India’s Gem & Jewellery Export Promotion Council (GJEPC) has again urged members to avoid taking on unsellable diamond inventory, arguing that the industry’s recent improvement has been only partial.
While polished demand is increasing and some categories are in short supply, a full recovery faces obstacles, the council said in a statement Tuesday.
“A good part of the inventory is not moving, and the trade should be cautious and take steps to reduce inventory further,” the organization said.
India’s 2020 wholesale diamond revenues will decline sharply, with the outlook for the rest of the year dependent on external factors, the GJEPC predicted. While the midstream will probably restock in 2021, provided consumer demand continues to recover, smaller players will likely drop out of the market, it predicted.
The warning comes as Indian manufacturers increasingly seek goods following months of reduced rough supply during the coronavirus pandemic. Market sources expect a rise in purchases at this week’s De Beers sight and Alrosa contract sale as dealers and cutters prepare for holiday demand.
After sustained weak revenues, De Beers cut prices of 1-carat rough and larger at its August sight in a bid to spur stronger sales. Alrosa would not say whether it had taken similar actions, but its prices “reflect the actual market trends and confirmed real demand,” a spokesperson for the miner told .
Indian companies’ strategy of avoiding rough purchases — and the two largest miners’ flexible sales policies — enabled the industry to survive the downturn so far, the GJEPC explained. The country’s rough imports plunged 83% to $481.7 million in the second quarter as businesses followed the council’s frequent recommendations to curb buying.
This supported polished prices, according to the GJEPC, with the RapNet Diamond Index (RAPI™) for 1-carat diamonds falling 6.8% in March before rising 2.3% in the second quarter.
“Commodities across the world, including oil, have fallen, but diamond prices have been stable,” added GJEPC chairman Colin Shah. “This was the result of a conscious decision taken by the Indian diamond companies to cut down rough imports so that businesses can reduce their inventories, lower [their] debt[s], and manage cash flow.”