Indian diamond industry

Information about : Indian diamond industry ,Diamond Manufacturers in Surat,polished diamond surat


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CHALLENGING TIMES AHEAD FOR DIAMOND INDUSTRY?

The Indian diamond industry is under severe pressure these days. Since October 2011, polished demand has been decreasing leading to a drop in export figures. June 2012 witnessed a 35% drop in polished diamond exports at $1.450 billion. This continuous downturn has badly affected manufacturers and operating margins are shrinking. This is in addition to the macro issues of global economic uncertainty, liquidity shortages, and volatile currency markets - all of which could have a major impact on the diamond industry.

Surat is the world capital of diamond manufacturing, and naturally global trends and movements have a direct bearing on the business here. Since the fourth quarter of 2011, market conditions have become challenging and manufacturers here are doing their best to handle this tough situation.

Slow polished diamond demand along with the weakening of the rupee has worsened the situation. It has been a turbulent time for manufacturing centres like Surat and surrounding parts of Saurashtra. In smaller manufacturing centres near Surat it is becoming difficult to manufacture day by day. Production in volume terms is 25% less than the peak last year, and 35% lower in value terms. Although manufacturers have become cautious, they are not letting go of their workers — keeping in mind the 2008 experience when the recession was at its peak and workers who were retrenched did not come back.

Today, polishers are working fewer hours and have more time on their hands. The general production environment is slack. The labour rates in the diamond industry have not really moved up to be in a position to compete with the wages prevailing in certain other industries and hence, there seems to be scarcity of labour, especially in the small size, lower value category. And although there is no shortage of artisans for the higher value diamond segment, production of big goods is low In spite of this, manufacturers are assessing every possibility to deal with the situation. They are observing self-restraint by reducing production. Even the DTC has helped ease the situation by giving sightholders at the July sight the opportunity to reschedule half their allocation to any other sight in the current ITO period that ends in March 2013. This move is expected to help sightholders reduce production volume considerably. But only time will tell if the reduced supply will be enough to re-invigorate the market.

"Historically, reducing supply has been an effective way of stimulating the market, and we believe that the pipeline is indeed experiencing a degree of 'indigestion' with a build-up of stock following enthusiastic rough buying in the previous months. It is also true to say that rough manufacturing in the tier II and III cities in India has reduced and in some cases, stopped altogether. Then, there have been a number of bankruptcies within the industry among some smaller players as a degree of consolidation takes place. Polished demand will return with the forthcoming IIJS trade fair in India in August, the Hong Kong show in September, followed by Diwali in November (plus the wedding season) and the Christmas season in America. Therefore with limitations to the supply of rough, the situation should become more favourable for the manufacturers," said Mike Aggett, managing director, H. Goldie & Co. Ltd, a renowned diamond broking firm.


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