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Shipments of cut and polished diamonds picked up in October 2005, indicating a late start of pre-Christmas activity. In the past overseas buyers used to come to Mumbai by the latter half of July to make on-the-spot selection of goods they would like to stock for the Christmas season. This trend seems to have changed of late.
Despatches Commenced in October:
This year July turned out slow, with slight improvement in despatches to US$1,255.88 million in August and US$1,538.35 million in September, compared with July shipments amounting to US$1,043.84 million. However, there was a significant spurt in shipments to US$1,341.80 million in October, 2005. This clearly indicates the late start of pre-Christmas business activity.
Of course, despatches (shipments) are technically considered sales. Actually, some of these dispatches might be one's own sister concern abroad. Moreover, when shipments are made to third parties, they may be on long-term credit or sale-on-return basis. To what extent such dispatches eventually result in actual sales can be known only after a long interval.
Shipments up 25.45 per cent:
However, for all practical purposes shipments are considered to be sales. If one follows this rule, exports of cut and polished diamonds in the first seven months (April to October 2005), have been of the order of US$7,609.09 million, indicating a rise of 25.45 per cent over shipments worth US$6,065.46 million in the same period of the earlier year.
Volume up 10.29 per cent:
In terms of volume, shipments in the first seven months of 2005-06 have been of the order of 292.93 lakh carats compared with 256.50 lakh carats in the same period a year ago, indicating an increase of 10.29 per cent.
Average Price Realization Better
The average price realizations for cut and polished diamonds dispatched in the first seven months of this fiscal comes to US$258.87 per carat, compared with US$227.22 per carat in the same period a year ago. This indicates an improvement of about 13.93 per cent.
However, leading exporters complain that their margins are being squeezed. So they are not much happy with the significant improvement in dispatches. There is another reason for their concern as well. Payments are unduly delayed even after the expiry of credit limit. This shows that overseas importers may be finding it difficult to dispose off the goods imported by them and inventories with them could be piling up. Much depends on how the Christmas season's sales shape.
In case the overseas retailers who are waiting for Christmas demand to go up, are able to clear, or substantially bring down their inventories, one can expect good business activity in January and February when stockists may be expected to make fresh purchases to replenish their depleted inventories.%%
However, no one is in a position to hazard any guess in this regard in November. Most of the dealers prefer to keep their fingers crossed for several reasons. Consumers, particularly in the U.S.A., which remains the most important market for diamond jewellery find that job losses continue to exceed fresh appointments. This has made the US consumer considerably cautious about expenditure on luxuries which can be avoided or postponed.
Consumer Confidence Declines:
This is reflected in the sharp set back to consumer confidence in the U.S.A. The Conference Board's index of consumer confidence fell as low as 86.6 in October 2005, from 105.5 in August 2005. Consumers are yet to come out of the shock delivered the devastating hurricane Katrina which was followed by another hurricane Rita. This makes it extremely difficult to predict the mood of the consumer, though Christmas is fast approaching.
Basically, the US economy which recovered smartly in 2004, is slowing down again. According to a recent forecast by the International Monetary Fund (IMF) the US economy which grew at the rate 4.2 per cent in 2004, will have its growth rate reduced to 3.5 per cent in 2005.
This implies that the Christmas season will be there. Consumers will also buy, but with greater caution than in the earlier years. Such forecasts are naturally causing concern to retailers in the US dealing in luxury goods including gems and jewellery.
Manufacturing Activity at Low Ebb:
Meanwhile, the manufacturing activity remains at a low ebb, as workers of most manufacturing units have not yet returned to their work-places, though the Diwali festival has been over long ago. Many manufacturers are of the view that they may not be in full operation before November-end. In other words, they may be observing this year a two-month Diwali vacation, instead of one month normally. This actually shuts many manufacturing units particularly when the going is not so smooth.
In view of buoyant conditions prevailing in the overseas markets, both gold and silver have been witnessing extremely firm conditions. On November 15, gold in the overseas markets was placed at US$478.30 per oz., while silver was placed at 7.84 per oz. In the domestic market standard gold was traded as high as Rs.7,020/- per 10 grammes, while silver was transacted at Rs.11,400/- per Kg.
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