Demand keeps diamond prices stable

The surge in demand for diamond in India and China will keep the prices of the gem stable, says a CRISIL Ratings report released this week. The report suggests that India and China, the fastest growing markets in the world, are likely to continue with their double-digit growth in 2011.

Experts say that the diamond market in India and China has grown by 25% in 2010 and has contributed to 20% of the global consumer demand for diamond jewellery in 2010, as against 12% in 2008.

"China and India are at an inflexion point and will see a structural shift in consumer preference for diamond jewellery resulting in a strong demand growth," said Gurpreet Chhatwal, director, CRISIL Ratings, a research firm.

Sale of diamond jewellery in the US market, which accounts for almost 40% of the global diamond consumption, is estimated to have increased by 7% in 2010, driven by recovery in consumer spending and inventory restocking by retailers. Price of polished and rough diamonds has increased by more than 30% over the past one year due to a strong demand and lower production cost.

During the downturn in 2008, miners especially the De Beers group, the largest supplier of rough diamonds, had curtailed supply with respect to subdued demand. "While rough diamond prices may be volatile because of temporary demand-supply mismatch, the prices will remain stable as the supply is expected to increase with the De Beers group likely to achieve full production capacity and Rio Tinto's Argyle mine commencing underground operations," said Subodh Rai, head, CRISIL Ratings.

Players believe that by 2016, India will account for 20% of the diamond jewellery consumer demand.

"The key factors for the uptrend are an increased consumer awareness supported by the enhanced promotion of diamond jewellery as a regular wear and an increase in the discretionary income and growth in the number of high networth individuals in India. This has resulted in an evident increase in the demand for solitaires. Importantly, we are seeing growth coming from not just tier I cities but even from the tier II and tier III cities," said Rajeshree Naik, marketing head, Forever mark, part of the De Beers group of companies. "The world is looking to India as a driver of future growth in the diamond industry," said an official from Rio Tinto into India.

8 May 2011 — The Sunday Guardian.