Diamond processing on road to recovery

Local, overseas demand nurses industry back to health.

The country’s Rs 80,000 crore diamond-processing and jewellery-making industry is heaving a sigh of relief with the recovery in demand from local as well as international markets.

Demand for rough diamond has improved immensely in the last two months on a 60 per cent mine output cut executed by about half a dozen global mining majors. Hence, supply of all sizes of rough diamonds have reduced tremendously, creating a supply crunch.

Almost half of the 100 diamond varieties are in short supply, of all sizes, ranging from -0.01 carat to + 3.00 carat. This means the demand has erupted suddenly, said Praveen Shankar Pandya, convener of the apex trade body of the diamond-processing industry the Gems & Jewellery Export Promotion Council (GJEPC).

 

Same is the case for Indian diamond processors too. After halting rough imports for a month in December, the supply of rough receded resulting in a lower production in India. Though, falling demand amid global economic recession since the debacle of Lehman Brothers in September 2008, the industry has lost up to 400,000 skilled workers that, if not employed immediately, will be a great loss to the entire sector. Yet, the industry has overcome the downward trend and hope to continue in the months to come, said Vasant Mehta, chairman of the council.

US market, which was accounting for 90 per cent of India’s jewellery exports, continued to remain a cause of concern for exporters as the world’s largest economy is struggling to avoid recession.

But, the demand from West Asia, Dubai in particular, and China emerged suddenly, compensating for fall in business from the US. Domestic jewellery demand has also picked up in the last two months.

As a result, the jewellery inventory, a barometer for judging the market sentiment, has slumped to four months of annual jewellery exports as against 10 months during the peak recession in September - October.

The industry, however, sold 50 per cent of its stocks till March and since then stockpiles continued to fall.

The diamond processing cannot be stopped fully on fears of a loss of workforce. But, the capacity can be reduced. The industry is currently operating at 60-65 per cent of its capacity.

The Indian market is facing supply shortfall. This is a positive indication, Pandya said and added, “Even

De Beers, a global diamond trading major, has recovered its monthly sales from its siteholders to about half a billion dollar now from $100 million at the peak of recession.”

The employment intensive industry, currently employs about 650,000 people, industry has re-employed about 10 per cent of skilled work force of the 33 per cent it had lost since September last year.

Meanwhile, looking at the healthy resumption in demand, De Beers has raised rough diamond prices by 20 per cent in since January 2009. But, the recovery has been up to 15 per cent and is yet to recover which will take time.

“We do not want price to recover fully as it would create another problem for us to sell our goods. Steady rise which may stretch up to the peak demand season of October will be fairly good,’ said Pandya.

Sanjay Kothari, an industry veteran and immediate past chairman of GJEPC feels that the industry has started taking ‘U’ turn and expects no downward movement further to go into “W” shape.