Pressure on India’s diamond sector in 2019
The
melee market became more selective
The
sharp decline in prices of small, low-value diamonds will exert further
pressure on India’s manufacturing sector, according to the latest issue of the
Rapaport Research Report. Prices in some categories have dropped by up to 20%
in 2018 due to an oversupply and weaker demand.
The
report, “A Crisis in Melee,” outlines four factors influencing the weakness in
the market for small diamonds:
1: The addition of three new mines in
2017 brought global rough production to its highest level since 2008, resulting in an excess of supply.
2: Manufacturers became cautious due
to tighter credit in India and the depreciation of the rupee.
3: Some US retailers are shying away
from natural melee because of the threat of undisclosed synthetics. There is a shift toward better-quality
goods, which includes a small but growing preference to use better-quality lab-grown melee rather
than lower-quality natural stones.
4: Technology used in jewelry design
has changed the way small diamonds are traded, leading the melee market to be more selective.
These
factors will continue to pressure India’s manufacturing sector in 2019. With
rising labor costs, small stones are becoming less economical to produce at
current lower price levels. India’s polishing factories will be forced to
streamline their operations, and mining companies are expected to reduce their
production plans.
While prices of
small, low-value diamonds declined, the market for larger, certified polished
stabilized in November, supported by US holiday demand. Sentiment improved
after a positive start to the season. There is concern about the impact of the US-China
trade war on luxury retail as Chinese tourists are spending less abroad.
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