MIUZ Diamonds - diamonds with a century of history

Moscow Jewellery Factory (MIUZ) has always been famous for its craftsmen winning prizes and obtaining the diplomas of “the best enterprise in the jewellery trade”. One of the oldest factories in Russia has two interesting news: about its recent...

21 june 2021

Lab-grown diamonds and jewellery are the future, says Liu

As the founder of the Diamond Little Star® brand, Liu Jiangjiang is actively involved in various business activities. He founded the Lab Grown Diamond Research Centre and the Lab Grown Diamond Club in China. At the same time, he is also the General Counsel...

14 june 2021

Pandora’s endorsement of lab-grown stones will not devalue natural diamonds – Zimnisky

Jewellery retailer Pandora recently announced that it will no longer purchase natural diamonds as it had switched to lab-grown diamonds. However, diamond market analyst Paul Zimnisky told Rough&Polished’s Mathew Nyaungwa in an exclusive interview that...

07 june 2021

“The volume of Forevermark diamonds that we drive through Indian partners is much higher than in other parts of the world,” says Sachin Jain

Sachin Jain has been a part of the Indian arm of De Beers that dates back to 2010 when he came on board as Head of Retail. In year 2014 he took over as President of Forevermark and today he is the Managing Director of De Beers, India. His single-minded...

31 may 2021

GSI's new Jaipur office to specialize in colored gemstones

Gemological Science International (GSI) has opened a new laboratory in Jaipur, India. Since this state is the capital of colored gemstones, the laboratory will have a dedicated division specializing in colored gemstone geographical origin and...

24 may 2021

The COVID-19 Effect: Indian diamond industry shaken but not broken

18 may 2020

Surat Diamond Bourse                                                                                                                              Image credit: SDB

The Indian Gem & Jewellery industry has weathered many a storm in the past, but nothing close to the current COVID19 crisis. This is unprecedented, and to gauge the volatility in the industry is beyond imagination leave alone comprehend the scenario. COVID-19, which took a pandemic shape this March, has completely stalled the Indian gem and jewellery trade. GJEPC vice-chairman Colin Shah opines: “This industry has come out of every crisis more resilient and this time it would take longer to find the new normal, which could be about 20% below the pre-corona level in value terms.”

When the Coronavirus pandemic was announced much after the disease originated in Wuhan in China, the impact had already begun to show. Demand slowed down from consuming centres, leaving diamantaires staring at huge inventories and low revenues. India has a monopoly in cutting and polishing diamonds, with 14 out of every 15 diamonds in the world being processed here. But, the country’s diamond polishing industry is set to plunge in fiscal 2021 to a low of $13-15 billion, compared with the $24 billion in fiscal 2019, and an estimated $19 billion in fiscal 2020.

The shift in the epicentre of Covid-19 pandemic to the US and the European Union (EU) from China also added to the woes of the diamond industry as both together account for over 45% of India’s polished diamond exports.

India’s polished exports to the two geographies declined by about 41% in February y-o-y. And, it has plunged further since then, especially with the nationwide lockdown which began mid-March. In addition, demand from Hong Kong and China, which accounted for about 45% of the exports, also declined 79% in February and even further since then. As inventory levels increased 15-20% over the March quarter, prices fell by an average 7% across various cuts of polished diamonds in March 2020 as the pandemic hit all major global markets, which resulted in inventory losses. Meanwhile, since March, payments from across geographies have reduced to about 25-30% of the actual monthly dues, putting financial stress on the manufacturing companies.

Of late, the Indian diamond processors have been urged by trade organizations to curtail the import of rough stones for one month from May 15 to June 15, hoping that the move will help the industry clear inventory and ease the working capital situation. This is expected to help processors manage the current lockdown-induced crisis and banking sector’s reluctance to finance the sector.

In a meeting with industry members, trade organizations like The Gem & Jewellery Export Promotion Council (GJEPC) Bharat Diamond Bourse (BDB) and other trade organizations too indicated that a curtailment of rough imports will help the industry face the challenges arising out of the drop in demand in the global gems and jewellery market. And also, indicated that the move will send a signal to the banking system, reassuring bankers and prompting them not to reduce credit exposure to the industry.

