After changing its policies by letting authorised buyers or sightholders return 2 to 30 per cent of rough diamonds sold to them in October-November, DeBeers is likely to revert to its original policy of zero returns, except in certain limited categories of rough diamonds.
Amidst an oversupply in rough diamonds given the challenging cut and polished diamond demand and sales, the over 130-year-old company had relaxed return policies for its sightholders in last couple of months. However, with festive season in the West boosting cut and polished diamond exports from India, the oversupply scenario is set to ease up, letting DeBeers go back to its original policy of zero returns.
Indian diamond processing industry was facing situation of high inventory of polished diamonds while facing working capital tightness. To address this issue, De Beers is understood to have offered facility to take sold goods back.
"Last month, when DeBeers gave sightholders parcel of rough diamonds, they gave the flexibility of returning 30 per cent of the goods after sorting. This was to help the manufacturers since the market has been tough for the last one and a half years and they wanted to support their clients. This month they adjusted prices and said we will buyback only 20 per cent. But now, hopefully by December and January when prices are realistic to the market they will go back to their old policies of sightholders picking up 100 per cent except for certain bigger sized boxes where you could return 10 per cent rejections," said Anoop Mehta, director of Mohit Diamonds and president of Bharat Diamond Bourse (BDB).
According to Mehta, since last four months, DeBeers had been cutting back by selling 30-40 per cent less. The scenario now has changed whereby supply of rough diamonds and consumption of polished diamonds has more or less aligned. "So you don't see polished diamonds prices under pressure anymore and the sales in the US also seem to be good which is also helping. Very soon they would want to go back to their older policy of 10 per cent return policy on only certain bigger boxes," Mehta added.
Email sent to De Beers has remained unanswered.
According to provisional data from the Gem & Jewellery Export Promotion Council, Overall gross exports of gem and jewellery is showing a decline of only 2.05% to US$3.46 bn during the month of October 2019 as compared to US$ 3.5 bn in October 2018. In September decline was 6.24 % and in August the fall was 14.4 %.
Even first 7 months gross exports of G&J falling rate also was 6.25% to US$22.42bn which was 7.6percent in first six months. More importantly, exports of cut and polished diamonds fall seems to have been arrested to an extent. The exports saw a fall on 24.86 per cent to $1.64bn in August and 17.8 per cent in September to $1.94 was down 15.4 per cent to $1.95 bn in October showing marginal recovery taking place month on month. Although this is not enough to fill the gap created since previous two quarters.
Nonetheless in recent times, production or diamond polishing has been reduced by diamantaires in Surat to level with demand to ease up the pricing pressure, said Dinesh Navadiya, regional chairman, GJEPC.
"The oversupply situation has also improved since despatches during the recent Diwali season when stock went down considerably. Exports and sales of cut and polished diamonds is now improving from this month and is likely to continue for the next few months due to uptake in demand, especially in the West," Navadiya added.