Rapaport Press Release: Diamond Prices Slide as Year Begins with Caution

Indian Banks Reduce Industry Credit

LAS VEGAS–(BUSINESS WIRE)–Polished-diamond prices softened in January as US restocking proved
slower than expected after the holiday season, and as Far East buyers
took vacation ahead of the Chinese New Year. Dealers were cautious due
to weak demand, tight profitability and a significant reduction in bank
credit.

The RapNet Diamond Index (RAPI^™) for 1-carat diamonds fell
0.4% in January and was down 1.8% from a year ago.

	RapNet Diamond Index (RAPI™)
				January			Y2Y Feb. 1, 2018, to Feb. 1, 2019
	RAPI 0.30 ct.			-0.8%			-4.1%
	RAPI 0.50 ct.			-0.3%			-0.1%
	RAPI 1 ct.			-0.4%			-1.8%
	RAPI 3 ct.			-1.8%			-5.9%
	© Copyright 2019, Rapaport USA Inc.

Although polished prices declined in the second half of 2018, inventory
levels have remained high: The number of diamonds on RapNet as of
February 5 was 26% higher than a year ago, coming to 1.5 million. In
January, rough trading was slow, as De Beers and Alrosa left prices
unchanged.

Bank credit to India’s diamond trade declined by up to 30% in the past
year and currently stands at $5 billion to $5.5 billion, as noted in the
January edition of the Rapaport Research Report. The reduction
resulted from several factors:

• State-owned banks adopted a more conservative approach across all
  industries in response to a rise in non-performing assets in the
  country.
• The 12% depreciation of the rupee against the US dollar in 2018
  reduced credit in dollar terms, since Indian credit lines are set in
  rupees.
• Bankers raised the industry’s risk profile following the $2 billion
  alleged fraud of Punjab National Bank by jewelers Nirav Modi and
  Gitanjali Gems.
• Manufacturers’ profits continued to tighten due to high rough prices.

Indian diamantaires need to improve transparency and profitability to
gain favor with the banks. A shift to a more conservative lending
environment in India will exert additional pressure on the trade in
2019, but will be a positive development in the long term. With reduced
bank credit, businesses will have less money to spend on non-profitable
rough, helping to shift their mind-set away from turnover and toward
bottom-line profits.

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Contacts

Rapaport Media Contacts: media@diamonds.net
US:
Sherri Hendricks +1-702-893-9400
International: Alex Shine
+1-718-878-5138
Mumbai: Prashant Bhojani +91-97694-66855