China a threat to India’s diamond ambitions

We publish courtesy of Mineweb

Author: Shivom Seth

MUMBAI – China is emerging as a major threat to the Indian gems and jewellery industry,  according to Chaim Even-Zohar, chairman of Tacy Diamond Consultants, which is a specialty strategic consultancy house serving the stakeholders in the international diamond industry.

Speaking at the International Diamond Conference in Mumbai, on Tuesday, Even-Zohar said that even as India plays catch up to China in other industries, the Chinese have announced their arrival by ruthlessly  conquering huge African mines. China, Africa’s biggest emerging market partner, has been investing in the continent’s mining and energy sectors.

The Asian major was keen on  conquering Africa as it becomes the preferred trading partner. Reports have indicated that Beijing is buying up Africa’s abundant natural resources and providing it with needed cash and cheaply produced consumer goods in return.

“Though the Chinese have been keen to invest in the processing of minerals in the country (a key priority of South Africa’s government, which hopes to extract as much value from its mines as possible and boost job creation), one has to understand who it is playing catch up to,” said the Tacy chairman.

“In 2008, China imported $26 million carats and exported $23 million carats. China is making heavy inroads into Africa, buying up huge mines. This should make Indian manufacturers sit up and take stock,” he added.

Underscoring the push by China, Gareth Penny, former CEO of the De Beers Group and keynote speaker said the market share of India and China globally was at 7% and 6%, respectively in 2009. “This is  expected to jump to 10% and 11%, respectively by 2016. But, as you can see, it is neck to neck,” he told a stunned gathering.
At an earlier press conference in the city, Rajiv Jain, chairman of the GJEPC said India was trying to establish itself as a centre for the global gem and jewellery trade. “In manufacturing, we are already the leaders.  It is time we realise the potential of India as a ‘Global Brand’,” he said.

Net imports of cutable diamonds into India were $110million carats of the total world production of $165 million in 2008. However, consumer demand reduced by 9.7% in India in 2009, due to the global recessionary trend, which affected the Indian gem sector.
Tacy’s chairman also spoke on recession and said that speculative pricing had added to their woes. “Russia is the only country to not curtail production during the recession and has ensured that its workers are not affected,” he said.

Penny elaborated that luxury products, including diamonds, were not  immune from the effect of the unprecedented global economic downturn.  “However, we believe that diamonds are uniquely positioned to withstand the effects of the downturn. Our research also shows that in uncertain times, consumers gravitate towards quality, though they buy fewer and better things. Diamonds clearly fulfill this need.”

He added that it was time to promote diamonds as something other than a luxury item. “Diamonds do have to compete with other luxury goods. A significant part of the proposed International Diamond Board’s mission is to create and sustain strong consumer demand for diamonds worldwide. This would be achieved through effective category marketing that generates the best-sustained return for the entire industry and brings direct benefits to members,” he added.

Pranay Narvekar, strategy consultant at Rosy Blue said India is the largest exporter of polished diamonds. “Currently, $12 billion worth of stock is still in the pipeline. The borrowing for the sector is pegged 1.5 times year-on-year. The country’s debt:equity ratio for 2008 was more than 2, which dropped in 2009, due to the global recession.

To which Penny added: “I do believe, and hope, that going forward, the industry will be more prudent in its borrowing and also in the efficiency of the diamond pipeline,” he said.
Forevermark, a diamond brand from the De Beers family of companies is to be launched in India in December this year, a top company official said. “India will be the third major market into which Forevermark will launch in December — after China and Japan,” Diamond Trading Company (DTC) Managing Director, Varda Shine, said at the International Diamond Conference-Mines to Market 2010. Over the next few months, Forevermark will be looking to identify the right retail partners to expand into Bangalore, Mumbai, Delhi, Chennai, Hyderabad and Kolkata, Shine added.

As with many sectors in the Indian industry, the Indian gems and jewellery sector too is worried over the threat from China. Yet in gems, India might have an opportunity that more than makes up for any threat.


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