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Are Indian (ice) cutters creating a price bubble again!
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strmrdr
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They are paying unrealistic prices for rough again!
In my opinion, the state of the world economy doesnt justify it...
The rough bubble burst in Oct/Nov 08...., prices went down and leveled out with polished price demand...
In the last 2-3 months..., some rough segments prices shot up 15-50% easily...
Extremely unhealthy!
strmrdr
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rubyisforlove
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Date: 6/21/2009 9:08:18 AM
Author: DiaGem
The Indian banks are pushing/financing dealers and manufacturers to purchase Diamonds (only).
So when the $$$ is easy..., its easy to pay!!!
Let see them deal with reselling in this environment!
I believe the BLUFF will be revealed
by: Rapaport news, Market Comments 7/10/2009
"Caution:.....Rough price bubble developing as Antwerp reports further 10% price increase at BHP tenders. Recent rough price increases appear unsustainable and may be fueled by too much Indian bank credit."
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IDEX market report Jully 16, 2009:
"Diamantaires are facing increased pressure as the prices for rough are rising, yet prices for polished remain depressed. As the world economy is still weak, there are not enough purchases enabling the prices of rough to meet willing buyers. This became evident this week as buyers limited their purchases citing high prices. Manfacturers suggest this may be an error in judgement as the prices for new rough will be even higher....
...A struggle between Indian and Israeli rough buyers has surfaced, as the indian buyers are paying the increased prices for rough, while Israeli traders refuse to. This week was mainly focused on the issue of increasing rough prices, and many traders not willing to pay thses high prices and manufacture the goods...."
"Diamantaires are facing increased pressure as the prices for rough are rising, yet prices for polished remain depressed. As the world economy is still weak, there are not enough purchases enabling the prices of rough to meet willing buyers. This became evident this week as buyers limited their purchases citing high prices. Manfacturers suggest this may be an error in judgement as the prices for new rough will be even higher....
...A struggle between Indian and Israeli rough buyers has surfaced, as the indian buyers are paying the increased prices for rough, while Israeli traders refuse to. This week was mainly focused on the issue of increasing rough prices, and many traders not willing to pay thses high prices and manufacture the goods...."
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Rapaport TradeWire - Friday, July 31, 2009
By Rapaport
"....Rough price bubble has developed as recent rough price increases appear unsustainable and may have been fueled by too much Indian bank credit. Demand for rough slows as Indian cutters resist high prices amid concerns that Russia’s ALROSA plans to sell $2 bil. in 2H 2009."
By Rapaport
"....Rough price bubble has developed as recent rough price increases appear unsustainable and may have been fueled by too much Indian bank credit. Demand for rough slows as Indian cutters resist high prices amid concerns that Russia’s ALROSA plans to sell $2 bil. in 2H 2009."
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Will be interesting to see how the Indian banks plan to collect their gambled financing to the Diamond manufacturing sector....
Problems are arising already..., thank you Chaim!
http://www.idexonline.com/portal_FullEditorial.asp
Playing Dangerous Games with Indian Diamond Banks
"Playing Dangerous Games with Indian Diamond Banks
In Mumbai diamond circles there is much talk about a candid “name and shame” letter in which a major diamond industry financing institution identifies a number of clients (some of them DTC Sightholders) who are defying their borrowing covenant with the bank, defaulting on their obligations and skirting the laws of the land. The letter notes that “in the face of continuing default, we would have no option but to blacklist the firms,
companies, their associates and buyers, with DTC, Dun & Bradstreet and with world-wide [diamond] bourses.”
Very few people have actually seen the letter, but its impact and ramifications have not been lost on any member of the Indian diamond industry. The bank goes out of its way to note the “high level of integrity of the diamond manufacturers” and their “exemplary track record established over decades,” which “is on the verge of being breached by the actions of a few promoters.”
