In April, the import volume of cultivated diamonds fell month on month, the export volume continued to grow and the penetration rate reached a new high: GJEPC released the import and export data of India’s cultivated diamonds in April. The import volume was US $100 million, with a year-on-year / month on month ratio of + 25.0% / – 50.7% respectively. The penetration rate (import volume caliber) in diamond categories was 7.1%, with a year-on-year / month ratio of + 2.6pct / – 2.0pct respectively, but the same as the 7.0% in February, the import volume of cultivated diamonds fell month on month, Mainly due to the high base brought by the demand for replenishment of inventory in March (the import of cultivated drill in India increased by 157.0% year-on-year in March) and the general reduction of the production capacity of processing plants, the year-on-year growth is still good; In April, the export volume was 148 million US dollars, with a year-on-year / month on month ratio of + 64.4% / + 8.0% respectively, and the category penetration rate of export volume was 6.4%, with a year-on-year / month on month ratio of + 2.6pct / + 0.6pct respectively, a new high since 2019, which verified that the downstream demand was strong.
In April, the import volume of Indian natural diamond blanks fell sharply, and the insufficient supply led to a sharp rise in prices. In April, the import volume of Indian natural diamond was only 6.003 million carats, with a year-on-year / month on month ratio of – 63.0% / – 51.5% respectively; The import volume was US $1.31 billion, with a year-on-year / month on month ratio of – 22.8% / – 35.7% respectively. The decline in import volume was mainly due to the significant reduction in production of factories in Surat, India due to the impact of sanctions on the export of Alrosa rough diamonds; The average import price was US $217.4/carat, up 108.8% year-on-year, a new high since 2019, which verified our judgment that the Russian Ukrainian crisis exacerbated the shortage of natural diamond supply and led to the rise in the price of natural diamond blanks. The export volume of natural drilling was US $2.16 billion, with a year-on-year / month on month ratio of – 4.0% / – 1.8% respectively, which was the first year-on-year and month on month decline since November last year. Under the price fluctuation, the terminal consumption of natural drilling tends to be unstable.
The escalation of US sanctions on the export of Russian natural diamond blanks may accelerate the penetration of cultivated diamonds. The US sanctions on the export of Russian natural diamond blanks since March have led to the continuous rise in the price of natural diamond blanks. According to media reports such as Bloomberg and rob report, the price of small particle rough drill (Alrosa products are mainly small particles) has increased by more than 20% since March. In April, IDEX natural diamond finished product diamond price index fell by about 2.1% month on month, and rapi1 carat finished product diamond index fell by 3.2%. Since May, the United States has upgraded its sanctions on the export of natural diamond blanks to Russia. The Russian Ukrainian crisis and the closure of the Chinese epidemic have increased the uncertainty of natural diamond prices, superimposed with the expectation of high inflation in the United States, curbed consumer demand, or accelerated the penetration of cultivated diamond.
Investment advice
In April, the export data of India’s cultivated drilling industry improved, and the penetration rate reached a new high, which verified the strong downstream demand. The United States has upgraded its sanctions on the export of natural diamond blanks to Russia. The fluctuation of natural diamond market price + high inflation may accelerate the penetration of cultivated diamond. The new capacity of Chinese manufacturers is expected to continue in 2022. It is suggested to focus on the breakthrough of dakla process, and cultivate diamond manufacturers with stable performance and rising volume and profit brought by new production capacity Henan Liliang Diamond Co.Ltd(301071) , Henan Huanghe Whirlwind Co.Ltd(600172) , North Industries Group Red Arrow Co.Ltd(000519) .
Risk tips
Macroeconomic growth is less than expected, resulting in the decline of residents’ purchasing power; The intensified competition in the cultivation diamond industry led to price fluctuations, and the increase of industry penetration was less than expected.
