxury items.”
Due to the lack of demand and high prices in the market, gold imports by India plummeted by 97 percent in the first three months of 2009 to 1.8 tons, compared with 61 tons in the first quarter of 2008. ASSOCHAM also released year-end statistics showing the contribution of gems and jewelry to total imports by the U.S. from India declined to 21.7 percent in 2008 from 25.73 percent in 2007.
Brand India
The Gems and Jewellery Export Promotion Council (GJEPC), in its continuing attempt to develop alternative markets to offset the depressed U.S. market, has launched a “Brand India” campaign in the Middle East. The campaign, which is expected to cost as much as $50 million, is scheduled to launch in late 2009 in Saudi Arabia, the United Arab Emirates (UAE), Iran and Kuwait. Campaign activities would include events with Bollywood celebrities, print and television advertisements and trade meetings in the targeted countries.
Middle Eastern countries, according to industry estimates, offer a very good potential market for the Indian gems and jewelry industry, as these countries now account for nearly 15 percent of India’s diamond and jewelry export, compared to the 5 percent share a few years back. Commenting on the campaign, Vasant Mehta, GJEPC chairman, shared, “We are trying to ensure that Middle East customers get an integrated understanding of diamond and jewelry products from India, given the strong demand emanating from the region.” Speaking with RDR, Mehta stated that the council also is in the process of exploring promotional activities in Commonwealth of Independent States (CIS) countries and China. He said, “Our next target will be countries like New Zealand, Brunei, North and South Korea and Ireland, all of which remain unexplored for us.”
Market DynamicsCommenting on market dynamics, Vijay B. Shah, director, J.B. Brothers, said, “The market condition is gradually changing as people have more or less accepted the higher price of goods since 2008. There is an air of confidence in the market with regard to price stability and hence there is considerable investment taking place by industry players in terms of buying and selling goods. The American market, too, has looked more positive since March and the Far East is showing a lot of potential as well.”
Global mining giant Rio Tinto reportedly has discovered a rich diamond resource in Madhya Pradesh, India. The Hindu, the English-language daily, reported that the discovery could possibly boost the company’s plans of investing “hundreds of millions of dollars” in India. According to Nik Senapati, Rio Tinto India managing director, “Rio Tinto has completed an Order of Magnitude study, which has inferred resources of 37 million tons of diamonds and estimated the grade of the resource at 0.7 carats per ton.” Sharing details about the investment, Senapati told the press that the amount of future investment would depend on further evaluations of the distribution of diamonds in the pipes, hardness of rocks and so on. “But, it would be in the order of hundreds of millions of dollars,” he said.
The MarketplaceThe overall mood is positive in the Indian trading markets. Some highlights:
• Dossiers in EX cuts under 1 carat are selling very well to the Far East and other markets.
• Demand is very good for 1.00 to 1.99 carats up to J, SI1, and discounts have narrowed by 4 to 5 percent across the board.
• Domestic demand, especially for bridal goods, has picked up due to the ongoing wedding season in India.
• Goods in the SI category and lower are moving slowly but surely.
• Nice large stones of 3 carats+ with no black are increasingly difficult to find.
• Movement for small pears and marquise cuts has also improved in sizes smaller than 0.50 carats.
• Manufacturing units in Surat are operational again in order to fulfill new orders for polished goods, as the old inventory is being used up.
Article from the Rapaport Magazine - May 2009. To subscribe click here.