We used a short stay in Mumbai to find out what practice had invoked the ire of the bank. The seven companies mentioned in the letter have made polished exports to associated companies, relatives and oversea third parties and have enjoyed the financing of the bank. At some point, remittances almost totally stopped coming in. According to the letter, “Non-receipt of a single bill for 3-6 months at a stretch, as is happening in a few cases, is inexplicable.”
What apparently really angers the bank is that some of the clients involved, who enjoy an extensive credit line with the bank, are clearly behaving in bad faith. Repeated phone calls, for example, are not returned. In some instances there seems to be a complete breakdown of communications. If the non-receipt of any remittances over an extensive period happens in “good faith,” the diamantaire would be talking to his bank. These “shamed seven” aren’t talking– at least not until the letter was sent. The bank, which officially cannot comment on the letter, is really trying to work it out with its clients.
It is hard to fully understand what is happening. In one instance, which we were able to verify, a particular diamantaire fears that if export proceeds are credited to his account, the bank may reduce his lending facility by the very same amount. These fears may not be exaggerated; we know of a bank in Israel that did just that. This fear has apparently led some banking clients to shift the transfer of remittances for exports financed by one bank to another, sometimes even in another country. Thus the diamantaires had the use of the funds, while the bank was kept waiting.
Based on the best of my information, most of the companies involved are not in serious financial straights – though two of the listed firms may be close to facing bankruptcy. Undoubtedly, some on the list will face insolvency if their credit facilities are significantly reduced. There is no intention, prima facie, not to remit the funds at some point to the bank. But at this point, these companies are clearly defaulting on their commitments and obligations. Moreover, to use the words used in the letter, these companies “are flouting Reserve Bank of India (RBI)” regulations.
Infringing Central Bank Rules
Most diamond financing institutions are government-owned, but the same rules apply to private and government banks. Playing around with the rules will, in first instance, bring in the RBI. But thereafter, especially when dealing with government-owned banks, don’t be surprised if tax officials, custom authorities, VAT regulators and others will come down on you – even on totally unrelated matters. In India, if you want to conduct your business undisturbed, don’t mess around with banks and, especially, not with a government-owned bank or with government in general. You cannot win.
Bankers know that and want to protect their customers. They will go the extra mile not to report defaults if they can still solve the problem amicably.
How serious are the legal infringements of the seven clients? It is customary practice in the Indian banking sector that, prior to discounting (i.e. financing) an export bill, banks require the exporter to draw a Bill of Exchange (“BoE”) on the concerned importer, i.e. buyer. The exporter''s BoE calls on the overseas buyer to pay a designated sum of money at a certain date. Acceptance consists of an acknowledgement to written across the face of the BoE and signed by the drawee, i.e. importer. This thereby creates the effect of obligating the importer to provide the payment of the amount stated within the time period designated. I was told that most export shipments today are “open” and don’t involve banks at all.
According to the financing rules for diamond exports from India, on the invoice, in the space for “consignee,” generally the name of the overseas buyer’s bank appears, with the buyer''s name in the designated space. This is done so the buyer can sign acceptance of the BoE at his bank, before it hands him the parcel. The foreign bank will confirm the acceptance of the draft to the Indian exporter’s bank.
Legal advice we obtained says that “before discounting/purchasing a bill, banks must demand a valid BoE from the exporter where the assent of the drawee is mandatory for constituting a valid BoE. We assume that before discounting/purchasing a bill, a bank will ensure that the overseas importer has given his assent and take custody of such BoE.”
If the overseas party has given its consent to make the remittance to a specific Indian bank, then the bank will also have a case to take action against the clients of the seven exporters – something which is clearly hinted at in the letter which has been circulating in Mumbai.
Blacklisting Can Become a Major Commercial Headache
When delving into this story, we found out that the diversion of remittances, essentially changing the payment instructions given to foreign buyers, is now taking place in several places around the world. The higher interest payments on deposits placed with UAE banks has also given rise to arbitrage – there is more than one reason for delaying the receipt of export remittances.
