India’s Rough in A Rough State

Few numbers highlight the current situation in the rough diamond sector of the pipeline as the following does: India’s imports of rough diamonds plunged 75.66 percent to just $217.06 million in January. A year ago, that figure stood at $891.89 million. The mighty Indian diamond industry, with its heavy financing, low cost labor and sophisticated modus operandi has decided to cutback on its manufacturing.

Many among the Indian traders say that Mumbai holds a huge stock of polished diamonds, maybe even the largest ever in history. This is not a result of an appetite for buying polished. It is a reflection of large manufacturing that did not end in sales.

The outcome is an awakening. To maintain the very viability of many businesses, manufacturers are simply holding on to their cash, curtailing rough diamond purchases and doing their best to lower their stocks - knowing that these sales are not going to happen soon in any meaningful way. In addition, the center is trying to rid itself of unwanted rough diamonds, increasing exports.

India’s rough diamond suppliers, mainly Rio Tinto and De Beers, have significantly lowered their production, bringing their mining operations to a near standstill until their buyers are ready to renew purchases.

India imported 4.237 million carats in January at an average value of $51.23 per carat, compared to 15.494 million carats averaging $57.56 p/c imported the year earlier. In volume, imports declined 72.65 percent year-over-year.

Rough diamond exports of $59.2 million were a 32.23 percent increase over January 2008. By volume, rough diamond exports totaled 2.088 million carats, a 16.41 percent decline, averaging $21.44 p/c.