Page 28 - Bullion World Volume 3 Issue 2 February 2023
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Bullion World | Volume 3 | Issue 2 | February 2023

           CPD Exports Cautious after Strong



           FY22 Show, Margin dip Imminent:





           Mr Ujjwal Patel, Associate Director, CARE Ratings Limited





           While overall exports of CPD declined by just 8% at USD 16.6 billion
           during 9MFY23 (9MFY22: USD 18.0 billion) in value terms, CPD exports
           volume declined by 24% to 183.30 lakh carats during 9MFY23 (9MFY22:
           241.07 lakh carats) reflecting the absence of Alrosa’s smaller goods and a
           dip in the consumer demand from China, which consumes smaller-sized
           diamonds below 0.30-carat as compared to the US, which consumes
           larger sizes/ higher-value stones.




           Demand for natural diamonds       by China and Japan, which
           crossed pre-COVID-19 levels in    accounted for about 11% and 5%,
           CY21                              respectively, in CY21.
           The demand for global natural
           diamond jewellery as well as global   Midstream segment mirrors
           polished diamonds witnessed a     industry performance                       Mr Ujjwal Patel
           robust recovery at USD 87 billion   With a global share of more
           and USD 28 billion, respectively, in   than 90% in the processing of   Impact of war and macro-
           CY21, crossing the pre-pandemic   rough diamonds, the midstream     economic environment on CPD
           levels of CY19 by around 10%.     segment, dominated by Indian      exports
           The year-on-year (y-o-y) growth   entities, reflected a mirror image   Russia’s invasion of Ukraine
           of natural diamond jewellery      of the industry performance post-  and resurgence of COVID-19 in
           demand was significant at 29%     COVID-19, marked by a steady      China (the second-largest export
           and consequently the demand of    increase in the overall exports. The   market) and its zero-tolerance
           polished diamonds grew by 51%     recovery in demand after the lifting   policy leading to intermittent
           on a y-o-y basis in CY21. Over    of lockdown restrictions in the US   lockdowns, impacted the overall
           and above the fiscal stimulus, the   and China resulted in a faster-than-  performance of the industry in the
           lack of alternatives in terms of   envisaged recovery in demand     current financial year. With the
           other luxury spending, experience-  from Q2FY21 for five straight   absence of Alrosa’s rough, which
           based activities, travelling, etc.,   quarters, both in volume as well as   accounts for about 25% of global
           made diamonds a preferred choice   value. Contrary to the expectation   production with 40-50% market
           for customers, who had excess     of softening in the prices of rough   share in smaller-sized diamonds,
           liquidity due to a reduction in the   diamonds post Diwali break, it   CPD exports declined by 24%
           overall expenditure. Moreso, the   continued to increase, thereby   at 183.30 lakh carats during
           reduction in unemployment rates   creating an imbalance in the pricing  9MFY23 (9MFY22: 241.07 lakh
           and vaccination drives in the     parity of rough diamond vs polished  carats). Nevertheless, CPD exports
           second half of the financial year   diamond, marked by an increase   declined by just 8% at USD 16.6
           resulted in faster inventory turnover  in CPD exports by 11% to USD 6.2   billion during 9MFY23 (9MFY22:
           and earlier-than-usual orders for   billion in Q4FY22, but with a decline  USD 18.0 billion), primarily on
           depleted inventories.             in volume by 15% to 64 lakh carats   account of elevated CPD prices,
                                             over Q3FY22. On an annual basis,   which also reflects the absence of
           Overall, more than half of the global  the exports of CPD rebounded   smaller size Russian rough and a
           natural diamond jewellery demand   significantly by 49% y-o-y to USD   dip in the consumer demand from
           is contributed by the US, followed   24 billion.                    China.



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