But, will one-month stoppage of rough imports help, given that the industry is now already overstocked with rough stones? Dilip Mehta, Partner-Star Rays, who is confident that curtailing of rough imports will help the industry said: “A temporary suspension on the import will surely help bring some sort of balance between supply and demand. If we continue to manufacture at pre-COVID levels then it may lead to flooding of the market putting pressure on the prices.”

As expected, many industry leaders are pro-suspension of rough imports by the industry for at least a few months so as to return to normalcy. Former Chairman of GJEPC, Sanjay Kothari, who is currently the Chairman of the Gem & Jewellery Skill Council of India (GJSCI) & Director of Diatrends Jewellery Pvt Ltd said: “We are into jewellery, so when the effect for sure would be there across the world, we can’t be an exception. Regarding rough imports …yes, it needs to be stopped for a few months to have proper cash flow, and prices of polish goods don’t fall drastically.”

As rough diamonds worth over $1 bln are imported every month on an average, a month's restraint will allow processing units to lower inventories and tide over the current situation at least partially. Most MSMEs are under severe financial stress currently. In fact, they are not in a position to restart even if allowed. This has resulted in another major issue of rendering lakhs of employees jobless, who are now rebelling to return to their homes creating law and order problems in the cutting centres.

While setting up Rs 50 cr COVID-19 Relief Fund, Pramod Agrawal, Chairman, GJEPC, said that the economic situation of the gem and jewellery industry has taken a severe beating but the most affected are the daily wage workers. He added: “The industry employs over five million workforces and in such distress times, it becomes important for us to take adequate care of our employees.”

Indian diamond industry members expect the rough import curtailing to also give a signal to bankers that the trade would not increase its indebtedness, and make bankers confident to continue supporting the sector. The sector had around $9.5 billion of bank debt at the beginning of the current financial year started on April 1.

The move to suspend the import of rough diamonds for a month will basically cause fewer roughs to enter the diamond pipeline and the producer companies will thus face lesser strain on their finances. That will help in the faster restoration of normalcy in an otherwise healthy business when the pandemic comes under control.

Dilip Mehta, Partner- Star Rays said: “Considering the fact that there is a lot of inventory in the pipeline which can easily last for next few months, manufacturing is not the most urgent thing. Looking at the current situation it’s very difficult to say when the manufacturing can start. Once the required permission is received from the government we can start at the earliest. We have been able to cater to our global client’s requirement through our online inventory and overseas offices.”

Recently, on being granted permission from the authorities, a few gem and jewellery manufacturing units in the Surat SEZ (Special Economic Zone) and in the Jaipur SEZs and Export Promotion Industrial Park (EPIP) resumed limited production from April 27, observing all safeguards and other prescribed norms.

Similarly, in Surat, eight units had started their operations in Surat SEZ, and the first 10 shipments have been exported from Surat Hira Bourse on April 29 with the Surat-Mumbai transhipment being done by flight. Starting April 29, polished diamonds exports of around $90 mln resumed from Surat to Hong Kong, which is minuscule compared to the inventory of more than $2.3 bln that Surat is sitting on currently. However, the diamond industry in Surat has heaved a sigh of relief with the resumption of exports, though in a small quantity.

As Mumbai, as well as the whole of Maharashtra State, is in under strict lockdown, The GJEPC, in collaboration with SEEPZ Gem & Jewellery Manufacturers’ Association is actively following up with concerned government departments to enable units in the SEZ in Mumbai commence operations and exports from SEEPZ (Santacruz Electronics Export Processing Zone) under the mandated guidelines of MHA and Govt of Maharashtra. The manufacturers now await permission from the authorities to restart their businesses. It is estimated that around 30 per cent of India's annual exports are still waiting to be executed.

Many industry leaders are of the opinion that if the sector could manage to stop rough imports for the next three months, the situation should come under control, and they also expect demand to be restored by 2021. As of now, after urging the importers to stop rough imports for 1 month (from May 15 to June 15), the trade bodies have decided to review the situation and consider a further course of action in the second week of June.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished