India wants to buy more rough diamonds directly from mining companies as the world’s biggest polisher of the gems seeks to bypass traditional dealers.
Prime Minister Narendra Modi called on more major suppliers such as Russia’s OAO Alrosa to sell directly to India, which polishes 80 percent of the world’s diamonds, avoiding trading centers such as Antwerp and Dubai. Speaking alongside President Vladimir Putin in New Delhi yesterday, Modi said he asked the Russian leader to drop duties on jewelry makers who send rough stones to India and re-import polished gems.
“Diamonds sparkle in the world because of the skills of Indian workers,” Modi said at the World Diamond Conference. “However, rough diamond in India comes from abroad. And, it mostly comes indirectly through places like Antwerp and Dubai.”
By buying directly from mines, Indian importers can cut costs by as much as 10 percent, according to Vipul Shah, chairman of the Gems & Jewellery Export Promotion Council. The South Asian nation has signed three long-term agreements to buy from OAO Alrosa (ALRS), the world’s biggest producer by volume, in addition to nine existing deals, according to Andrey Polyakov, vice president of the Russian company.
“I would like Alrosa to have direct long-term contracts with more Indian companies,” Modi said. “I am pleased to know that they are moving in that direction.”
India will establish a special zone in which companies can import rough gems on a consignment basis and re-export unsold ones, the prime minister said. While most of Russia’s rough diamonds end up in India, less than 20 percent get there directly, Modi said.
“We are trying to get Russia to sell even more diamonds directly to us,” Shah said in an interview in New Delhi. “Russia being the biggest producer of rough diamonds in the world and India being the biggest center for cut and polished diamond manufacturing, it is a natural partner for us.”
India’s rough-diamond imports jumped 12 percent to $16.72 billion in the year ended March 31, the council says. About 3.5 million people work in India’s diamond industry, Modi said.
De Beers, the diamond producer owned by Anglo American Plc, (AGL) currently sells diamonds through sightholders, a group of clients who conform with the company’s criteria in order to be permitted to buy the diamonds.
Increasing demand and lack of new rough diamond capacity in the next five years will help prices climb, according to Alrosa’s Polyakov. “Combined demand in China and India will match U.S. demand by 2020,” he said in an interview on Dec. 10. “More affluent Indian and Chinese consumers are buying jewelry as economies grow.”
Alrosa expects more than $5 billion of diamond sales in 2014, while production of rough diamonds is set to rise to 38.2 million carats in 2015 from 36.1 million carats this year, the company said in an e-mailed statement.
Prices for 1-carat diamonds are little changed for the second year after dropping 11 percent in 2012, according to data from PolishedPrices.com, a consultant.-Bloomberg
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