Editor’s Note
Global diamond prices have fallen significantly from their 2022 peak, sparking debate among consumers about whether now is the time to buy. This article examines the current market trends and the factors behind the decline.
According to the latest global rough diamond price index, current diamond prices have fallen by 18% compared to the historical peak in February 2022, with a 6.5% drop this year alone. Many jokingly claim the opportunity to buy diamonds at rock-bottom prices has arrived, while others adopt a wait-and-see approach.
The underlying reason for this trend is the maturing technology for lab-grown diamonds. In response, India has ramped up support for its cultivated diamond industry, aiming to increase its share of the global cultivated diamond output value from the current 15% to 30% by 2025. Last month, during his visit to the US, Indian Prime Minister Narendra Modi presented a 7.5-carat lab-grown green diamond to President Biden and his wife, clearly promoting India’s diamond industry.
Surat, a top-ten industrial and commercial city in India by GDP, is located in Gujarat on India’s west coast. Situated just 250 km north of Mumbai, it is also a vital trading port. Its rapid rise into the ranks of the world’s top 500 cities is attributed to the concentration of industries like diamonds, textiles, and oil. Surat is renowned worldwide as the “Diamond City.” Approximately 90% of the world’s diamond roughs are cut and polished in Surat. In the early 17th century, the East India Company established its first diamond factory here. While other regions were still performing simple cutting and polishing, Surat had already introduced the most advanced diamond processing equipment and the latest techniques, developing diamond processing into a local specialty industry. Today, it has become a global diamond processing and manufacturing hub.
One-third of the raw materials (rough diamonds) for Surat’s diamond processing industry come primarily from Russia, one of India’s largest suppliers of diamond roughs. Since the Russia-Ukraine conflict, geopolitical developments have triggered economic sanctions against Russia by multiple countries, aiming to cut off this crucial revenue source of “$4.5 billion in annual diamond trade” for Russia. Western nations, led by the US and UK, have excluded the Russian central bank and two major banks from the global SWIFT payment system. With payment systems in trouble, Russia’s foreign trade settlements have become difficult. Although the Indian government allowed nine Indian banks to open special rupee Vostro accounts (accounts opened by domestic Indian banks for foreign banks to facilitate Indian diamond trade) last November, Russia has not received much payment for diamond commercial trade in the past few months. This has indirectly led to disruptions in the supply of diamond raw materials, severely disturbing the diamond industry and its ecosystem. The decline in finished diamond exports is expected to persist alongside the economic sanctions stemming from the Russia-Ukraine conflict. The most severely affected are the industry’s laborers, whose livelihoods depend on Surat’s diamond factories.
According to data from The Business Research Company, a market research service provider, the global diamond market size was $2.43 billion in 2022 and is projected to grow to $3.41 billion by 2027. However, obtaining precise figures on Surat’s workforce and number of units is difficult. Apart from the few dozen leading processing and trading companies with industrial-scale production and mature supply chains, many of the remaining processing units are unorganized private small workshops or even individual households. Most of these units operate with minimal social insurance but accept extremely high production intensity and strict standards. They are the unseen, astonishing force behind the industry. Nearly 70% of the workers in Surat’s diamond city come from Gujarat, followed by workers from Rajasthan, Uttar Pradesh, Bihar, and Kerala. Among them, workers from Gujarat primarily hail from the Patel community in the south of the state and the Jain community in the north. Both communities have established strongholds in Surat’s diamond trade. In rural areas of Gujarat, nearly 500,000 people are engaged in diamond cutting and polishing, with many families having careers in the diamond processing industry for nearly two generations. They farm in the morning and spend about 3 hours in the evening cutting and polishing diamonds in small workshops next to their homes, earning an additional monthly income of approximately 18,000 rupees (about 1,578 yuan). Additionally, full-time diamond processing masters generally earn over 100,000 rupees (about 8,770 yuan) per month. However, in the past few months, they have received almost no new orders. About 50,000 diamond workers have already lost their jobs. Currently, workers and traders in the diamond city are praying for an early end to the Russia-Ukraine conflict.
Although Surat can import rough diamonds from countries other than Russia, such as Canada, Australia, South Africa, Botswana, Zimbabwe, and Congo in Africa, 75% of the end-product consumption comes directly or indirectly from the US market. Market direction ultimately determines production methods. Despite repeated emphasis on the origin of rough diamonds, Surat’s processing industry remains constrained overall. In recent months, demand for diamond end-products in the US and European markets has plummeted as companies like Signet and Tiffany & Co. refuse to purchase diamonds originating from Russia. Besides the impact of the Russia-Ukraine conflict, the US economic recession is also a reason for the decline in luxury shopping. According to data from the Gem & Jewellery Export Promotion Council (GJEPC), a Surat trade body, the total export value of cut and polished diamonds in May 2023 was $1.72317 billion (141.9028 billion rupees). This represents a 17.52% decrease compared to the same period last year. The diamond processing industry alone is valued at 1.73 billion rupees, with nearly 80% located in Surat. However, based on diamond market finance and sales data, the only profitable segment comes from the stable demand of wealthy investors for large, high-quality diamonds.
Data from the diamond trading platform RapNet shows that prices for high-quality one-carat diamonds are steadily rising, currently up about 12% since the beginning of the year, while prices for low-quality diamonds of the same size remain depressed. However, only a few gem merchants with substantial high-quality diamond deposits are fortunate enough to remain resilient amid the overall downturn in the diamond market. Single stones with slightly higher prices and larger sizes are not only the most popular processing targets but also the most watched purchasing objects.
The United States is the world’s largest diamond consumer. The remaining market share flows to regions like China, Europe, and the Middle East. An interesting factor is that, compared to other industries, demand for diamonds has increased due to changes in investment trends among American youth. Young Americans have quite aggressive investment preferences and are happy to purchase diamond jewelry as a family investment. According to data from India’s Gem & Jewellery Export Promotion Council, the total gem and jewelry exports for 2021-2022 were approximately $37 billion, compared to $27 billion the previous year. Surprisingly, India’s diamond exports flourished during the COVID-19 pandemic lockdowns. This unprecedented demand highlight likely created a golden sales period in the history of the diamond industry. Modi himself is actively seizing the opportunity, promising to formulate appropriate value-added policies in the diamond industry to benefit India 100%. Due to Sino-US trade friction, India’s diamond processing industry has generally benefited. Currently, 400 new factories in Surat are producing jewelry in fashionable styles, striving to cultivate young jewelry designers. A report from the Antwerp World Diamond Centre predicts that demand for diamond jewelry will return to pre-pandemic levels by 2024, with Chinese market demand taking the lead. The report also states that rough diamond production will remain stable from 2023 to 2030, and the growing middle class in China and India will drive the development of the global diamond industry.