Low Margins Holding Indian Diamond Production Back

(IDEX Online News) - Indian diamond factory output has risen, but not by as much as expected. Industry watchers note that because demand has been good, whatever rough there was in the market has been snapped up, leading to a raw material shortage. This in turn has triggered higher premiums on Sight boxes, which resulted in a rough price hike by De Beers during the last Sight.

The industry is now back where it was when this cycle started — with not enough rough and that which is available commanding high premiums that drastically erode profitability. Manufacturers are, therefore, holding back cautiously, waiting to see whether the situation changes before ramping up production.

There were fears that the Indian diamond industry was unable to retain its workforce, as it was no longer the top wage payer. However, Gem & Jewellery Export Promotion Council (GJEPC) Vice Chairman Sanjay Kothari noted, “The workforce is not the main issue today. The industry is willing to pay higher wages to retain its skilled personnel, but you can’t pay higher wages if your margins have shrunk.”

According to Kothari, this Christmas sales season would determine whether this vicious cycle would be broken or not. “If Christmas sales are good and rough supply consequently increases in keeping with demand and manufacturers don’t have to pay high premiums and thus improve their profitability, we’ll see production going up in the new year,” according to Kothari.