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India
By Zainab Morbiwala
If industry experts are to be believed, good days for the gems and jewelry industry in India seem a distant dream. Currently, the industry is plagued by poor demand both from within India and from the international market, banks acting conservatively in extending credit to the industry and the high price of rough. Added to that is the issue of synthetic diamonds being mixed with natural diamonds, which is tarnishing the image of the Indian diamond industry.
Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), assessed the current market in an exclusive conversation with Rapaport Magazine. “The market is in very bad shape,” he said. “Globally, the demand for gems and jewelry is low. The message across the industry is that the players are slowing down production. We can expect them to close for a longer vacation in May. And I think that is the best strategy, since no one is controlling the sales levels from the mines. Manufacturing centers need to show restraint. If they want a sustainable and healthy market, they need to manufacture less.” Industry players are not in a position to lose more money on inventory right now, according to Shah. “I personally feel that everybody in the industry is applying a brake. The situation we are facing now is very different from what we witnessed in 2008, when players could sell goods at a lower price and turn around and find lower-priced replacement goods to make up the price difference. This time there is no replacement at a lower price; in fact, the rough is at a higher price. With no demand for the polished, we are compelled to sell it at a lower price to attract buyers. This does not serve our purpose as there is no replacement of the polished with rough at a cheaper price.” As a result of all the negative pressures, traders are holding on to their goods, waiting for actual demand to pick up, and manufacturers are cutting back on production. Once the market and, eventually, demand start improving, things may start moving again. Sabyasachi Ray, executive director, GJEPC, also sounded pessimistic. “2015 began on a negative note,” he said. “Demand from China is slow. Demand in India has not picked up as well. Rough prices are at a high. Polished prices have not picked up and that has led to unrest.” GJEPC representatives met recently with Philippe Mellier, chief executive officer (CEO) of De Beers Group. Mellier briefed the industry stakeholders on the good times ahead for the industry, according to Shah. “We had a discussion with Mellier when he was in Mumbai and he was of the opinion that the world diamond jewelry is on a growth trend,” said Shah. “He said the global signs are encouraging from a diamond jewelry point of view and there is no reason for the industry to panic.” Mellier reportedly suggested that what is hampering the growth is the fact that jewelers do not want to carry huge inventory as they did in the past. Shah agreed that “There is a lot of destocking taking place. Previously, jewelers would carry huge inventory and huge stocks, but now they are bringing their overhead costs down so they are not stocking anymore. And this is causing problems in the industry.”
In positive news, the GJEPC and Bharat Diamond Bourse (BDB) recently cohosted the Responsible Jewellery Council (RJC)’s first Annual General Meeting (AGM) to be held outside Europe. As part of their India visit, RJC board members toured the Indian gems and jewelry industry. Ray said that the fact that the RJC chose India for the meeting is “a matter of pride. We wanted to show them the industry as a whole.” As part of their meeting, the board members visited Surat and its manufacturing sites, the Panchatantra musical at the Opera House, SEEPZ Special Economic Zones, the bourse and the Zaveri Bazaar. The AGM included a seminar for representatives from different sectors of the diamond industry. In other positive news, the government of India has agreed to establish a Special Notified Zone (SNZ) for rough diamond trading. In the first phase, the SNZ will be located in the bourse, with subsequent zones in Surat and Mumbai.
A Diamond Detection and Research Centre (DDRC) was recently inaugurated in Surat by the GJECP in association with the Indian Diamond Institute. Emphasizing its importance, Dinesh Navadia, president of the Surat Diamond Association (SDA), said, “The credibility of the trade in Surat has been affected by the importing of synthetic diamonds and this initiative has been taken to check the trade of synthetic diamonds in the market.” According to the GJEPC, the state-of-the-art Automated Melee Sorting (AMS) machines at DDRC can rapidly detect synthetic stones in parcels of small diamonds ranging from .01 carat to .20 carat in a cost-effective manner. With early detection of synthetic diamonds, the facility will help to ensure the purity of the diamond pipeline. In conjunction with the center’s opening, the council asked the government to introduce different value-added tax (VAT) regulations for synthetic diamonds in Gujarat to differentiate them from natural diamonds within the tax system. Article from the Rapaport Magazine - May 2015. To subscribe click here.
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