Surat Diamond Units Halt Production Amid Price and Demand Issues

Chennai: Hundreds of diamond processing units in Surat have suspended their operations for 10 days amidst oversupply and slower demand from the export markets for natural diamonds. Almost 65 per cent price drop in lab-grown diamond prices due to higher inventory too has affected the operations of the processing units.

According to Vipul Shah, chairman of GJEPC, the processing units have decided to cut production due to excess inventory. “The demand from the export markets, especially the US, is sluggish. Hence, the units are taking a break to become light on the inventory,” he said. Usually, this is the time when the units receive orders from abroad for the Christmas and New Year seasons. The slower orders during August-September are likely to affect the exports of polished diamonds and jewellery in the second half of the calendar year. The gems and jewellery exports are already down by 15 per cent in the first half of the year.

Further, the price drop of lab-grown diamonds is also affecting the processing industry. In recent years when the demand for natural diamonds became sluggish, the processing industry has been surviving on lab-grown diamonds, a cheaper alternative to natural diamonds. Globally, the demand for lab-grown diamond jewellery too had increased during the pandemic times.

However, according to GTRI, the prices of lab-grown diamonds have dropped 65 per cent in the past year from Rs 60,000 to Rs 20,000 per carat. Overproduction, high imports and lack of regulation are hurting consumer confidence and eventually demand.

In FY24, India had processed 16 million carats of lab-grown diamonds. In the fiscal, it imported rough and polished lab-grown diamonds valued at $1384 million, higher than the exports valued at $1344 million. This oversupply has brought down the lab-grown prices, GTRI said. Part of the imports also went into the domestic market.

“The Indian lab-grown diamond industry is poised for significant growth, with the potential to become a global leader. However, addressing the challenges, including overproduction, higher imports, price volatility, financial strain and regulatory ambiguities is crucial for long-term sustainability,” it said.