November 16th, 2008
By Charles Wyndham.
Things really are coming to a head.
News about the Gem and Jewellery Export Promotion Council in India trying to limit rough imports says it all.
Whatever the politics behind the decision or whether this seemingly voluntary restriction is abided by is not really the point, as I see it.
What this announcement puts clearly before everyone is just how extreme the situation has become and is becoming.
The days for platitudes is clearly over and everyone has got to realise that the diamond industry is a passenger in the train smash that has occurred throughout the world’s financial markets and not some lucky ‘decoupled’ bystander.
Everyone is going to be suffering to a greater or lesser extent.
The other point is that we are not at the worst part of the crash yet which looks likely to come in the first quarter of 2009.
Producers are going to have no choice but to sell less.
The more they try to sell is going to reduce the average price of what they sell as the tiny availability of cash is eaten up.
The less they can sell at the moment is going to allow for a much quicker recovery. Forcing sales will simply kill the patient.
The patient in this case is the producer as well as those further down the chain.
At the same time the trade has got to start to really accept change and stop thinking that the old smoke and mirrors is going to get them out of this mess.
It won’t, neither will panic.
The trade must accept transparent pricing and get away from the current monopoly that transfixes them.
Banks could also contribute beyond keeping as much money in the industry as possible by reasserting some discipline in the industry. This business, if it is a business, of selling on 180 days and hoping to be paid before the next millennium is a curse that must be stopped, as is ‘selling’ on memo.
Banks should simply refuse to finance such business.
There are going to have to be mega changes and it is going to be interesting to see who is going to be around to benefit from the inevitable turn around when it finally comes.
Even in the worst train smashes there are usually many more survivors than victims.
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