Demand for large lab-grown polished diamonds will grow in high-income countries

Anastasia Shramko is an expert in precious stones, rough and polished diamond market, and an analyst. She is an author of the course “Lab-Grown Diamonds: Gemology and the Market” conducted on the site and in collaboration with the GemAcademia (International...

23 may 2022

Waiting for Godot?: Botswana Diamonds awaits Zim kimberlite concessions application outcome

Diamond explorer, Botswana Diamonds applied for kimberlite concessions in the Northwest of Zimbabwe in late 2020. Company managing director James Campbell told Rough&Polished’s Mathew Nyaungwa in an exclusive interview that they are still waiting for...

16 may 2022

“The demand far exceeds the supply,” says Dev Shetty, Founder-President & CEO of Fura Gems

In 2017, after a decade as chief operating officer and board member at Gemfields a coloured gemstone mining company, Dev Shetty took the courageous step of starting, from scratch, a mining company. He named it FURA Gems. Today, it is one of the largest...

09 may 2022

Igor Kulichik: The diamond market is now in the initial phase of turbulence

Igor Kulichik is a well-known expert in the diamond market. He has worked in the diamond industry for 20 years: he was CFO of ALROSA from 2002 to 2017, and a member of the Board of Directors of AGD Diamonds from 2018 to 2022. He is also a member of the...

02 may 2022

There is a classic phrase: “Art is an Ambassador of Peace.” And this is true

Chief Expert of the Gokhran (State Valuables Depository) of Russia Veronika Voldaeva, Art History Ph.D., Honored Worker of Culture of the Russian Federation, author and compiler of the decorative and applied section of the Gokhran’s collection...

25 april 2022

Indian diamond industry to log annual growth rate of 5-7 per cent over the medium term

04 april 2022

The diamond industry in India has survived many upheavals since its humble beginning sometime in 1966, but always survived them only to become stronger and more resilient. Today, some of the world’s largest diamond companies are Indian including 33 accredited buyers and many other contracted buyers of the world’s major diamond producers. Indian diamond companies own and operate diamond-polishing facilities in Botswana, Namibia, China, Vietnam and many other countries across the globe.

The main Indian diamond cutting & polishing centre in Surat presently employs more than 0.8 million artisans and other employees and manufactures 14 out of 15 diamonds in the world. So, when the geopolitical situation in Russia began over a month ago, it was not surprising for the Indian diamond industry to be concerned as the Russian miner ALROSA was a rough diamond supplier to the Indian industry. Being known as the diamond manufacturing centre of the world, the Surat sector was apprehensive initially. But, known for its resiliency the Indian industry soon found its footing and organized itself to run the sector without any hindrances, especially in the rough supply area.

Moreover, the media reports dramatized the situation to the point of putting forth a dismal picture claiming that the Indian diamond industry could be affected drastically by sanctions imposed on Russian miner ALROSA…

Rating agency Crisil in a note said sanctions will have a bearing on the growth of the diamond industry. If the trade disruption is protracted, next quarter's sales will be down by 25-30 per cent shaving off about $2-2.5 billion, Crisil Ratings director Rahul Guha said.

Claims were put forth that the sanctions imposed by the United States and European nations on Russia in the wake of its Ukraine episode are likely to have a direct impact on the Indian diamond industry at a time when it is in the recovery mode after the pandemic and is aiming at $24 billion revenue in FY'22, they warned.

All the brouhaha quickly died down with The Gem & Jewellery Export Promotion Council (GJEPC) of India swiftly setting right the impact of events in Ukraine on the Indian diamond industry. As ALROSA is an important supplier of rough diamond to the diamond industry, the miner too gave a green signal to India.

Colin Shah, Chairman of the Gem & Jewellery Export Promotion Council, India (GJEPC) admitted that the US sanctions imposed on Russia could affect the Indian diamond industry, but assured the industry of ALROSA’s support.

