The vibrant diamond cutting and polishing industry of Surat is currently seeing a downturn due to sluggish global demand and other deterrents like the Russia-Ukraine war and slow post-pandemic recovery of the economy.
The prices of rough diamonds started falling since the start of 2022 and have seen no signs of a recovery in the last 18 months. Industry sources said that the rough stones’ prices have fallen nearly 30% in this period, implying an average drop of about 1.5% every week.
And the drop in prices spans all categories of roughs, which have a cascading effect on the polished diamond, forcing the makers to rush to clear their inventory at the cost of profit margins before the Christmas festivities in the West.
“A rough diamond that was selling at $2,500 per carat at the start of 2022 is now sold at around $1,750. This has forced the diamond manufacturers to sell the polished stones at lower prices and clear inventories. Only then will they have the finance to purchase roughs at current lower prices and manage losses,” said an industry insider.
The only hope the manufacturers have is to keep hoping for an early recovery so that the losses could be made up. Many say, the downward phase is over and now it has hit the abyssal plain. There are chances that these will stabilise from here on or grow.
The inroads made by lab-grown diamonds, which are fast becoming a popular affordable option among price-wary customers, is also not being ruled out as a reason for the downfall and a delayed recovery trajectory.
On the other hand, long-term investors have gained by investing in diamonds.
According to estimates by polished diamond traders, a plain transparent (FG) very very slightly included (VVS) diamond in the size of 1 cent to 3 cent will cost Rs 35,000 per carat in the wholesale market back in 2018. The same has now gone up to as high as Rs 50,000 per carat, yielding a 42% return over five years.
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