Processors in India, which polishes 80 percent of the world’s diamonds, are seeking to buy more rough gems directly from mining companies in Russia and Africa to cut costs and meet increasing demand.

The South Asian nation signed three long-term agreements to buy diamonds from OAO Alrosa (ALRS), the world’s biggest producer by volume, in addition to the nine currently, said Andrey Polyakov, vice president at the Russian company. This will boost direct sales to more than $700 million annually, he said.

Indian processors plan to increase purchases from miners and reduce their dependence on De Beers as the move can cut costs for importers by 5 percent to 10 percent, said Vipul Shah, chairman of Gems & Jewellery Export Promotion Council.

“We are trying to get Russia to sell even more diamonds directly to us,” Shah said in an interview in New Delhi. “Russia being the biggest producer of rough diamonds in the world and India being the biggest center for cut and polished diamond manufacturing, it is a natural partner for us.”

The group is in talks with the Indian government to establish a tax-friendly special economic zone so that suppliers can set up offices in the South Asian nation, he said.

De Beers currently sells diamonds through sightholders, a group of clients who conform with the company’s criteria in order to be permitted to buy the diamonds. India’s rough-diamond imports jumped 12 percent to $16.72 billion in the year ended March 31, the council estimates.

Increasing demand and lack of new rough diamond capacity in the next five years will help prices climb, Polyakov said.

“Combined demand in China and India will match U.S. demand by 2020,” he said in an interview in New Delhi yesterday. “More affluent Indian and Chinese consumers are buying jewelry as economies grow.”

Prices for 1-carat diamonds are little changed for the second year in 2014 after dropping 11 percent in 2012, according to consultant PolishedPrices.com data.

Bomerang

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