‘Russia’s partly state-owned diamond mining company ALROSA is one of the world’s biggest diamond producers, accounting for approximately 30% of global diamond output,’ the note said. ‘India directly imports around 10% of ALROSA’s total rough diamond output. However, most Russian diamonds end up in India for cutting and polishing after passing through trading centres,’ Colin added.

In addition, GJEPC also felt that the sanctions on Russia might affect the Indian diamond business as Indian diamond companies might face difficulties in making payments for rough diamonds sourced from ALROSA as Russia has been banned from the SWIFT financial network. This impacts the five major Russian banks, including state-backed Sberbank and VTB, the country's two largest lenders. Delayed payments were expected to impact rough supplies by 2-3 weeks, resulting in a scarcity of rough from Russian allocations.

However, GJEPC received a letter from ALROSA dated 28th February stating that ‘ALROSA is ready to address the concerns related to day-to-day operations and stated that ALROSA’s settlements with foreign partners continue as usual as there are no restrictions on the Company’s transactions in dollars, euros, or other currencies. Diverse banking partners, allow the company to operate normally without any delays.’

ALROSA also assured that they are running their business as usual and they have all the necessary resources to ensure normal operation in the current circumstances. They will be fulfilling all their obligations to their clients in any part of the world.

For remittances to ALROSA-Russia, GJEPC has advised Indian importers to consult their bankers and with their approval transfer currency to ALROSA.

Last week the Russian Foreign Minister Sergey Lavrov arrived in Delhi-India on 31 March on a two-day official visit for crucial talks with the Prime Minister Narendra Modi and Foreign Minister Subrahmanyam Jaishankar. Apart from the high-level talks on the current geopolitical situation, trade was discussed with the possibility of India buying larger volumes of discounted Russian oil. Both, the Russian and Indian sides, showed keen interest in having a ruble-rupee arrangement for bilateral trade. As far as the Indian diamond industry is concerned, the ruble-rupee trade arrangement could work out convenient for procuring rough diamonds from ALROSA and any other payments.

As India’s diamond industry is 100% import-dependent, any shortage in rough would have a severe impact on manufacturing activity and employment in the sector. This will also have a huge impact on total gem & jewellery exports, as diamonds account for more than 50% of the exports.

However, India imports, cuts and polishes 80-90 per cent of the world's rough diamonds. "There is no major impact as of now though there are problems in fund transfer with some banks. We are keeping our fingers crossed and monitoring the situation as ALROSA is a critical source," Gems and Jewellery Export Promotion Council (GJEPC) ED Sabyasachi Ray told PTI during the initial days a month ago.

The sanctions have severed Russia's central bank and two major banks from the SWIFT system. While they do not prohibit business with ALROSA, trade settlement has become difficult, which could lead to supply disruptions, Crisil said.

But, in a short period, all issues faced by the Indian diamond industry have been tackled and solved, allowing the industry to function normally as of now. The Indian diamond industry, which is almost entirely export-oriented, is likely to clock revenues of $24 billion this fiscal, bouncing back to pre-pandemic levels. The Indian industry is expected to log a compound annual growth rate of 5-7 per cent over the medium term on the back of steady demand and hardening prices.

Again, almost a month ago, trade media assessed the situation well by saying that while it’s too early to understand the full impact of the crisis, the longer it goes on, the deeper its effect will be on the market. “ALROSA was added to a list of menu-based sanctions but not added to the Specially Designated Nationals List,” the Jewelers Vigilance Committee (JVC) explained.

But soon, in the Indian diamond industry, business returned to normal with Surat recording a huge surge in direct rough diamond imports. The diamond city Surat has created a record of sorts with the import of rough diamonds directly to Surat witnessing a massive surge compared to the traditional gateway Mumbai, as per a report in Times of India.

According to the report, rough diamond imports into Surat were nearly four times more than Mumbai during the current financial year. In the financial year 2019-20, Surat’s import of roughs was marginally more than that of Mumbai. But, the import of roughs in Mumbai dropped drastically in 2020-21 during the Covid-19 pandemic while it grew slightly in Surat. However, the city's famed diamond cutting and polishing industry regained its sparkle rapidly.

