Surat’s lab-grown diamond crisis deepens as De Beers cuts prices

Surat’s lab-grown diamond crisis deepens as De Beers cuts prices
Surat’s lab-grown diamond crisis deepens as De Beers cuts prices

Ahmedabad: Surat’s lab-grown diamond industry, already grappling with oversupply issues after a shift from natural diamonds, is bracing for further turmoil as De Beers recently announced a steep price cut for its Lightbox brand.

The Surat diamond industry in Gujarat has been facing trouble since after the 2022 Russia-Ukraine war (Representative Photo)
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The De Beers Group is a South African-British corporation that specializes in diamond mining and retail. The global diamond giant has slashed prices of its IJ color lab-grown diamonds by 37.5%, now offering them at $500 per carat.

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The move could exacerbate the existing oversupply crisis in Surat, where diamantaires had pivoted to lab-grown diamonds due to a slow natural diamond trade. With De Beers’ pricing disruption, local manufacturers face increased competition and potential margin squeeze.

“In the last two years, nearly half of the units that were in the cutting and polishing of natural diamonds have partly shifted their business to lab-grown diamonds. This has already led to a slowdown, and prices have already slumped. There is a vacation in the industry for now, so we need to wait for the next two months or so to see the real impact,” said Babubhai Vaghani, president of the Lab-grown Diamond Association.

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Surat is a major contributor to India’s gems and jewelery exports of about Rs.3 lakh crore and employs close to 800,000 people in its diamond industry. Gujarat contributes to 80% of India’s diamond exports, with 90% of the state’s diamonds cut and polished in Surat. The city has over 5,000 diamond-cutting and polishing units.

The market leader De Beer’s strategic decision to maintain competitiveness amid declining prices could trigger a ripple effect, forcing further price adjustments and consolidation within Surat’s lab-grown diamond sector, where substantial investments have been made, said an industry leader based in Surat.

Lab-grown diamonds are created using cutting-edge technology that replicates the natural diamond-growing process, resulting in man-made diamonds chemically, physically, and optically identical to those formed beneath the Earth’s surface. India contributes around 15% to the global production of lab-grown diamonds, primarily from Surat, according to industry experts.

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“The prices of diamonds have been on a constant decline in the last two years. Also, there is an overall dip in demand due to various reasons,” said a top executive of a leading lab-grown diamond company in Surat. “India exports lab-grown diamonds to the USA, Hong Kong, UAE, Israel, and Belgium, with the USA accounting for nearly 70% of India’s exports. With a majority of the natural diamond cutting and polishing companies in Surat starting to parallelly produce lab-grown diamonds, there is pressure building up due to De Beers’ move.”

Besides the jewelry industry, lab-grown diamonds find applications in semiconductors, satellites, and 5G networks.

The overall gross exports of cut and polished diamonds at US $15966.47 million (Rs.132,128.29 crore) showed a decline of 27.58% in the 2023-24 financial year as compared to US$ 22046.9 million (Rs. 176,716.06 crore) for the same period of previous year, according to data by compiled by Gems and Jewelery Exports Promotion Council of India (GJEPC).

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Also, the gross export of Polished Lab Grown Diamonds for the period April 2023 to March 2024 period at US $1402.3 million (Rs.11,611.25 crore) shows a decline of 16.54% over the comparative figure of US $1680.22 million (Rs.13,468.32 crore) for the previous year, data showed.

The diamond industry in Surat has been facing trouble since after the 2022 Russia-Ukraine war. In February this year, the US government further tightened restrictions on polished diamonds made from Russian rough stones. On March 1, the US Office of Foreign Assets Control (OFAC) announced the banning of imports regardless of whether they were processed in Russia or substantially transformed in a third country.

The decision has adversely impacted the diamond industry of Surat which heavily depends on imports of roughs from Russia that are polished and processed here, industry experts say. Surat imports 4% of the diamonds directly from Russia while the remaining 29% from Russian mines makes its way to Surat through other countries that are also now under sanctions.

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Vaghani of the Lab-grown Diamond Association is hopeful that the industry will get some new direction from an upcoming diamond exhibition in Las Vegas later this month by the Natural Diamond Council.

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