India’s diamond cutting and polishing trade is facing an unprecedented crisis amid falling demand, prompting trade bodies to ask members to halt the imports of rough stones for two months.
This is the “worst-ever demand crisis,” said Anoop Vrajlal Mehta, president of Bharat Diamond Bourse (BDB), India’s hub of diamond trading with the rest of the world. This is just the fifth time since the 1970s that trade associations have made such an appeal to members to halt imports.
The country cuts and polishes nine out of 10 of the world’s rough diamonds, providing employment to two million Indians. So far this financial year, exports are down 30.27% from a year ago to $7.03 billion, the worst fall in at least five years.
Demand has collapsed in China, which is battling an economic slowdown after a property bubble burst. In the US, another key market, consumers are shunning luxury goods amid high inflation fuelled by an easy monetary policy during the pandemic. China accounts for 13% of polished diamond exports from India and the US 45-48%.
“Polished diamond prices have fallen by 15-20% from a year ago,” said Mehta, who is also chairman and managing director of Mohit Diamonds, one of the 38 Indian sightholders of De Beers. Sightholders are companies authorized by De Beers to buy rough diamonds.
What’s worrying is that the fall in demand seems to be structural, with prices for natural diamonds (as opposed to lab-grown diamonds) collapsing by 59% in the past three years, according to a report by Edahn Golan Diamond Research.
“In China, because of a general economic slowdown…offtake has completely ceased, and the US is seeing around 5-10% dent in demand because of tighter monetary conditions,” said Vipul Shah, managing director and chief executive officer of Asian Star, another De Beers sightholder.
Shah said a recovery from this demand downturn “seems more difficult” compared to past instances.
Low demand has led to a pile-up of inventory, and thus the call to halt imports, added Shah. “That’s why we need to balance the supply-demand dynamic and take a call on the evolving situation by November end.”
Industry associations such as the commerce ministry-sponsored Gem and Jewellery Export Promotion Council (GJEPC), BDB and Surat Diamond Bourse have called for a halt on imports of rough diamonds from 15 October to 15 December by their members. Previous instances of such import interruptions include Saudi Arabia’s oil embargo in 1973, the 1992 balance of payments crisis in India, the 2008 global financial crisis and in 2019 due to a slowdown just months before the pandemic.
The outlook, too, is none too promising with order books for cutting and polishing down compared to a year ago.
“The domestic market is doing well, but wherever the economy is struggling, exports are not picking up,” said Shah, who is also chairman of the GJEPC. Traditionally, gems and jewellery demand picks up ahead of the festive season, but that is not happening this year.
India imports rough diamonds from the likes of De Beers, Rio Tinto and Russia’s Alrosa. The imports flow through BDB, from where they are shipped to Surat Diamond Bourse, where cutting and polishing happen before polished diamonds are re-routed to BDB, from where they are exported to the US, Hong Kong and Belgium.
“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!
Download The Mint News App to get Daily Market Updates.
Updated: 27 Sep 2023, 11:57 PM IST