Surat’s diamond sparkle dulls as west fights recession

The diamond polishing industry in Surat has nearly ground to a halt as demand for cut and polished diamonds (CPD) has eroded over the past two quarters. With the US and a major part of Europe battling a recession due to rising inflation and the Russia-Ukraine war, global diamond demand fell by a third, according to industry players. Diamantaires have been in a tizzy and are mulling over downsizing operations.

Surat is the world’s largest diamond processing hub, with 90% of the world’s diamonds processed and exported, mainly to the US and China.

According to the Gems and Jewellery Export Promotion Council (GJEPC), CPD exports accounted for Rs 1. 8 lakh crore in the 2021-22 fiscal year, making up a major part of the Rs 2. 91 lakh crore of gems and jewellery exports. From April to December 2022, CPD exports fell by 1. 24% to Rs 1. 32 lakh crore against Rs 1. 33 lakh crore in the corresponding period of 2021. In December 2022, however, gems and jewellery exports declined by 11. 25% to Rs 19,432 crore against Rs 21,896 crore in December 2021; CPD exports fell by 22% to Rs 10,472 crore.

“December export figures reflect the global headwinds that the industry is facing — inflation and the likelihood of a downturn in the US. Conditions in China also have an impact on demand for diamonds,” said Vipul Shah, chairman, GJEPC.

‘Units running five days a week instead of six’

With demand for diamonds falling, Surat is reeling, and many units are looking at downsizing operations.

“As CPD exports fall, leading diamantaires have reduced working hours at their units. Most are running five days a week instead of the usual six,” said Navadiya.

“However, no layoffs are being considered at this point. No one has lost their job,” he added.

Diamond polishing units say that on the contrary, they’re facing a shortage of workers.

“We are yet to receive reports of mass layoffs in Surat,” said Damji Mavani, secretary, Surat Diamond Association.

Surat’s diamond polishing units and companies employ about 8 lakh people.

Down from historic growth rate of 2021:

Diamond exports clocked record growth rates soon after the pandemic hit in 2021. In FY 22, CPD exports rose to Rs 1.8 lakh crore, growing by 50% from Rs 1.2 lakh crore in FY 21. Gems and jewellery exports grew by 54% from Rs 1.87 lakh crore to Rs 2.91 lakh crore.

“The growth of 2021 was historic as people abroad bought diamond jewellery as their spending dropped heavily due to lockdowns, and they were getting salaries and relief money,” said Dinesh Navadiya, member, GJEPC regional council. However, due to inflation and the slowdown in the US, and with the China market yet to open due to Covid-19, overall demand has reduced recently.

Lab-grown diamond exports surge

Meanwhile, lab-grown diamond (LGD) exports grew by 54% to Rs 10,587 crore from April to December 2022, against Rs 6,865 crore in the corresponding period of 2021. There is greater acceptance of lab-grown diamonds in the domestic market due to their prices. Jewellers are setting up dedicated showrooms for lab-grown diamonds due to increasing demand. Nishant Soni, a former secretary of the Jewellers’ Association of Ahmedabad, has set up a special showroom for lab- grown diamond jewellery.

“Demand for LGD jewellery increased by about 15% in India in 2022, and the industry believes demand will grow at 20% in 2023, as lab-grown diamonds are chemically, physically and optically identical to natural diamonds. Jewellery made from lab-grown diamonds is about 60% cheaper and labgrown solitaire diamonds are up to 70% cheaper,” Soni said.

According to him, the growing preference for lab-grown diamonds among millennials has increased demand. In Ahmedabad, four stores dealing in lab-grown diamonds have been set up and industry players believe several more will open in Gujarat. To boost consumer trust, jewellers have buy-back policies on such jewellery that is the same as for other jewellery.

Courtesy: Times of India