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Eagerly Awaiting Christmas Season...
By: Administrator
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Aug 28 2007 12:00AM
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Reference: 2231  

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The diamond and jewellery trade and industry are keenly awaiting some clues from abroad, particularly from the U.S. market, for the ensuing Christmas season’s business prospects as the month of July ends.

Business Sluggish:
They point out that in the past foreign buyers used to start arrive here by mid July to make on the spot selection of goods. However this trend seems to have changed for some time now. Overseas buyers and their orders for the busy season come very late now. For instance, last year, visible export business started only around in early September. This is believed to be the outcome of excess manufacturing capacity built up by the industry. As a result, enough supplies are available at any point of time. Retailers are therefore, in no hurry to replenish their inventories. Also, there are substantial stocks in the pipeline. Under these circumstances business activity remains sluggish currently.

Weak Start of Manufacturing Season:
Most manufacturing units have resumed production after the summer vacation but their overall production is estimated to be running at 60-70 per cent of their capacity in view of subdued demand. This has affected the market for polished goods. Prices of certain categories of stars are reported to have fallen by 10-15 per cent during the past two months. Of course good quality larger gemstones continue to move but the bulk of production is of stones of which the offtake is very sluggish.

Inventories Heavy, Money Stringency:
Inventories of such unsaleable gems are rising. That is one problem being faced by the industry and trade at present. Another problem arising from this situation is that while manufacturers have to pay wages in cash, they have to borrow funds for holding the piling inventories. Banks continue to lend, albeit selectively, but many smaller and medium scale manufacturers who are unable to obtain bank credit or have already utilized bank facilities are forced to approach non-institutional lenders. Money stringency has become more acute partly because of abnormal delays in getting payments from abroad for goods dispatched long ago. Secondly, this trade and industry have been paying of late, more attention to investments in shares and property. It becomes difficult to pull out investments from property. In view of these factors, the trade and industry are experiencing considerable money stringency at present. This can be seen from very high interest rates of 1.5 to 2.0 per cent per month charged by non-institutional money lenders. If a number of manufacturers are forced to pay such high interest rates, it is because the other alternative for them could be to liquidate on the sluggish market, their inventories and bear losses. As sales are weak, prices in several cases remain under pressure. Overall stock position in the polished segment is estimated at 4 to 5 months’ requirements.

Rough Diamonds in Short Supply:
Another problem for the manufacturing units is that while polished prices remain under pressure, rough prices are strong. Currently, rough diamonds are commanding premium ranging from 5 to 10 per cent even more depending upon the variety. This places many manufacturers in a very difficult situation and they are finding it very difficult to sell most of their production, they have to pay higher prices for rough, if they want to run their factories. It is very difficult to lay off all workers all of a sudden. Besides, there is a hope that the situation may be bad now, but it could improve later. However, many manufacturers are unable to provide jobs to all their workers. Many workers who are unable to retain jobs in the diamond industry are now turning to the embroidery industry in Surat.

Rough Prices Up:
According to trade sources, the July DTC Sight was of the order of US$ 625-650 million. Prices of certain varieties were reportedly raised by an average of around 2 per cent. There were no ex-plan allocations. Those units which have already resumed production want more rough diamonds but these are in short supply even in the open market.

Antwerp Market Firm:
According to reports from Antwerp, a number of Indian manufacturers were in Antwerp during July in search of rough stones. The open market prices there were also quite strong but those who wanted to run their factories to meet the anticipated pre-Christmas demand had no alternative but to pay such prices. Antwerp businessmen expect good Christmas sales in most of the markets, barring the U.S.A. whose economy continues to move southward. Interest rates in Antwerp are placed around Libor plus two per cent. These could be higher, depending upon clients. The Antwerp market will be having its usual holiday during the first three weeks of August. The real mood of the market there will be known only when the market reopens thereafter.

Export Despatches Up:
Exports of cut and polished diamonds from the country in the first quarter of 2007-08 are provisionally placed at US$ 2,886.62 million, compared with US$ 2,403.15 million in the same period of the earlier year from the same ports, including a rise of 20.12 per cent. In terms of carats also shipments in the first quarters of 2007-08 have been higher at 88.42 lakh carats, compared with 69.31 lakh carats in the same period a year ago.

Gold Jewellery Upswing:
Gold jewellery exports in the first quarter of 2007-08 have also been higher by about 26.22 per cent at US$ 1,263.70 million, compared with US$ 1001.16 million in the same period of the earlier year.

Export trade circles are unhappy with the removal of duty exemption enjoyed by imports of Indian jewellery into the U.S.A. They are also not happy with the increasing strength of the Indian rupee.

Bullion Volatile:
Bullion prices abroad are influenced these days by the weakening of the US dollar in relation to Euro and strong oil prices as well as by uncertainties of the international political situation. On July 26, the yellow metal was placed abroad US$ 672.13 per oz. and silver at US$ 12.98 per Oz; while in the local market standard gold was placed on the same day at Rs. 8,830 per 10 grammes and Silver at Rs. 18,085 per kg. The market remained quite volatile.

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