MUMBAI: Encouraged by the economic revival, Indian diamond manufacturers have urged Diamond Trading Company (DTC) — the distribution arm of diamond mining giant De Beers and the world’s largest supplier of rough diamonds — to widen its supply pipeline to the country. However, DTC, while acknowledging that its major markets are emerging out of the woods, has said it prefers to remain cautious, as the global consumer demand for luxury goods has not fully recovered from the pre-crisis levels.
“We have asked DTC to increase India’s share of rough diamonds supplies and it has agreed to do so, albeit in a measured manner so as not to flood the market at a time when it believes demand is yet to recover to the pre-crisis high levels,” said Sanjay Kothari, former chairman of Gems & Jewellery Export Promotion Council (GJEPC) and currently a convener for marketing and promotions of the industry body.
Earlier, Varda Shine, CEO of DTC, whose Indian itinerary comprised back-to-back meetings with the company’s sight holders this week, told ET: “De Beers is encouraged by much stronger levels of demand (for rough diamonds) than it witnessed at this time in 2009, and history has shown that the demand generally rebounds strongly in the post-recessionary period, as manufacturers and retailers look to re-build their inventories. We will continue to take a prudent approach to production in 2010. Whilst production is planned to increase over 2009 levels, it is not expected to return to historic highs for the forseeable future.”
Production of rough diamonds by De Beers reduced by half from 2008 levels to 24 million carats in 2009 due to the recession, which caused prices to hit rock bottom. Thanks to rough prices, which had gone up by 3 times in the January-March quarter this year from the same period in 2009.
De Beers plans to increase production to 31 mn carats this year.
According to a source, DTC recently extended its three-year supply contracts with sight holders by a year without changing the terms of the contracts.
The extension will start on March 31, 2011, and run until March 30, 2012. A new three-year supply contract will now come into effect in 2012.
DTC handles nearly half of the world’s supply of roughs by value, supplying the diamonds to 74 sight holders under Supplier of Choice contracts worldwide, of which 28 are based in India. De Beers mines rough diamonds from Botswana, Namibia, South Africa and Canada. India is a global hub for the manufacture of polished diamonds, with 11 out of 12 diamonds sold in the world market being cut and polished in the country. DTC sells the rough diamonds to its sight holders or clients based in India, who, in turn, cut and polish the diamonds and sell them to retailers. DTC sight holders based in India, include Rosy Blue, Shrenuj, Dimexon and Blue Star.
The diamond industry’s call for an increase in roughs supply from De Beers could not have come at a more appropriate time, as cut and polished diamond exports from India have grown by 20.11% to $17.54 billion in FY10 from a year earlier, according to the GJEPC, which released the FY10 export data in New Delhi on Friday.
Cut and polished diamond exports were the main drivers of the 16% growth in gems and jewellery exports to $28.41 billion in FY10. Against the close to 62% share by value of diamonds in the total gems and jewellery basket, gold jewellery accounted for 31.17%. In value terms, India’s diamond share in the world market also witnessed an increase in FY10 from 60% to 70%. According to GJEPC, the performance of this industry is critical, as it contributes 13% to India’s total merchandise exports.
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