Nevertheless, missing the remittance deadlines can lead to blacklisting. What does that mean? According to Regulation 9(1) of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 (“Export Regulations”), an exporter is required to realize and repatriate the full export value of the goods exported within six months from the date of export. A financing bank, by law, is obligated to report the non-receipt of remittances – and also to report the names of the overseas clients who failed to make the payments – or who have made the payments to a different bank, at the request of the exporter.
We checked, and the relevant Export Circular provides that Authorized Dealer banks should furnish to the concerned regional office of the RBI, on half-yearly basis, a consolidated statement giving details of all export bills outstanding beyond six months from the date of export at the end of March and September every year. The statement should be submitted in triplicate within fifteen days from the close of the relative half year. Inter alia, the statement also requires disclosure as to the name and address of the overseas importer (i.e. the buyer) in relation to the outstanding invoices.
The term “Black List” is slightly misleading. It refers to an “Exporter’s Caution List,” which is maintained by the RBI and on which the central bank places the names of those exporters who have come to its adverse notice in regard to realization of export proceeds. Once an exporter’s name is entered onto the Exporter’s Caution List, such exporter is required, before making subsequent exports, to submit the export-related documentation through an authorized dealer to the RBI for its prior approval. The submitted documentation also needs to be supported by documentary evidence to show that such exporter has received advance payment or an irrevocable letter of credit in his favor covering the full value of goods to be exported.
Basically, a requirement to get advance payments or a letter of credit on any diamond shipment from India is something not a single Indian diamond exporter is able to do. A diamantaire on the so-called “Black List,” at least in theory, can forget about his business.
There is another aspect here. India still has very stringent foreign currency controls, which are contained in the FEMA legislation. Not bringing in export proceeds is seen as a flight of foreign currency from the country. It is far more serious than just defaulting on an obligation to a bank. One industry leader told me that, in the past, even in some instances where he could show that his U.S. client had filed for Chapter 11 and he didn’t get his money, he somehow arranged for the open bill to be paid out of his own resources – simply to avoid problems with the authorities.
This underscores the seriousness of the issue.
Implications for the Industry at Large
The troubles created by a handful of players adversely impact the exemplary record of the industry. “This [behavior] constrains us in our efforts to extend the much needed support to the industry at this critical juncture,” warns the bank’s letter.
We have argued with ourselves whether we should publish the seven names or the name of the bank. After all, what is the use of “naming and shaming” if not all members of the industry are made aware of it. We decided not to publish the names for the time being. We believe that the purpose of circulating the letter is to give a general message: don’t risk the relationship with your bank – if you have a problem, come and talk to us and we’ll solve it together. Playing games will only bring unintended consequences and start a domino effect with the RBI and government that one may not be able to roll back or contain.
Surely, this concerns us all. Nobody wants to give credit to a trade partner who may be embroiled in serious conflicts with his bank – and possibly also in violation of industry best practices, which may lead to sanctions by rough and other suppliers as well.
Our advice to the seven companies: talk to your bank. There is too much at stake."
Problems are arising already..., thank you Chaim!
http://www.idexonline.com/portal_FullEditorial.asp
Playing Dangerous Games with Indian Diamond Banks
"Playing Dangerous Games with Indian Diamond Banks
In Mumbai diamond circles there is much talk about a candid “name and shame” letter in which a major diamond industry financing institution identifies a number of clients (some of them DTC Sightholders) who are defying their borrowing covenant with the bank, defaulting on their obligations and skirting the laws of the land. The letter notes that “in the face of continuing default, we would have no option but to blacklist the firms,
companies, their associates and buyers, with DTC, Dun & Bradstreet and with world-wide [diamond] bourses.”
Very few people have actually seen the letter, but its impact and ramifications have not been lost on any member of the Indian diamond industry. The bank goes out of its way to note the “high level of integrity of the diamond manufacturers” and their “exemplary track record established over decades,” which “is on the verge of being breached by the actions of a few promoters.”
