India’s Cash Crunch Effects Rough Diamond Prices

[Garry H (Cut Nut)]

http://www.thediamondloupe.com/arti...-effects-rough-diamond-sights-imports-fall-47
Diamond traders from all around the world are on their way to Botswana for one of the biggest annual sales as the $14 billion industry attempts to recover from India’s demonetization. India processes as much as 90% of the worlds rough diamonds with the purpose of being cut, polished or traded, but the steady supply of diamonds for its manufacturing industry has come under pressure as a result of the currency crisis. “The Indian demonetization program is showing how much of the polishing industry is still a cash business,” said Richard Chetwode, an industry consultant and former executive at Dominion Diamond Corp. and Gem Diamonds Ltd. continued via the link

 

[baby monster]

Does this mean consumer prices will trend down?

 

[Garry H (Cut Nut)]

Does this mean consumer prices will trend down?

It will likely reduce the price of lower quality smaller sizes more than larger mid range goods that PS people tend to prefer.
Already Top color clarity stones have dropped a lot because of Chinese and Indian corruption crackdowns, low oil prices and Russia's sanctions - those naughty people being rather fond of 'running away' easily saleable diamonds that can be sold based on the cert alone with no need to see the stone.
https://www.pricescope.com/diamond-prices/diamond-prices-chart

 

[Paul-Antwerp]

Thank you for sharing, Garry.

If you read the article, it says that rough diamond imports into India fell 28% in volume, and 4.7% in value. That directly translates into the rough of low-average-value mostly imported less, and almost no change in medium- and high-average-value rough. If this has any effect on pricing further down the pipeline, it is likely to be in very small, low-quality diamonds. I would not expect any direct influence on anything bigger than 0.15 Ct.

At the same time, other things are occurring:

While the Rapaport price-sheet is mostly theoretical in sizes under 0.18 Ct., and not often used as a basis by the trade, it was telling to see Rapaport-pricing of diamonds under that size being reduced by close to 30% around year-end. That does show clear downward-pressure on these smaller diamonds.

This may be partially due to a rising production of especially small-size synthetic diamonds. Fear in the industry is that parcels of small-size diamonds are being peppered with synthetic diamonds. That fear is actively fueled by two interested groups:
- diamond dealers, who hope they can get synthetic diamonds banned,
- labs and producers of detection machines, who sell a solution to a rising fear
Anyway, whether undisclosed synthetics are mixed into natural parcels of small size diamonds or not, the fear exists, and it creates extra costs on many levels. It also reduces the transaction-prices at wholesale-level.
On this topic, I need to add that the fear of undisclosed synthetics above a certain size is almost non-existent, as lab-grading is more common, and lab-detection is only a minor cost, compared to the value of the stone.

Live long,

 

[Garry H (Cut Nut)]

Thx for the great insider update Paul

 

[diagem]

Thank you for sharing, Garry.

If you read the article, it says that rough diamond imports into India fell 28% in volume, and 4.7% in value. That directly translates into the rough of low-average-value mostly imported less, and almost no change in medium- and high-average-value rough. If this has any effect on pricing further down the pipeline, it is likely to be in very small, low-quality diamonds. I would not expect any direct influence on anything bigger than 0.15 Ct.

At the same time, other things are occurring:

While the Rapaport price-sheet is mostly theoretical in sizes under 0.18 Ct., and not often used as a basis by the trade, it was telling to see Rapaport-pricing of diamonds under that size being reduced by close to 30% around year-end. That does show clear downward-pressure on these smaller diamonds.

This may be partially due to a rising production of especially small-size synthetic diamonds. Fear in the industry is that parcels of small-size diamonds are being peppered with synthetic diamonds. That fear is actively fueled by two interested groups:
- diamond dealers, who hope they can get synthetic diamonds banned,
- labs and producers of detection machines, who sell a solution to a rising fear
Anyway, whether undisclosed synthetics are mixed into natural parcels of small size diamonds or not, the fear exists, and it creates extra costs on many levels. It also reduces the transaction-prices at wholesale-level.
On this topic, I need to add that the fear of undisclosed synthetics above a certain size is almost non-existent, as lab-grading is more common, and lab-detection is only a minor cost, compared to the value of the stone.

Live long,

I fully agree with Paul's assessment on the issue.
There's so much fear installed on the industry regarding the sysnthetics issue that we keep forgetting that (according to numerous analysts) production of synthetic diamonds grabs only between 1-5% market share from the annual natural diamonds production. (Likely 2-2.5%).

In reality this means it will take many more years for the industry to really feel the impact.
In the meantime our industry prefers to block such intervention (ban as Paul's mentions) instead of embracing it.
In such a volatile period for our industry where many members are being pushed out on a daily basis (literally), I seriously don't understand why embracing synthetics doesn't occur naturally.

Synthetics are a reality, they are here to stay, and members of our industry must take advantage of this. It is actually an industry in its diaper stage. Some would even dare call it a dream.

 

[Lore]

In reality this means it will take many more years for the industry to really feel the impact.
In the meantime our industry prefers to block such intervention (ban as Paul's mentions) instead of embracing it.
In such a volatile period for our industry where many members are being pushed out on a daily basis (literally), I seriously don't understand why embracing synthetics doesn't occur naturally.

...for the same reason that the movie or music industry never embraced streaming for a good 10-15 years! People are scared of change!

If the value proposition is there, it'll happen.

 

[diagem]

In reality this means it will take many more years for the industry to really feel the impact.
In the meantime our industry prefers to block such intervention (ban as Paul's mentions) instead of embracing it.
In such a volatile period for our industry where many members are being pushed out on a daily basis (literally), I seriously don't understand why embracing synthetics doesn't occur naturally.

...for the same reason that the movie or music industry never embraced streaming for a good 10-15 years! People are scared of change!

If the value proposition is there, it'll happen.

The value proposition will be there when and only when synthetic diamonds will be valued on their OWN merits (e.g. Production costs plus expenses plus proposed added value/profit) as opposed to presently being marketed on a discount price from its natural diamond counterpart. Production costs are going down with time as with any new technologies.

Valuing synthetics based on a lower percentage from natural ones is a hoax. Any capital investment on the material based on that will be in a loss position.

I believe Swarovski will change that eventually once they become better rooted in the segment.