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March 2002

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WINDOW ON UK / EUROPE

 

 

 Good for India's Industry

 

By Subroto Mukherjee

 

Rough diamonds

Cut and polished

 

The first signs have emerged in recent weeks of a revival of the Indian diamond polishing industry.


The annual report by De Beers, the world's dominant wholesaler in rough diamonds shows that sales slumped 21.5 per cent last year. But the reports points also to signs that business has begun to pick up.


Diamond sales have a strong impact on the polishing business in India; seven out of ten diamonds sold in the world are cut and polished in India; though these tend to be the smaller stones.


An excess of polished diamonds in the market meant losses at the polishing centres in India and holding up of stock and payment with retailers and wholesalers.


The diamond business went through one of its roughest patches last year. The annual report by De Beers released Friday says the sale of roughs fell 21.5 per cent over the previous year to $4,454 million.


The annual report records substantial de-stocking by the retail trade following a lower demand for jewellery. This led to a "downward pressure on prices".


That lowering of prices and demand has had a hard impact on the Indian business. "There has been too much unsold diamond jewellery about," says Divyesh Mehta, a diamond dealer in London.    


"That meant bad days for sellers and bad days for cutters." But things could be looking up this year following encouraging trends in recent weeks, the De Beers report says. "There is still an overhang of polished in the pipeline, but this is less than in February 2001," the report says.


But any substantial recovery in 2002 will depend on the recovery of the world economy and the "level of polished stocks that the trade pipeline will be confident to convey," the annual report for 2001 says.

 

De Beers absorbed much of the shock in the decline last year. Its annual earnings last year were $837 million, compared with $1.71 billion a year earlier.


But looking at some bright signs, the De Beers report says that retail sales of diamond jewellery had been higher than expectations last Christmas. That was despite fears of a Christmas without sparkle after September 11.


De Beers says stocks at the cutting centres are now low. That is expected to bring movement back in the business. The De Beers report speaks of low stocks of roughs at the cutting centres, which is expected to lead to a higher demand for rough diamonds through De Beers sales.