We used a short stay in Mumbai to find out what practice had invoked the ire of the bank. The seven companies mentioned in the letter have made polished exports to associated companies, relatives and oversea third parties and have enjoyed the financing of the bank. At some point, remittances almost totally stopped coming in. According to the letter, “Non-receipt of a single bill for 3-6 months at a stretch, as is happening in a few cases, is inexplicable.”
What apparently really angers the bank is that some of the clients involved, who enjoy an extensive credit line with the bank, are clearly behaving in bad faith. Repeated phone calls, for example, are not returned. In some instances there seems to be a complete breakdown of communications. If the non-receipt of any remittances over an extensive period happens in “good faith,” the diamantaire would be talking to his bank. These “shamed seven” aren’t talking– at least not until the letter was sent. The bank, which officially cannot comment on the letter, is really trying to work it out with its clients.
It is hard to fully understand what is happening. In one instance, which we were able to verify, a particular diamantaire fears that if export proceeds are credited to his account, the bank may reduce his lending facility by the very same amount. These fears may not be exaggerated; we know of a bank in Israel that did just that. This fear has apparently led some banking clients to shift the transfer of remittances for exports financed by one bank to another, sometimes even in another country. Thus the diamantaires had the use of the funds, while the bank was kept waiting.
Based on the best of my information, most of the companies involved are not in serious financial straights – though two of the listed firms may be close to facing bankruptcy. Undoubtedly, some on the list will face insolvency if their credit facilities are significantly reduced. There is no intention, prima facie, not to remit the funds at some point to the bank. But at this point, these companies are clearly defaulting on their commitments and obligations. Moreover, to use the words used in the letter, these companies “are flouting Reserve Bank of India (RBI)” regulations.
Infringing Central Bank Rules
Most diamond financing institutions are government-owned, but the same rules apply to private and government banks. Playing around with the rules will, in first instance, bring in the RBI. But thereafter, especially when dealing with government-owned banks, don’t be surprised if tax officials, custom authorities, VAT regulators and others will come down on you – even on totally unrelated matters. In India, if you want to conduct your business undisturbed, don’t mess around with banks and, especially, not with a government-owned bank or with government in general. You cannot win.
Bankers know that and want to protect their customers. They will go the extra mile not to report defaults if they can still solve the problem amicably.
How serious are the legal infringements of the seven clients? It is customary practice in the Indian banking sector that, prior to discounting (i.e. financing) an export bill, banks require the exporter to draw a Bill of Exchange (“BoE”) on the concerned importer, i.e. buyer. The exporter''s BoE calls on the overseas buyer to pay a designated sum of money at a certain date. Acceptance consists of an acknowledgement to written across the face of the BoE and signed by the drawee, i.e. importer. This thereby creates the effect of obligating the importer to provide the payment of the amount stated within the time period designated. I was told that most export shipments today are “open” and don’t involve banks at all.
According to the financing rules for diamond exports from India, on the invoice, in the space for “consignee,” generally the name of the overseas buyer’s bank appears, with the buyer''s name in the designated space. This is done so the buyer can sign acceptance of the BoE at his bank, before it hands him the parcel. The foreign bank will confirm the acceptance of the draft to the Indian exporter’s bank.
Legal advice we obtained says that “before discounting/purchasing a bill, banks must demand a valid BoE from the exporter where the assent of the drawee is mandatory for constituting a valid BoE. We assume that before discounting/purchasing a bill, a bank will ensure that the overseas importer has given his assent and take custody of such BoE.”
If the overseas party has given its consent to make the remittance to a specific Indian bank, then the bank will also have a case to take action against the clients of the seven exporters – something which is clearly hinted at in the letter which has been circulating in Mumbai.
Blacklisting Can Become a Major Commercial Headache
When delving into this story, we found out that the diversion of remittances, essentially changing the payment instructions given to foreign buyers, is now taking place in several places around the world. The higher interest payments on deposits placed with UAE banks has also given rise to arbitrage – there is more than one reason for delaying the receipt of export remittances.
