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Weak rouble may soften rough diamond prices by 2-5% |
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KOLKATA: As the rouble crisis deepens, with the country staring at a possible recession, Russia — the largest diamond producing country in the world — may increase its diamond exports which may lead to a decline in rough diamond prices by 2-5%.
Talking to ET, Mavji Patel, managing director, Kiran Gems, said, "There may be some impact on rough diamond prices if Russia steps up its exports. Prices may fall by 2-5%, but we do not see a drastic crash as other international players like De Beers or Rio Tinto wouldn't like to see such a situation, and would step in to arrest a slide."
The Russian currency crashed drastically in the past week with the rouble crossing 60 to a dollar.
The country wants to boost its exports to increase its dollar inflow, and with diamond being a major exportable item, Russia may therefore increase its exports.
"If rough diamonds from Russia become cheaper by 2-5%, then the manufacturing industry in India will definitely benefit. They will have better margins," said Jignesh Mehta, managing director, Divine Solitaires. ALROSA, which signed a contract with Kiran Gems recently, also signed similar deals with 11 other Indian firms so that it can sell more roughs to India, especially at a time when Russia is looking at all possible ways to get out of the financial mess.
India is a global diamond polishing hub where 14 out of 15 rough diamonds are polished. The country's overall import of rough diamonds from the producing nations in November stood at 149.64 lakh carats, which is 32% higher than in November 2013, when it had imported 113.22 lakh carats.
However, Indian importers would have gained more had the rupee been stronger against the dollar. "If at all prices come down, we will not be able to take the entire benefit as the rupee has weakened against the dollar. Diamond trade takes place in dollar," said Pankaj Parekh, vice-chairman, Gem and Jewellery Export Promotion Council (GJEPC). The rupee has crossed the 63-mark against the dollar, making imports costlier.
While there's a feeling that rough prices might decline due to the rouble crisis in Russia, the demand scenario worldwide isn't very bright either. According to the Rapaport Monthly Report — December 2014, the sentiment among dealers and manufacturers is weak.
Though demand is stable in the US, things are somewhat quiet in the Far East markets due to economic and political uncertainties.
Polished inventory levels are high across the pipeline. Profit margins are being squeezed as polished prices have declined since April, while rough prices have been relatively steady.
"Christmas sales across the US and Europe have not been very exciting.
But we are hoping that things will start looking up from February onwards," said Patel.
Source : economictimes.indiatimes.com
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