Rough diamond prices gained 4 - 5% between January – March period this year following resurgence in its demand from Indian cutting and processing industry. India, which claims to process 85% of the diamond mined across the world went slow towards the end of 2012 to avoid presumed losses on primarily two counts. However, going ahead prices are likely to set off the first quarter gain in May due to lower lean season demand from processing industry ahead of the monsoon season.
Fear of losses loomed large for poor export demand on worsening euro zone debt crisis resulting into extra cost of storage and handling on swelling inventory. Also, depreciation in the rupee against the dollar made imported raw material costlier. Since, India depends solely on import of the raw material for jewellery manufacturing, a record depreciation in the rupee posed a bigger threat for losses.
“Now, the rupee has stabilized at around 55.50 level against the dollar resulting into a renewed demand of raw materials including diamond for jewellery making. Sudden spurt in demand created a deficit which raised diamond prices across all varieties of roughs,” said Vipul Shah, chairman of Gems & Jewellery Export Promotion Council (GJEPC), the premier export promotion body under the Ministry of Commerce.
Challenging times coming from both the European and American regions which consist of around 60% the world diamond jewellery consumption threatened demand of the natural stones in 2012. Consequently, rough diamond price fell sharply by 12% in 2012 which pulled De Beers sales 16% lower in the year at $6.1 billion from $7.3 billion in the previous year.
The miner’s rough diamond output was also lower at 27.9 million carats in 2012 as against 31.3 million carats in the previous year.
Confirming the price escalation, Mehul Choksi, chairman of Gitanjali Gems, India’s largest branded jewellery producer, said, “Prices of certain varieties of polished diamond also went up by an average 3-4% between January – March period.
Although, the price of certain category of diamond, currently in short supply, shot up even higher, others remained rangebound on poor demand.
The price fall in roughs as cited by De Beers had not made any repercussive impact on polished prices in India as the price took a “U” turn by the lag time. The price increase or decrease in the global markets, generally, comes with a lag effect of 2-3 months in India.
“Come May, diamond prices are likely to set off the gain they have made in the first three months,” said Shah.
Generally, bulk demand from processing industry wanes ahead of the monsoon season in May. Skilled labourers also shift their attention on farming resulting into labour shortage during this season also.
The Solitaire Price Index, an average of all category diamond prices compiled by Divine Solitaire, showed 1.81% rise in prices in April.