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India
By Zainab Morbiwala
Diwali — the festival of lights — is also a festival for gift shopping in India. Jewelers actively mark the occasion with promotional, marketing and public relations campaigns. Leading online Indian jewelry portals like jewelsouk.com, jewelhub.com and marketplace portals like Amazon.in took front-page advertisements in newspapers and magazines offering huge discounts and special offers on fine jewelry. All these efforts combined gave a slight push to sales of diamond and gold jewelry during October through the first week of November 2015. However, with the exception of these five or six weeks, the gem and jewelry industry is still waiting for a silver lining in an otherwise gloomy situation.
The India Diamond Trading Centre (IDTC), established by the Gem and Jewellery Export Promotion Council (GJEPC) and the Bharat Diamond Bourse (BDB) and housed within the BDB, provides producers direct access to the Indian market and vice versa and acts as an operator of the Special Notified Zone (SNZ). IDTC completed its first shipment from Rio Tinto on November 9, 2015, and the same was re-exported back the next day. IDTC is the first SNZ in the country to trade rough diamonds under special laws. It is expected to be of significant benefit to the majority of diamond companies, especially the small and medium enterprises (SMEs), as it will enable them to source rough directly from miners, reducing operational costs and drastically reducing travel by Indian traders to diamond trading centers abroad. According to a press release, IDTC will be conducting a weekly viewing and auctioning of rough diamonds. The IDTC viewing slots are booked through December 2016 by major trading companies such as Diamond Trading Company (DTC), Dominion Diamond Corporation and Rio Tinto.
Speaking exclusively with Rapaport Magazine, Praveenshankar Pandya, chairman, GJEPC, minced no words in acknowledging that the industry situation is far from being positive. He pointed out, “As far as the diamond industry is concerned, we are in a cyclic situation where the world market has not been responding very well. The demand cycle has decreased, largely because the Chinese economy is slow. Except for America, no other market is responding well and this includes India, Europe and Japan.” Drawing a comparison of the October market situation to August and September Pandya noted, “I would rate October 2015 as a better month than September 2015 in general. But to reiterate, the overall situation is slow and gloomy.” GJEPC reported that the overall exports from the gem and jewelry sector in India during the month of October 2015 was $2.95 billion, a decline of 17.5 percent over the $3.58 billion exported in the same period last year. Overall, exports from the gem and jewelry sector in India during the first seven months of fiscal 2015-16 stood at $22.17 billion, a decline of 7.4 percent compared to the $23.93 billion exported in the same period in 2014.
“There is a severe crisis of profitability,” Pandya continued during his exclusive interview. “The time for inventory turnover was two months, but in the past few months, it has stretched to four months. Inventory carrying cost has gone up. Interest cost in India is very high, so it does not make sense to pay high prices, but usually the players borrow money to take stocks from the miner and carry inventory for four months.” According to Pandya, the issue the industry faces can be traced to the fact that the miners are not getting enough direct market feedback. “They need to take action before the market is overloaded with stock and not a corrective action afterwards. If miners had market intelligence, they could take a proactive stand and correct the situation before it happens, then the price drop would not happen. This price drop affects their inventory prices also.”
“When De Beers was in complete control,” continued Pandya, “they took responsibility and in times of crisis they were seen taking corrective measures. Today, we have half a dozen leading miners. So it becomes imperative that all these miners work out a system in a collaborative way. It is high time that we evolve a system where we all are better informed — miners, manufacturers and retailers.” Pandya offered corrective measures that could help the industry. “My efforts would be directed at ensuring that we talk to all the stakeholders. If we could come up with some kind of a structure where we start slowly, by including everyone, then we would build up confidence. It is for everybody’s good. Whether India takes up the initiatives or someone else takes it up, it has to be done.”Article from the Rapaport Magazine - December 2015. To subscribe click here.
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