The Indian diamond industry is taking drastic measures to weather a tough market. Factories in Surat, the world’s largest diamond cutting and polishing hub, have reduced production by as much as 50% due to high inventories and weak prices.
Strategic Shutdowns to Stabilize the Market
While Diwali shutdowns are an annual tradition to reset the diamond market, this year’s closures are more extensive. Major players like Kiran Gems, the world’s largest natural diamond manufacturer, have extended their August holidays, suspending production for 10 days instead of the usual five.
“We’ve drastically cut production—down by about 40% to 50%,” confirmed Anoop Mehta, president of Mumbai’s Bharat Diamond Bourse.
Reducing Rough Diamond Purchases
The production cuts also reflect manufacturers’ efforts to limit financial losses from high rough diamond prices and weak polished diamond demand. Companies are now buying fewer rough diamonds, with reports of:
- De Beers postponing its August sales, merging them with the October session.
- Okavango Diamond Company in Botswana seeing sales drop from $66.6 million in June to $55.5 million in August, with prices falling 5% to 15%.
Unlike last year, there’s no formal joint effort to freeze rough imports. Instead, manufacturers are self-regulating, focusing on weathering the storm, said Vipul Shah, chairman of the Gem & Jewellery Export Promotion Council (GJEPC).
Shifting Focus to Smaller Diamonds
Amid the downturn, manufacturers are pivoting toward producing smaller, lower-value diamonds under 0.18 carats, which remain in demand for jewelry and watches globally. However, this shift poses challenges as workers need specialized skills for these smaller stones.
Larger diamonds, particularly in the 0.18 to 3-carat range, are struggling the most, with demand weakened by economic pressures in key markets like the U.S. and China. In contrast, India’s domestic market, buoyed by the upcoming Diwali and wedding season, is providing some relief.
“Even melee (small diamonds) are down in demand, but they’re still selling better than larger goods,” noted Ravi Bhansali, managing director of diamond manufacturer Rosy Blue.
Looking Ahead: Will Production Cuts Help?
As the festive season approaches, the industry hopes that production cuts will stabilize polished diamond inventories and spark a recovery in global demand. According to Shah, the current reductions might dry up the supply pipeline in the coming months, potentially driving up prices.