"The major reason for such a big surge is that smaller diamond manufacturing units have started importing rough directly to the city. They are taking delivery through the courier here," said Dinesh Navadiya, regional chairman, GJEPC.

"Earlier, some other people, who were traditionally importing roughs, used to get them at Mumbai and later the Surat-based units collected them. Hence, the imports in Mumbai were high. GJEPC ran programs to create awareness among the unit owners to empower them and they gradually started importing directly here," said Navadiya.

Experts claim the GST- related formalities are also one of the reasons for directly importing the roughs to the city instead Mumbai. The roughs reach India from different mining countries across the globe.

"If they import at Mumbai, they will have to do processes related to GST for transporting the consignments to Surat," Navadiya explained.

The Indian Diamond Industry sources rough diamonds from many producers, so there is no chance of any major issues in the supply chain. The regional Chairman Dinesh Navadiya is positive that the Surat cutting & polishing sector will remain a strong, controlled and resilient manufacturing sector.

Currently, the Surat manufacturing sector is working fine and in full swing as usual. Normal production is going on in the cutting & polishing factories, and there is no negative impact on diamond production because of the rough diamond supply. The Surat manufacturing sector receives sufficient rough diamonds and production is going on as usual. All the Surat diamond manufacturing units are working at full capacity as in the past. There is no shortage of rough diamonds and the manufacturing units are working at the usual pace in the Surat diamond manufacturing sector.

But, as the situation is far from over GJEPC has requested the government to look into a long term policy by which the payments made in Euro to Russian counterparts be acceptable universally by all, or if alternatively a mechanism to allow Rupee-Ruble trade arrangement with Russia which has been in the talks since 2018 to facilitate payments to Russia in rupee and ease trade disruption. Further, if ALROSA is permitted to open a selling office in India then the rough availability can be made within India which will save time, money and help in increasing India’s exports as well.

India, being the leader in manufacturing cut & polished diamonds, cut and polishes 94% of the world’s diamond by volume and has a built-in manufacturing infrastructure for that with millions of dollars of investment. About one million people, the majority of whom are from the agrarian and financially underprivileged section of society are directly employed in the industry in India. GJEPC believes that if the situation doesn’t improve, it may impact the industry in the coming days. However, as the supply of rough shipments from ALROSA has resumed, the cutting and manufacturing sector in Surat and elsewhere are working as usual.

The Indian diamond industry also imports rough diamonds from various sources across the globe for instance UAE, Belgium, Russia, South Africa, Canada, Israel, Botswana, Hong Kong, Angola, Singapore and so on…that keeps the diamond manufacturing industry working continuously without any hitch. So, as the Indian diamond industry has various sources for rough diamonds, there will not be any major issues in rough supply now or in the future to create hindrances in the manufacturing supply chain.

Meanwhile, the Indian diamond industry is wary of the price of rough diamonds fluctuation over the next few months given the current challenging situation. A trade journal recently reported that diamond dealers revealed that rough prices had fallen substantially on the open market following months of heightened activity. Buyers had stocked up on goods in anticipation of further price increases while rising rough valuations had resulted in thin manufacturing margins.

According to the report, prices on the secondary market had slipped by around 10% for 2-carat goods and larger in recent weeks, with rough up to 0.75 carats declining by 20% to 25% as per a market member. Prices of the smallest melee items also dipped by approximately 40% and tenders had also seen price drops of more than 10%, according to the sources.

According to market sources, ALROSA kept prices steady at the recent contract sale. Customers were reportedly willing to buy but also remained cautious and used different payment solutions due to financial sanctions on Russia.

On the payment matter, the GJEPC regional Chairman of Gujarat too said that India had been in talks with Russia since 2018 to allow Rupee-Ruble trade arrangements, which would be conducive for the diamond industry in particular. But asked about price fluctuations in the market that will affect the industry he said that the prices of a diamond depend on demand vs supply. And as of now, there doesn’t seem any factor affecting prices.

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