Pressure on Margins
No doubt, diamond-mining companies
continued jacking up prices of their rough
diamonds, but most of the manufacturers
were finding it difficult to pass on such
increases to the buyers of polished
stones trade when the demand was soft.
Manufacturers, by and large, were seen
under this situation, complaining about
pressure on their margins. In view of this
situation, overall manufacturing activity
was reported to have slowed down to some
extent.
Discounts
Manufacturers who were until recently,
eager to pick up rough from the secondary
market, even at some premium, were no more
inclined to do so in view of the slackening
of demand for polished stones. This can be
seen from the fact that certain categories
of rough diamonds were now available at
discounts ranging from 4 to 6 per cent. Not long ago these varieties of rough diamonds,
commanded premium ranging about 3-4 per
cent over the producer-prices.
Prices Causing Concern
In view of ragging demand, prices for
polished diamonds of certain categories have
also softened, causing considerable concern
to manufacturers as well as trade circles.
Over the past one or two months, prices of
good quality stars have come down to about
Rs. 42,000 per carat from the earlier level
of Rs. 50,000 per carat. Potential buyers are
now generally inclined to postpone their
purchases.
Prices of some other categories of polished diamonds have also softened to a varying extent over the past couple of weeks. Consequently, business sentiment remains shaken at present.
Under this situation, manufacturers are inclined to operate at lower capacity in order to avoid accumulation of stocks. Some observers seem to be of the view that the present situation might continue at least until the Lok Sabha election results are out. This explains why the demand for rough, particularly in the secondary market, has slackened now.
Money Stringency
Earlier it was easy to borrow funds from
banks to hold stocks. Recently, however,
certain banks turned reluctant to extend
adequate credit facilities to this sector, in
view of defaults by some major borrowers.
Those who still need to borrow have to turn
to private moneylenders, who are reportedly
charging interest at the rates of 18 to 21
per cent per annum. Private moneylenders
are said to be carrying on this activity on
selective basis.
Jewellery Shows Below Expectations
This also explains why the response to
some jewellery shows that were organised in
some countries during the last two months,
received less than expected response.
Though the response from exhibitors
might have remained unchanged that
from serious buyers was reduced. Hence
a number of exhibitors were unable to do
business to satisfy their expectations. Some
exhibitors complained about over-crowding
of such fairs. Though organised by different
countries, they came about nearly around
the same time, or at small intervals.
Diamonds Shipments Decline
Shipments of polished diamonds in 2013
from the country were certainly better than
in the earlier year. However, they could not
reach the level achieved in 2011, as can be
seen from the following estimates in this
regard.
Despatches of Diamonds (in US$ Million)
2011 21.01
2012 16.98
2013 20.46
It remains to be seen how the global
markets for polished diamonds behave in
the coming months.
Gold Jewellery Exports Go Down
Exports of gold jewellery from the country
have been sharply down during the current
year so far, in view of shortage and high prices
of gold in the wake of imposition of high
import duty on gold to face the problem of
high current account deficit. The authorities
concerned have however, not been able to
announce any alternative scheme for the
import of gold to promote exports of gold
jewellery from the country. The government
expects that there would be sufficient gold
available to gold jewellery exporters under
the 80:20 Scheme. Exporters, however,
contend that this scheme has been far from
satisfactory, as can be seen from declining
outflow of gold jewellery from the country.
Bullion Shaky
The U.S. Fed has decided to curtail its
bond purchase program to US$ 55 bn. per
month from the current 65 bn. per month
now. International political situation might
continue to affect the market sentiment for
some time more. Meanwhile in the overseas
market, gold was placed on March 18, around
US$ 1383.53 per ounce, while silver was
quoted around US$ 20.78 per ounce. In the
domestic market standard gold was traded
around Rs. 30,170 per 10 grammes, while
silver was quoted around Rs. 46,560 per
kg. The undertone of the market remained
shaky.
Follow DiamondWorld on Instagram: @diamondworldnet
Follow DiamondWorld on Twitter: @diamondworldnet
Follow DiamondWorld on Facebook: @diamondworldnet