Finance Update

The move: Diamond prices likely to stay steady this fiscal

Diamond prices

may remain steady in the current financial year as the

Diamond Trading Company

(DTC) has indicated to the Indian industry that supplies may be 15-20 per cent less than in the previous year.

Although this may lead to a drop in inventory levels of Indian diamantaires, traders said they do not expect exports of gems and jewellery to increase this year as bank finance remains tight for the sector, thereby continuing to limit business expansion.

“The move by DTC, the rough diamond sales and distribution arm of De Beers, may have a positive impact on prices but overall we do not see exports to grow in FY20. It may either remain flat or may fall 5 per cent,” Colin Shah, vice-chairman, Gem & Jewellery Export Promotion Council told ET.

Exports fell 6.3 per cent year-on-year during April 2018-February 2019 to $28,516.22 million. Shah said that getting bank finance has become harder in the current fiscal.

“Moreover, there are a lot of procedural issues which are slowing down exports of gems and jewellery,” he said.

He said that if bank finance remains tight, then a portion of cut and polished diamond work may shift from India to China, Thailand, Russia and Africa. In addition, he said, a portion of gold jewellery production may shift to China.

Imports of rough diamonds fell 17 per cent in April 2018-February 2019 to $14.31billion from a year ago as manufacturing activity at the cutting centres slowed down due to factors including a squeeze in bank credit.

Vipul Shah, managing director of Asian Star Company, said that domestic demand is also tepid on account of the ensuing elections. “Until the general elections are over and the new government is formed, nobody is interested in buying diamonds. Everybody is on a wait and watch mode,” he said.

The market for polished diamonds has slowed globally, except in the US where there is stable demand, said Shah. “The fourth quarter of FY19 was better. But with the onset of the first quarter of FY20, demand has slowed down. However, we are expecting some movement in global markets going ahead,” he said.

As per the latest Rapaport Market Comment, a widely followed trade report, sentiment in India remained subdued amid reduced bank credit and tight rough-to-polished profit margins.

“Manufacturers lowering production in an effort to deplete inflated inventories and in anticipation of lower De Beers rough offerings. Buyers are sensing midstream pressures and pushing for deeper discounts,” it said.

Source

Prakash Poojary
Business Analyst

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