Surat's raw diamond production may fall short in Christmas

The world's largest diamond processing zone in Surat, which is in the revival phase after a gap of nearly a year, may not be able to fulfil the export demand ahead of the Christmas season due to acute shortage of raw material arising out of a sharp fall in global major DeBeers' output, industry officials told NewsWire18. "Christmas export demand for polished diamonds is better this year against last year, but there is a shortage of raw diamonds due to fall in DeBeers' output which is likely to be almost half this year from last year," said Pravin Nanavaty, general secretary, Gujarat Hira Bourse, a Surat-based diamond manufacturers' and exporters' body. He said as per an interim output report of Anglo American plc, De Beers diamond output in the first nine months of 2009 stood at 14.4 million carat, down 61.2% on year. Anglo American Plc holds 45% stake in De Beers, the world's largest diamond mining company. Surat diamond industry sources most of raw diamonds from De Beers through its marketing arm, Diamond Trading Company. Nanavati said the total diamond production of De Beers is likely to fall this year to 24-25 million carats from 48.13 million carats last year. "De Beers had cut its production in the first half of this year due to weak demand. Now, when the global economic conditions have improved and demand for finished diamonds good it (De Beers) can not scale up its production sharply due to technical reasons," Nanavati said.

The company's output in the remaining three months of the current year will not be more than 10-11 million carats, he added. He said the company had already mined most of the diamond reserves from mines' surface and now the remaining diamond reserves are deep seated which is difficult to mine. De Beers has most of its mines located in South Africa and other African countries such as Botswana and Namibia, while some mines are located in Canada. "This means that Surat's diamond processors will have to struggle for sourcing raw material. There are many exporters who have outstanding Christmas export orders from China, Japan and European countries and they are running out of raw diamonds. This shortage might get worse in the coming months," said C.P. Vanani, former president of Surat Diamond Association. He said due to good export orders, most of the diamond processors is observing only a 15-day long Diwali vacation till November 2.

Normally, diamond processors observe Diwali vacation for 30-40 days. "Some large processing units have already resumed work to complete their outstanding export orders. However, if raw material shortage increases, then they might have to refuse further orders," said Dinesh Navadiya, vice president, Surat Diamond Association. Surat boasted of having 4,000 cutting and polishing units, employing 200,000 workers. In 2008, over half these units shut down due to liquidity crunch and fall in global demand. Currently, around 2,500 units are functional. The annual revenue of India's diamond processing industry is around Rs 600 billion, 80% of which is generated by Surat-based units.