Financial meltdown in the US seems to have shaken the confidence of diamantiares in world`s biggest diamond cutting and polishing centre in Surat.

The industry is hit hard with the severe liquidity crisis as there is a strong resistance to polished prices by the domestic and international buyers. On the other hand, the rough diamond prices have declined by 10 to 15 per cent in the past few days. Diamond manufacturers offering polished that has come out of the high-priced rough are keeping an eye on the market and holding their stocks.

As per official statistics of Gems and Jewellery Export Promotion Council (GJEPC), rough diamonds worth Rs 20,000 crore were imported in three months from April-June, registering a 32 per cent increase compared to the same period in the previous year. In June 2011 alone, the diamantaires imported Rs 7,000 crore worth of rough stones registering 40 per cent increase compared to the same month in the previous year.

On the other hand, export of polished diamonds during April-June was not impressive for the industry. In April-June, polished diamonds worth Rs 29,000 crore were exported, an increase of only 7 per cent compared to the same period in the previous year. The export of polished diamonds in June 2011 declined by 3 per cent at Rs 9,900 crore compared to Rs10,000 crore in the same period previous year.

Industry experts said rough diamond prices touched their peak in July 2011 with a 50 per cent increase compared to the same period in the previous year. Fearing rough prices may increase in the short term due to increasing demand from the US, Hong Kong, India, UAE and China, the rough diamond imports in the country increased by almost 32 per cent compared to previous year.

"It is a good sign that the rough prices have started declining by almost 10 to 15 per cent. But what about diamond manufacturers who had purchased rough at a high price between January-July 2011," said Ashit Mehta, chairman of Blue Star group, whose second online auction of rough diamonds received a poor response from the diamantiares due to liquidity crisis on Friday.

"There is a severe liquidity crisis in the industry as diamantaires are not ready to compromise on the polished diamond prices. Also, the rough diamond prices which touched their peak in July are now declining, worrying the diamantaires," Mehta added.

"Diamantaires are not interested in big commitments as the rough diamond market has gone awry. The polished prices are still holding strong amid resistance from the buyers. However, the liquidity issue has cropped up in the market and ultimately the workers will have to suffer as the polished diamond inventories with diamantaires are full," a DTC sightholder said.