Diamond firms want supply tie-ups abroad

To ensure supply of raw material to processors.

Following the trend seen in other industries, diamond processors are looking for a steady flow of raw material (rough diamonds) and discussing possibilities with diamond mining companies in South Africa.

India has two consortiums of diamond processors and exporters. Diamond India Ltd (DIL), one of these, wants an arrangement with mining firms abroad for either a back-to-back agreement to purchase rough diamonds or a joint venture for mining. DIL members control around a fifth of the country’s total exports of polished diamonds.

At present, DIL imports rough diamonds and even gold on behalf of members. Bulk buying helps efficient procurement. “Now we are looking at possibilities for ensuring supply of rough diamonds and exploring all options,” said Pravin Shankar Pandya, its chairman.

Surat Rough Diamond Sourcing India, another consortium of processors from Surat, is also negotiating with mining firms abroad for procuring roughs for its members. “We are not discussing possibilities of mining right now but definitely looking for a supply arrangement,” said its spokes person..

Rough diamond production and supplies have always remained controlled. After the 2008 recession, all diamond miners had cut production by 40-50 per cent. Despite rising demand, the production cut is yet to be restored. Diamond Trading Company, marketing arm of De Beers, the group that dominates the market, had cut output by half. It has restored only half the cut till now. A leading Russian diamond mining company wanted to sell diamonds in the market last year, but was allowed to do so only to a Russian government treasury company. Those diamonds have yet to come to the market.

In many cases, diamonds sold by miners are cornered by foreign buyers but only to sell to Indian processors, as 90 per cent of processing is still done in India.

This seems to have prompted DIL to try for an arrangement with mining companies. However, Pandya declined to discuss details. If he could close such a deal, it will be the first of its kind in the Indian diamond industry. Globally, many private traders have entered directly or in a joint venture into diamond mining.