Nevertheless, missing the remittance deadlines can lead to blacklisting. What does that mean? According to Regulation 9(1) of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 (“Export Regulations”), an exporter is required to realize and repatriate the full export value of the goods exported within six months from the date of export. A financing bank, by law, is obligated to report the non-receipt of remittances – and also to report the names of the overseas clients who failed to make the payments – or who have made the payments to a different bank, at the request of the exporter.
We checked, and the relevant Export Circular provides that Authorized Dealer banks should furnish to the concerned regional office of the RBI, on half-yearly basis, a consolidated statement giving details of all export bills outstanding beyond six months from the date of export at the end of March and September every year. The statement should be submitted in triplicate within fifteen days from the close of the relative half year. Inter alia, the statement also requires disclosure as to the name and address of the overseas importer (i.e. the buyer) in relation to the outstanding invoices.
The term “Black List” is slightly misleading. It refers to an “Exporter’s Caution List,” which is maintained by the RBI and on which the central bank places the names of those exporters who have come to its adverse notice in regard to realization of export proceeds. Once an exporter’s name is entered onto the Exporter’s Caution List, such exporter is required, before making subsequent exports, to submit the export-related documentation through an authorized dealer to the RBI for its prior approval. The submitted documentation also needs to be supported by documentary evidence to show that such exporter has received advance payment or an irrevocable letter of credit in his favor covering the full value of goods to be exported.
Basically, a requirement to get advance payments or a letter of credit on any diamond shipment from India is something not a single Indian diamond exporter is able to do. A diamantaire on the so-called “Black List,” at least in theory, can forget about his business.
There is another aspect here. India still has very stringent foreign currency controls, which are contained in the FEMA legislation. Not bringing in export proceeds is seen as a flight of foreign currency from the country. It is far more serious than just defaulting on an obligation to a bank. One industry leader told me that, in the past, even in some instances where he could show that his U.S. client had filed for Chapter 11 and he didn’t get his money, he somehow arranged for the open bill to be paid out of his own resources – simply to avoid problems with the authorities.
This underscores the seriousness of the issue.
Implications for the Industry at Large
The troubles created by a handful of players adversely impact the exemplary record of the industry. “This [behavior] constrains us in our efforts to extend the much needed support to the industry at this critical juncture,” warns the bank’s letter.
We have argued with ourselves whether we should publish the seven names or the name of the bank. After all, what is the use of “naming and shaming” if not all members of the industry are made aware of it. We decided not to publish the names for the time being. We believe that the purpose of circulating the letter is to give a general message: don’t risk the relationship with your bank – if you have a problem, come and talk to us and we’ll solve it together. Playing games will only bring unintended consequences and start a domino effect with the RBI and government that one may not be able to roll back or contain.
Surely, this concerns us all. Nobody wants to give credit to a trade partner who may be embroiled in serious conflicts with his bank – and possibly also in violation of industry best practices, which may lead to sanctions by rough and other suppliers as well.
Our advice to the seven companies: talk to your bank. There is too much at stake."
michealjackson
Rough_Rock
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So here we are almost two years later.....
http://www.idexonline.com/portal_FullNews.asp?SID=&id=35158
"...Who are we kidding when we say “we don’t understand” what causes this? We all, more or less, do understand the issue – but, just like having a bunch of mistresses, this is not a subject we like to talk about too loudly. Read my lips: the answer is India. The single-most serious distortion the industry faces in the current market structure is the abundantly available financing in India and the ability to make more money from financial manipulations than from diamonds.
In some instances in India, diamonds have just become a means to make money – without a need for the diamonds to reach any ultimate consumer. That isn’t the main purpose of being in this business – at least it’s not for some, I should carefully qualify lest I do damage to good and deserving diamond companies...."
http://www.idexonline.com/portal_FullNews.asp?SID=&id=35158
"...Who are we kidding when we say “we don’t understand” what causes this? We all, more or less, do understand the issue – but, just like having a bunch of mistresses, this is not a subject we like to talk about too loudly. Read my lips: the answer is India. The single-most serious distortion the industry faces in the current market structure is the abundantly available financing in India and the ability to make more money from financial manipulations than from diamonds.
