With China, the second-largest market refusing to pick up, the trade is betting on Diwali, US Thanksgiving (November 23), Christmas and finally Valentine’s Day to push out the unsold gems.A lurking concern among the traditional diamantaires is that while the supply of mined diamonds has slowed following the import ban, there is no control over LGD prices as anyone having the money can set up LGD factories. But LGD players say the prices have stabilised with 2 out of 11 players globally going bankrupt.
“We met senior bankers on Friday. We told them that the unsold stock has started to come down but the next four months would be vital.
We have controlled supply (of mined stones) though there is no such control on the supply over LGDs. LGDs, whose prices have fallen more, needs marketing support. LGDs and natural stones should complement each other,” said Vipulbhai Shah, chairman of Gem & Jewellery Export Promotion Council, the apex body which had reached out to the leading international miners in putting in place steps to regulate supply.
A senior banker told ET the surge in profits in the last two financial years could cushion the slowdown and stock losses of firms hit by the price fall. The local diamond industry employs close to 2 million.
According to Shah, while exports are low, debts of diamond firms have also come down. “China is down but there’s some demand picking up in India. We don’t expect any problem unless the major consuming markets continue to languish till next May,” he said.
Mining leaders DeBeers and Alrosa did not comment on possible promotional spends during the festival months when demand typically surges.
‘LGD PRICES HAVE STABLISED’
“We assured the bankers that the diamantaires are constantly monitoring their productions so that the inventory does not rise,” said Kirit Bhansali, vicechairman of the Council.
The gross export of cut and polished diamonds fell 28.7% to $8,702.23 million during April-September of FY24 compared to the year-ago period. Few months ago, the trade decided to refrain from importing rough diamonds from October 15 to December 15 till the export demand improves.
Diamonds exported are categorised into certified (bigger diamonds) and non-certified (smaller diamonds). “Earlier, the inventory of certified diamonds was two to two-and-a-half months. Now it’s four-and-a-half months. For noncertified, the inventory used to be three months. It’s gone up to four and-a-half months,” said Dinesh Lakhani, global director of Kiran Gems, the country’s largest diamond manufacturer.
While the price fall in LGDs is closely watched, the jury is out on how the two markets would evolve.
“The price drop in LGDs was a strategy to create an entry barrier, increase the investment payback period from 1.5 years to 5-7 years, and make capex unattractive.
There are less than 10 growers globally producing superior quality CVD diamonds and with less than 10,000 reactors. The global LGD production has just reached 30 million carats. Growers have driven pricing to the bottom with no room for a further decline. On the other hand, we expect demand to touch 160 million carats by 2030, with markets like India, Gulf and China warming up to LGDs,” said Pooja Sheth Madhavan, MD of Limelight Diamonds, a leading LGD firm.
Sections in the business fear that the Israel-Hamas war, which has put some pressure on India’s diamond supply chains, may impact the profit margins of some of the domestic players, who cut and polish rough stones. According to Colin Shah, MD of Kama Jewellery, “The war in the Middle East can impact Indian exports to Israel. Gems and jewellery trade between the two countries fell in FY23 compared to FY22. The war may worsen the volumes.”