Rough Prices May See 5-10% Correction

Mumbai: Even as diamond companies are starved of funds, with Antwerp Diamond Bank (ADB) shutting shop in India and Standard Chartered Bank reducing exposure, a correction in the prices of rough and polished diamonds is likely, reports Business Standard.

Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC), said, “The prices of both rough and polished diamonds are likely to soften 5-10 per cent, as demand was anyway low and now, supply is set to increase further. Globally, too, demand for polished diamonds has been low. Therefore, Indian diamantaires will face tough times, at least in the short run. However, we hope the festive season leading up to December might see some respite in terms of increased export orders.”

While Indian diamantaires might be able to clear stocks initially, they might have to offer discounts for liquidity, said Dinesh Navadiya of the Surat Diamond Association.

A Belgium-based Indian diamond trader said the liquidity crunch due to the fall in the availability of finance would not only result in correction in rough and polished diamond prices, but also force the sector to do away with the stock at a discount. “In the short run, this might seem detrimental to Indian diamantaires, but in the long term, it might turn out to be beneficial, as it will filter out fly-by-night operators,” the trader said.

Some in the sector say the current crisis might result in a decline in diamantaires’ capacity to keep stocks. “This will help in the long run, as this will make Indian diamantaires more disciplined, in terms of over-stocking. Against the current stock-keeping capacity of three-four months, this could fall to about a month,” said Shah.

While Standard Chartered’s exposure to the diamond sector couldn’t be ascertained, that of ADB in India is estimated at Rs 500-1,000 crore. Though Indian diamond polishers with exposure to ADB will face a liquidity crunch, diamantaires are hopeful other banks will be interested in buying out ADB’s Indian operations.