New Delhi, Sep 26 (FN Bureau) Rating and Research firm ICRA on Tuesday said that it expects India’s exports of cut and polished diamonds (CPD) to fall by 22% to $17.2 billion in FY24, amid weakened demand from the key consuming nations. ICRA noted that while some sequential improvement in volumes is expected in the coming months, driven by the onset of the festive season, overall exports are still expected to contract by 10% year-on-year (YoY) in the second half of the fiscal. The rating agency has thus revised the sector outlook to Negative from Stable. “The export contraction is primarily being driven by weak underlying demand conditions in key consuming nations like the US and Europe due to the inflationary pressures, leading to a shift in spending away from diamonds.
Demand from China, which accounts for 10-15% of the global demand, has also not picked up meaningfully so far,” said Sakshi Suneja, Vice President & Sector Head, ICRA. She further said that competition from lab-grown diamonds, which are priced at a significant discount to natural diamonds, also accentuated the dip in volumes, particularly for the large-sized diamonds in the range of one to three carats. “The share of lab-grown diamonds within India’s total CPD exports continues to rise,” said Suneja. As per the rating agency, the prices of rough diamonds remain elevated in FY2024 so far, with current prices hovering around the 15-year median level, despite some softening seen in the recent months.
“These prices had soared in the last two years, following limited supply from mining companies and robust revival in demand, post the pandemic. However, despite subsequent softening in demand, rough prices remained high due to limited availability from Russia in the market, following the US sanctions on Alrosa PJSC – the Russia-owned diamond mining entity, which supplies 30% of the rough diamonds globally,” it stated.