Soaring crude, rate hikes drive down polished diamond exports

AHMEDABAD: Look what’s polishing off the toplines of India’s diamond trade. Growing energy prices and higher interest rates in the US has forced buyers to cut down their spend on luxurious products like diamonds. India’s cut and polished diamond exports for June 2006 fell by a significant 22% to $783.3 million from the same month last year. Exports for June 2005 stood at $1,007.35 million.

Rising crude prices coupled with interest rates in the US markets have affected the industry. In addition to that, prices of raw material have gone up by around 10% in the past eight months. Worse, a lot of the diamond traders find their money blocked in realty investments, which has created a liquidity crisis.

Exports during the April-June quarter this year registered a decline of around 12% as compared to corresponding period previous year. The exports for the quarter ending on June 30, 2006 was $2,398.13 million-down from $2,722.65 million for the corresponding quarter previous year.

“The overall slowdown has affected the exports,” says Chandrakant Sanghvi, a Surat-based diamond trader who is also convenor at the Gems and Jewellery Exports Promotion Council (GJEPC). Sanghvi says the drop in demand, especially from the US market, has affected the industry. “Our analysis says rising crude prices coupled with interest rates have brought down the global demand.”

There has been a substantial rise in the export of jewellery, which has offset drop in exports of cut and polished diamonds. The jewellery exports rose by over 34% in April-June quarter this year as compared to the same period previous year.

Bakul Mehta, who heads GJEPC says the industry sees the current year as the year of consolidation. “We cannot grow 25% year after year. There is bound to be some correction,” he says. According to him, the decline in cut and polished diamonds from bonded warehouses have impacted the overall performance.

So, will such a trend continue? “We’ll get a clearer picture in September this year. That’s when the booking for Christmas season starts,” he says. Jivraj Sorani of JB Diamonds, a leading diamond firm, is more forthright. “This is recession. We are hoping that it does not last long. But for people who deliver quality, there is no need to worry,” he says.