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India’s diamond manufacturers can expect to face increasing pressure in the coming months, according to the latest Rapaport Research Report. Titled “A Crisis in Melee,” the report looks at the causes and effects of recent declines in price for smaller, lower-quality diamonds, including impact on the manufacturing sector.
The report attributes the weakening market to four primary factors:
- oversupply caused by the addition of three new mines last year, which brought global rough production to its highest point since 2008;
- caution among manufacturers due to tighter credit and a depreciating rupee in India;
- U.S. retailers’ tendency away from natural melee and toward higher-quality lab-grown melee, spurred by the threat of undisclosed synthetics; and
- a more selective melee market caused by changes to small diamond trading, which are in turn due to new design technology.
Rapaport also indicates the low price levels are making small diamonds less profitable to produce as labour costs increase. It expects miners will reduce production plans and Indian polishers will streamline operations in response.
However, the market for larger polished diamonds continues to hold steady thanks to holiday demand, despite growing concerns over the U.S.-China trade war and Chinese tourists’ lower spending habits.
