In a relief to the Indian diamond trade, the world’s second largest diamond miner, Russia’s ALROSA, has granted flexibility to Indian sightholders, or authorised bulk purchasers of rough diamonds, to buy 55 per cent of the contracted volume so that they do not pile up inventory. The move will help the Indian diamond trade reeling under low export volumes, non-availability of bank finance and falling margins.
“We have already introduced this system this year for Indian diamantaires. We did not force our clients to take the deferred goods later,” Jim Vimadalal, director of ALROSA’s India representative office, told ET.
Vimadalal said that though US has been the biggest buyer of diamonds, falling sales in Hong Kong and China is worrying the miners as well as traders.
In 2019, diamond jewellery retail sales in US are expected to fall 2 percent, in contrast to 3 percent growth in 2018, according to the ninth annual report on the global diamond industry by Antwerp World Diamond Centre and Bain & Company.
There are three key reasons for the reversal. First, consumer confidence fell to its lowest point since 2016 because of uncertainties surrounding the labour market, trade tensions and a possible recession. Second, a continuous decline in Chinese travellers to the US lowered luxury purchases overall. And third, an extra 15 per cent tariff on Chinese jewellery went into effect in September 2019 and could impact sales in the crucial holiday season.
In 2018, the Chinese market, including Hong Kong, grew 4 per cent. The trend reversed in 2019, the report said. The Chinese market is expected to decrease by 5 per cent in US dollar terms. The shift is attributed to yuan depreciation, declining consumer confidence stemming from trade tension between the US and China and significantly lower sales in HK amid protests in the area. ALROSA’s move of not forcing its sightholders to buy huge volumes has come a relief at a time when the global demand for diamond is not picking up. “Global demand is contracting. Diamantaires need to have flexibility to operate. Also bank finance to the sector has come down. So keeping a high inventory is a burden for the trade,” said Vipul Shah, MD, Asian Star & ALROSA’s sightholder.
Source: Economic Times