Diamond traders wary of price hike despite rough edges

KOLKATA: Prices of select categories of rough diamonds in the mining hub of Antwerp have firmed up 2-3% after a gap of nearly seven months, but diamond traders in India are refraining from increasing prices of polished diamonds.

India’s diamond traders fear that any price hike may impact sales, which showed some recovery in October and November, mainly on account of the demand from the US. Domestic traders are also worried over banks turning extra cautious in funding the sector on the grounds that both imports and exports have slipped continuously in the past seven months.

The hesitation of banks to increase exposure to diamond business has put the smaller units in trouble. State Bank of India, Bank of Baroda, Bank of India, Stanchart and IndusInd bank are some of the banks that have sizeable exposure to diamond business. “There is firmness in some categories of rough diamonds and prices have gone up 2-3%. This has happened because inventories have come down a bit and in October and November there has been some movement.

The US has been the major buyer,” said Praveen Shankar Pandya, chairman, Gem & Jewellery Export Promotion Council. “We have not increased the polished prices as we do not want to lose the demand that has come in,” he said.

Pandya also said that banks are trying to fine-tune their exposure to diamond trade so that they do not turn out to be non-performing assets.

This is good in a way, but banks must also understand that the global meltdown has affected the trade, he said. “We have told the banks to set up branches dedicated to diamond business for better understanding of the business, which is one of the largest foreign exchange earners for the country. The entire trade should not suffer because of some diamond companies that have defaulted in payments,” said Pandya.