Needless to say how fast economy of China develops and it seems there are no challenges to break the tendency. The goods produced by this Asian country reach the most remote places of our planet. The assortment is extremely rich from keychains to 3D TVs and presumably it will be even more amplified by diamonds. As the tendency shows China is on its way to displace Indian in processing rough diamonds field. Unbelievably it may sound taking into account that fact that 10 of 13 diamonds worldwide are now being processed in Indian. To find out the reasons of such unexpected shift, read this information below:
India might be seeing the start of a process which would end its reputation as the world’s major processor of rough diamonds.
Till last year, 11 of every 13 rough diamonds mined were processed in India. However, places with lower cost of production such as Hong Kong, Taiwan and China have started gaining at the cost of India. Due to lower taxes and a stable currency, the cost of manufacturing in these centres is 10-12 per cent lower than here.
“Miners have kept rough prices high. At this price, processing of rough diamonds in India is unviable. Hence, rough diamond processors have abstained from purchases. Around 30 per cent of what is purchased from De Beers (the world’s premier supplier of roughs) goes back to the company due to the exceptionally high price,” said Vipul Shah, chairman of the Gems & Jewellery Export Promotion Council (GJEPC).
Confirming lower purchase from Indian sightholders (the term for companies which are their authorised bulk purchasers), a De Beers spokesperson said, “What we did observe recently is some international rough dealers increasing their purchases of Indian-type material, as short-term liquidity pressures saw some Indian-based manufacturers elect not to purchase all of their allocations at the Sight.”
According to De Beers, currency fluctuations have had a very significant impact on Indian liquidity. The value of many Indian buyers’ bank lines has diminished substantially in recent months, simply due to currency issues. This has been a factor in recent rough diamond trading.
De Beers feels, though, that the price of rough diamonds is not an issue but liquidity is, owing to the rupee’s massive depreciation, from 54 to the dollar last year to around 64 now, after a low of 68 last week.
“We price all our rough diamonds in dollars and sell these, directly or indirectly, to manufacturers who turn these into polished diamonds, many of which are then sold on the export market, where diamonds are also priced in dollars. In fact, exporters are if anything at an advantage, as their manufacturing costs (denominated in rupees) have been deflated in dollar terms by the rupee’s relative weakness. The question is, therefore, not the price of roughs, which we believe is correct, so much as its current affordability in India,” De Beers added.
Meanwhile, GJEPC has urged Al Rosa, one of the world’s largest diamond mining companies, to cut prices. Shah says the Russian company has agreed and will cut the roughs’ price by 10-15 per cent soon. “Indian demand for small-size diamonds has shrunk due to squeezed disposable income, on high inflation in the food sector. Therefore, manufacturing activities in India have reduced,” said Mehul Choksi, managing director of Gitanjali Gems.
The diamond processing industry has reportedly begun laying off workers. According to Choksi, the Diwali vacation is going to become exceptionally longer for workers this year.
This information is taken from http://www.business-standard.com/article/markets/diamond-processing-losing-its-edge-113091200931_1.html