Expects manufacturing recovery in 2H 2016.
Rough diamond prices need to come down by 15 percent but the market needs to stabilize first, Maxim Shkadov, president of the International Diamond Manufacturers Association (IDMA) told Rapaport News.
“Rough prices need to come down to represent a fair value compared to polished but the concern is that if they go down in one shot, polished prices will go down again and the cycle will never stop,” he said in a phone interview on October 27. “We need to have stabilization in the market because people need to understand where the trend is going.”
Shkadov, who is also the chief executive officer of Moscow-based manufacturer Kristall Smolensk, estimated that rough prices have declined by about 15 percent since the beginning of the year and that they need to drop another 15 percent to enable manufacturers a reasonable profit. However, he stressed that a more gradual approach was required to pricing while he endorsed recent moves to reduce the quantity of rough brought to the market.
De Beers and ALROSA have enabled their clients to defer large volumes of supply in recent months with De Beers notifying sightholders they can defer their entire November allocations at this week’s sight to December.
There is still a lot of polished inventory available in the market which is putting downward pressure on polished prices, Shkadov noted. He explained that easy bank credit in India enabled miners to sell a lot of rough in 2013 and 2014 at high prices which led to the current situation of excess stock in the midstream. Manufacturers have responded by reducing factory output by about 40 percent this year, he estimated.
