The statement published this week by India’s diamond industry had an unnerving, 2008 feel to it. While the Gem & Jewellery Export Promotion Council (GJEPC) fell short of stopping all rough imports to the country, as it did in response to the 2008 crisis, the group reported that India’s medium-to-large diamond manufacturers have significantly reduced their polished production heading into the fourth quarter.
The GJEPC stated that manufacturers are looking to optimize their inventory and consequently improve their liquidity positions. To achieve that, they’re hoping to influence an increase in polished prices and/or a reduction in rough prices. While the council didn’t say it directly, the underlying message was that Indian manufacturers should stop buying high-priced, unprofitable rough.
Better late than never. Let’s hope they live up to their word. After all, many point a finger at the Indian manufacturers, and the banks which enabled them, as being responsible for driving up rough prices in the first place over the past five years.
This year, faced with a weak rupee, reduced bank financing, and a slowdown in diamond demand – at least in India and China – Indian manufacturers can no longer sustain previous rough buying levels at prevailing prices. They’re simply running out of money.