Zim diamonds shine in India

MUMBAI - Giant diamond mining companies like De Beers, Alrosa and Rio Tinto are losing out in India, with Zimbabwe ruling the roost in the Indian market with its high quality diamonds. Traders said Zimbabwe diamonds are about 50% cheaper than those from other sources.

"Diamonds from Zimbabwe have brought stiff competition to the international market, causing prices to fall sharply," said Santosh Desai, diamond trader at Mumbai's Zaveri Bazaar. "An immediate consequence of their arrival was that diamond prices have crashed by 25% in the markets of Mumbai and Surat since November 2011," he added.

Zimbabwe diamonds are available at $40 per carat, which is very cheap as compared to other mining giants whose diamonds are sold above $100 per carat.

Diamonds from Zimbabwe made a comeback in the world's biggest diamond cutting and polishing hub in Surat, India, from November 2011 after the international diamond regulatory body Kimberly Process (KP) allowed their exports from the controversial Marange fields.

Desai added that Zimbabwe was all set to influence prices and demand for rough diamonds in 2012, backed by rising demand from India. Traders added that around 11 million carats of Marange diamonds were expected to flood the Indian market this year.

In 2010-11, India imported rough diamonds worth $11 billion, out of which more than 50% were of low range quality. Exports of gems and jewellery for the same period jumped 47% to $43 billion from $29.4 billion.

Globally, global diamond production fell by 4% to 122 million carats in 2011, though the value of production rose to 25% to $14 billion. Zimbabwe's production does not figure in the global count, since the country was banned by KP.

De Beers, Alrosa, Rio Tinto and BHP Billiton account for 70% of the total production of rough diamonds in the world. Though De Beers benefited from rising demand in India in 2011, with rough diamond prices rising an average 15% in India when the KP ban was still in place, diamond giants have been forced to look elsewhere given the slide in their earnings.

Rio Tinto reported a minuscule 7% increase in diamond sales recording $727 million in 2011, with production at 11.7 million carats which was a 15% drop on the previous year's production levels. Similarly, BHP's revenue from diamond operations for 2011 was $357 million, down 16% on its 2010 revenue.

Prices of rough diamonds from De Beers and Alrosa have also slipped by around 10% per month in Surat as a result of the diamonds from Zimbabwe entering the market. About 30% of the diamond pieces currently manufactured in Surat are Zimbabwean stones.

"Zimbabwe has a stock pile of 4.5 million carats of diamonds valued at anything between $4 and $5 billion. Since India consumed about 80% of rough diamonds produced by Alrosa in 2011, Zimbabwe is bound to take away a large chunk of this consignment this year," said Uday Mahandale, diamond trader.

He added that in 2010, out of the total $5077 million worth of rough goods sold annually by Alrosa, around $3859 million worth of goods came to India through direct and indirect channels.

The move by Indian diamond cutters to choose roughs from Zimbabwe has also impacted the second online auction of the Surat Rough Diamond Sourcing India Limited held earlier this month. The firm has been able to sell only 51% goods to small and medium diamantaires.

Though the Indian firm presented about 300,000 carats of low range goods valued at more than $6 million during the auction process, it managed to sell only 21 of the 31 lots for $3 million. In January, when the same Indian firm had held its first online rough auction, it had managed to achieve sales of $17.2 million.