Diamond & Market attitude!
Price is such equilibrium where deal takes place! Nayan Jani
At the juncture I wish focus shortly on three points: 1: Market & finance, 2: Mining fraternity & 3: Market attitude.
1: Market & finance:
Recently Nirav Bhansali talk about the IIJS 2015 & its’ new layout. During the addressing about the IIJS 2015 he also said, last two, three years remained tough for diamond market! On the other hand mining fraternity says in one voice that the diamond pipeline is facing a problem of financing, liquidity issue not an issue has been created by oversupply. Yet the real point is over pricing of rough that has been focused at the edit of this issue.
De facto diamond market India must not face any liquidity issue. Though in the year 2014, few traders pushed out of market by saying liquidity issue! In the context our editor, JNI has learned seven points by interacting diamantaires.
Clearly one can enlists, 1: Higher rough cost, 2: growing overheads, 3: growing inflation, 4: growing financing cost, 5: growing interest rate, 6: longer cycle of stock & 7: diverting diamond money in to else investment! These bring altogether toughness in trading!
Traders & manufacturers have to learn & to show their competitive edge in future!
2: Mining fraternity:
Equally on the other hand higher rough price creates a wedge in pipeline. By considering new developments in mining sector rough diamond supply to be at around 160mn in 2014-2015 & during 2015-16 that to be of about 170mn at soft price point. Instead of following smooth road, mining fraternity restricted production by producing just 146 mn carats in 2014 to show a wider gap between demand & supply!
Here I am referring the Rapaport noted: ‘The De Beers July sight closed with an estimated value of $200 million with the amount of goods left on the table estimated to have exceeded 65 percent of the initial sight value. The size of this year’s July sight is the lowest amount for De Beers’s sixth sight of the year going at least as far back as the global financial crisis in 2009.’ Reason? The offered price remained higher than the polished!
This is the case study not only for DeBeers but also for mining fraternity that over price would not get accepted if offer is higher than the polished!
3: Market Attitude:
Market is a big show that never stops and never waits for any masters! If trader would not stop their practice of diverting diamond money in to else investment! They would get lost from the diamond market & new players would enter in order!
On the other hand if mining players would carry their practice with a natural stone by restricting their production & allow demand-supply gap widening to hike up the rough price where traders’ resists- they would be feel hot-water! What happens? How market would meet the demand?
Market rule says, when price of any goods hike up exorbitant, or supply stay far away from demand, Giffen goods sells to meet the demand! Here natural diamond is goods & Giffen goods are lab-made diamonds. Slowly these goods are growing their sparkle & it is estimate that the market shares of such lab-made stone are of US $9 billion! If goods would not meet the demand, the Giffen goods – Lab-made stones would grow rapidly from US $9bn to…
De facto the ‘De Beers has lowered the prices for its rough diamonds an average of 7 percent since the beginning of the year says Rapaport & quotes a trader, he says even if De Beers reduces prices by 5 percent the equilibrium would not be attained!
Here rough mining players & diamond manufacturing sector has to learn little more about the end-user’s attitude! What is the use of offering a higher price if deal does not take place? De facto price is such equilibrium where buyer & seller -meet& deal takes place. Any such price has to re-educate if fails to bring dealing! Else allow Giffen goods to fill-up the demand-n-supply gap in the market!