In some instances in India, diamonds have just become a means to make money – without a need for the diamonds to reach any ultimate consumer. That isn’t the main purpose of being in this business – at least it’s not for some, I should carefully qualify lest I do damage to good and deserving diamond companies...."
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No way, Warren would not do that!DiaGem|1300452421|2874566 said:Problem is..., presently we are talking governments, well Indian government specifically, but who's to stop a huge conglomerate which decide strategically to manipulate such a small industry as the Diamond industry.
Can you imagine......
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Garry H (Cut Nut)|1300512525|2875075 said:No way, Warren would not do that!DiaGem|1300452421|2874566 said:Problem is..., presently we are talking governments, well Indian government specifically, but who's to stop a huge conglomerate which decide strategically to manipulate such a small industry as the Diamond industry.
Can you imagine......
You are probably correct..., isn't he considered old money? But Mark Z. might actually believe putting a certain % of his wealth towards hard assets (the hardest) might bring a decent return when considering other options available these days.
Would such a scenario shock you?
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Garry H (Cut Nut)|1302940704|2897604 said:Yoram who are De Beers acusing of sitting on rough?
that would explain a lot.
Why would DeBeers care as long as they manage to grab it's monthly share of the premiums over box list?
Have you noticed India's latest official export/import numbers? It seems there is more rough than polished accumulating in India. Could the Indian local 'jewelry' market use up over a Billion US a month of polished? If no the numbers show a Billion US surplus in the last few months (based on my loose memory)..., seems like the answer to your question is India..., and they are by far DTC's largest clients in value and quantities.
And what if / when the Zim rough hits the market in one big bang?
Will these crazy price rises drop back?
Depending how loud the bang will sound??
I don't see prices dropping very soon when rough producers are lowering output to prolong their mine lives
It would surprise me if we wont see some sort of price correction in some rough segments soon but I don't see a scenario as we witnessed in late 2008 through early 09, the panic was proved as a huge mistake.
And what is (or not) Rap doing?
Sorry but you should know my answer as I voiced it numerous times in the past..., Rap is becoming irrelevant IMO, the problem is most industry pro's would have no idea how to value their goods without a sheet on their side. But we seem to witness huge gaps in the discount/premiums of asking prices, I believe it's a symptom of the trade slowly understanding Rap is part of the primitive past. As our industry changes in many ways, pricing is part of the change.
Rap has never revealed his pricing system, it's time to understand he is not calling the shots anymore unless he can present a valid system, which I greatly doubt. Rough can't be more expensive than polished. And according to Rap it is.
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About 10 years ago I MC'd a conflict diamond lecture he delivered at a trade fair in Oz. Picked him up from the airport and waited with him in his room while he reviewed the Rap List and made some changes and emailed them through.
As I remember it was a function of market gossip, clicks on hi B2B board and other stuff.
Today the CEO Saville Stern is very good with data and numbers. I think they are out of the 20th century now.
Since nearly a year ago we now do have price drops and De Beers boxes are trading at a discount, so a lot did change.
The big factor surely is the tax on re importing goods into India to get the additional bank credits - that seems to have worked and taken people back to core business Yoram?
thoughts?
regards Garry.
As I remember it was a function of market gossip, clicks on hi B2B board and other stuff.
Today the CEO Saville Stern is very good with data and numbers. I think they are out of the 20th century now.
Since nearly a year ago we now do have price drops and De Beers boxes are trading at a discount, so a lot did change.
The big factor surely is the tax on re importing goods into India to get the additional bank credits - that seems to have worked and taken people back to core business Yoram?
thoughts?
regards Garry.
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Past, Present, Future: The Meaning of Three-Stone Engagement Rings
Past, Present, Future: The Meaning of Three-Stone Engagement Rings - 04/14
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