Diamantaires in a ‘FIX’ again

In the recent past, there have been quite a few reports of bankruptcies. Such reports are not only unsettling and have an effect on the industry in the long run. They not only shake ‘trust’ factor that the industry thrives on but also put it at stake as the creditors, financial institutions especially banks may shy away from extending financial assistance.

Any bankruptcy report that comes in, firstly affects the midstream and the lenders, especially banks. ABN Amro, Antwerp Diamond Bank, and Standard Chartered are among those who have either stopped lending to the sector or have significantly reduced their exposure to the business.

As retailers always have an option to move to more profitable business avenues, the diamond polishers and wholesalers are stuck with unsold inventory (polished and roughs both). Of late, there have been reports of sagging global diamond demand and industry has been hoping for the market scenario to change for good.

Recently, Exelco North America, Inc., a diamond wholesaler based in Wilmington, DE, along with three affiliates, filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-12029). Exelco, North America is the American affiliate of Antwerp, Belgium-based Exelco NV, which has also filed a petition for relief. Three Exelco NV affiliates also filed a voluntary petition for relief, Exelco NV’s filing says. They are Exelco North America Inc., FTK Working Manufacturing BVBA and Ideal Diamond Trading USA Inc.

Exelco North America’s petition reports $0 to $50,000 in assets and $1 million to $10 million in liabilities Exelco NV’s petition reports $10 million to $50 million in assets and $50 million to $100 million in liabilities.

As per the court filing documents accessed by Diamond World, the company has given a list of 90+ creditors which includes banks, financial institutions, diamonds and jewellery companies. Amongst the diamond and jewellery companies, over 10 companies listed as creditors are Indian.

Usually, in the diamond industry, expecting a further growth in the demand, the industry continues to buy roughs/polish, which leads to stock accumulation (in case the diamond jewellery demand doesn’t realises as expected). As the entire diamond pipeline is linked to one another, one report of bankruptcy leads to a domino effect. As the traders/creditors lose money and take time to recover from the troubled companies, it leads to further losses for them. In the past, the losses have trickled down to every part of the diamond pipeline. Because most of the troubled or loss making companies would opt for consolidation and here, by consolidation I mean job-cuts or factories being shut down. The most affected in all these fiasco are the workers/daily wage labourers who work in factories in Mumbai and Surat.

The companies may recover their money but there are thousands of workers who may lose their jobs because someone in the diamond chain did not take decisions wisely. These cutters/polishers are the lifeline of the diamond industry. This continued uncertainty may force these workers to look for a steadier livelihood. 

No business empire can survive and flourish if it doesn’t have a good workforce and the diamond industry needs its cutters/polishers/assorters, to shine bright. Are we ready to lose this sparkle this Diwali and many more in our future?