MSME-led Surat’s diamond industry fears impact on exports amid jump in rough diamond prices

While the prices for rough diamonds increased 25-30 per cent per carat, the polished diamond prices jumped by only 10-15 per cent. (Images: Pixabay)

Trade, import and export for MSMEs: MSME-dominated Surat’s diamond industry, which reportedly accounts for 90 per cent of the world’s total rough diamond cutting and polishing, is expecting export-related challenges in the coming months amid a jump in rough diamond prices. The growth in polished diamond exports from India grew 45 per cent to $2,560.27 million in October 2021 from $1,764.73 million for the year-ago period, as per Gem and Jewellery Export Promotion Council (GJEPC). An increase in overseas demand over the past few months had consequently led to the price rise of rough diamonds by miners.

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“As the demand recovered after Covid, the requirement for raw material went up and hence, miners also increased the raw material prices. Mining companies like Russia’s Alrosa and the UK’s Diamond Trading Company control around 65 per cent of the raw material supply. When they increase the price, small miners in South Africa, Congo, Canada, Australia, etc., also revise their prices. Currently, majority diamond units in Surat are MSMEs,” Dinesh Navadia, Regional Chairman, GJEPC told Financial Express Online.

While the prices for rough diamonds increased 25-30 per cent per carat, the polished diamond prices jumped by only 10-15 per cent. The major jump in demand has been led by the US.

“The US is the main market for diamond consumption with around 65 per cent share globally. People prefer purchasing diamond jewellery more in the US and with the Covid recovery, the demand went up. Now, if the current price challenge in rough diamond persists, then there will be an impact on exports in one-two months. That’s also because polished diamond prices haven’t increased in proportion to rough diamonds. Even if there is another 5 per cent jump in prices of rough diamonds then there can be an impact,” added Navadia.

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India’s diamond exports are likely to grow past the $20-billion mark this fiscal year from around $16.4 billion revenues last fiscal. “Towards the second half of last fiscal, pent-up demand and stimuli had buoyed consumption of diamonds and jewellery in the US and China, which account for around 75 per cent of India’s polished diamond exports. With the pandemic said to be contained in China, and the US inoculating around 40 per cent of its population, consumer confidence has improved in both countries,” Crisil had said in a statement in June this year.

According to industry estimates, Surat has around 5 lakh workers working with around 5,500 cutting and polishing units. The price rise had also led to a reduction in daily work hours for workers to cut and polish rough diamonds as the purchase of rough diamonds dropped.

“Rough diamond prices have increased 25-30 per cent to Rs 17,000 per carat. Now due to lesser stock, workers don’t have full-day work. Though demand in foreign countries is there and we have enough orders in hand, but the polished diamond prices haven’t increased in the manner rough diamond prices have jumped. I think polished diamonds have increased by only 10 per cent,” Jagdishbhai Khunt, Vice President, Surat Diamond Association told Financial Express Online. 

Smaller, labour-intensive polishing units had witnessed 20-30 per cent labour migration post second wave, the rating agency Crisil had noted. Also, before demand picked up, the industry had voluntarily stopped importing rough diamonds to manage the then-existing inventory that had piled up as polished diamond exports declined during the Covid period. “We had kept a voluntary ban on import of rough diamonds for three months to make the best use of existing stocks and sell them after Covid subside,” added Khunt.