In a dramatic turn of events, hundreds of diamond processing units in Surat have shut down for ten days, a move driven by an overwhelming oversupply of natural diamonds and collapsing demand from international markets. The crisis has been deepened by a staggering 65% drop-in lab-grown diamond prices, a decline fueled by excessive inventory and market instability.
Diamond industry giant Kiran Gems is one of the those to declare a temporary halt in operations, affecting its entire workforce of 50,000. The company, known as the world’s top producer of natural diamonds, will cease activities from August 17 to August 27. This 10-day shutdown is a calculated response to the diamond market’s current challenges, including a dramatic drop in global demand and swelling inventory. The move underscores the severity of the economic downturn facing the diamond sector.
Vipul Shah, Chairman of the Gem and Jewellery Export Promotion Council (GJEPC), emphasized the gravity of the situation, stating, “The demand from export markets, particularly the US, has been sluggish. As a result, the units are taking a break to reduce their inventory.” Shah’s words underscore the severe impact this slowdown could have, especially as the usual surge in orders for the Christmas and New Year seasons has failed to materialize. The ripple effect is already visible, with gems and jewelry exports plummeting by 15% in the first half of 2024.
The situation is equally dire in the lab-grown diamond sector, which had become a lifeline for the industry as natural diamond demand waned. What was once a booming market during the pandemic has now turned into a quagmire. According to the Global Trade Research Initiative (GTRI), lab-grown diamond prices have nosedived from Rs 60,000 to Rs 20,000 per carat in just one year. This collapse, driven by overproduction, soaring imports, and a lack of regulatory control, has eroded consumer confidence and further dampened demand.
In FY24, India processed an enormous 16 million carats of lab-grown diamonds, importing rough and polished lab-grown stones worth $1,384 million—surpassing exports, which stood at $1,344 million. This oversupply has wreaked havoc on prices, driving them down to unsustainable levels. GTRI warns that despite the Indian lab-grown diamond industry’s potential to dominate globally, it is now entangled in significant challenges. Issues like overproduction, price volatility, financial strain, and regulatory gaps must be urgently addressed to ensure the sector’s survival.
Adding to the bleak outlook, Sanjay Shah, a prominent diamond merchant from Surat, painted an even darker picture. “The recent closure of production operations is largely due to ongoing wars across the globe, which have severely impacted exports and imports. The global market downturn has driven up the cost of diamonds, and the rise of lab-grown diamonds, which are much cheaper than natural diamonds, has shifted consumer interest. People are now prioritizing daily necessities and opting to buy gold over this heavy commodity,” Shah warned. He further noted that the market has nosedived by 50%, with no signs of recovery on the horizon for 2025, drawing parallels to the catastrophic 2024 diamond market crash.
