RAPAPORT... With the diamond market still seeing negative growth because of the high price of rough, the players in the Indian diamond market are anticipating some relief from the national budget this year. As reported by The Economic Times, the Indian gems and jewelry exporters may get duty-free access to the U.S. market once again as the Indian government is trying to bring the sector back on the U.S. government’s generalized system of preferences (GSP) list. The sector was “graduated out” of the system in 2007.
Under the qualification criteria of the GSP scheme, the U.S. administration grants duty-free access to goods from a country that fall within an annual cap of $1.87 billion. Goods that exceed that cap and products that constitute more than 75 percent of total U.S. imports of that category of goods do not qualify for the benefit. Since India’s exports of gems and jewelry to the U.S. reached $2 billion in 2006, it was “graduated out” when the scheme was renewed in June 2007. A review is slated in June and this time, India hopes to qualify because a variety of economic and employment factors are considered in granting GSP designations. If the sector gets the GSP designation, Indian jewelry will not have to pay the 6.7 percent import duty, making it more competitive against China.
Current Market DynamicsThere are many reasons for the increase in the price of rough and polished. Anil Shah, director of Venus Jewels, cited “the lack of proper, organized channels for the supply of rough diamonds, which has resulted in unwanted markups for the rough goods. We think another reason is that, over a period of time, there has been an increase in the establishment of manufacturing units without any increase in actual demand for the polished diamonds, which has resulted in an artificial increase in the price of rough goods.”
Anshu Sudhir Shah, partner, Dia Jewel, said, “Presently, the rough supply is less, which is affecting the trade, and anything above 8 carats is in very short supply. The same applies to SI quality in any color. Rough prices have risen in the range of 5 to 8 percent in just the past two to three months. Polished supply also has been affected. The poor performance of the overall market can be attributed to the stock market volatility and also to the rise in the price of real estate.”
Corrective MeasuresTo make up for the overall decline in demand for diamonds and diamond jewelry caused by the slowdown in U.S. economy, the SEEPZ Gems and Jewellery Manufacturers Association — SEEPZ stands for Santacruz Electronic Export Processing Zone — has asked the Indian government to allow association members to sell products in the local market to help them stay afloat while overseas demand is lean. Currently, SEEPZ in Mumbai has more than 130 jewelry units and accounts for 38 percent of India’s total jewelry exports worth $5.2 million.
In another bid to improve trade, the Gems and Jewellery Export Promotion Council (GJEPC) has asked the government to facilitate dollar financing. Sharing his recommendations for the budget, Sanjay Kothari, chairman, GJEPC, said that “Cut and polished colored gemstones are used as raw material in manufacturing studded jewelry. In order to maintain competitiveness in the jewelry sector, India needs stones, which are not available in India. Zero import duty would help assure availability of colored gemstones of various sizes and qualities in India, which would further help in the growth and diversification of studded jewelry exports, thereby transforming India into a global jewelry trading hub.” Furthermore, the council is proposing that the government remove the 5 percent duty on imports of cut and polished gemstones, eliminate duties on cubic zirconia and reduce by one-half the 10 percent duty on imports of plain gold jewelry below 18 karat.
Sharing his wish list for the budget, Anil Shah said, “There is a need for an international airport in Surat, which will help clients reach the manufacturing centers more easily, and for export tax incentives for companies that are operating outside SEEPZ. Also, loose diamond buying from the website with credit cards should be allowed because right now international customers have to purchase diamonds through wire transfers.”
The Marketplace• -2 is extremely hot and there are severe shortages due to less production.
• Stars are stable across the board.
• Melee is hot and showing good movement across the board.
• 0.08- to 0.18-pointers are showing good movement for VS+/I1 goods.
• 1/5 strong for SI1+, 1/4 and 1/3 are slow overall, with better movements for I1 and I2 goods.
• 0.50-pointers are stable.
• Shortages exist across the board in 0.80-pointers+.
• Demand is good across the board for 1 carat+, with collection goods and lower-quality goods both doing well.
• 2 carats+ are showing better
movement compared to previous months, with collection goods showing especially good movement.
• 3 carats+ have very high asking prices, with few stones available to meet demand.
• In fancy shapes, movement is steady for pears, marquise, oval and princess in collection goods. The piqué category has slowed down across the board.
Article from the Rapaport Magazine - March 2008. To subscribe click here.