How declining demand for natural diamonds is changing the dynamics of Surat

Lab diamonds are new sparklers on the block

Standing under a Peepal tree in a bylane of Katargam, a suburb in Surat that houses several diamond cutting and polishing units, 24-year-old Arun Chotaliya (name changed) from Junagadh is lost in thought. He is planning his trip back home for Diwali. But this year, his Diwali will be lacklustre. Not only is he returning home with less money, he is also not sure when he can come back to work after the festivities end.  

Chotaliya earns around Rs 25,000 a month when he has enough work. But in the last three months he has managed to make just Rs 8,000-10,000 per month for  lack of work.
 

“From working 12-hour shifts, I have gone to doing six-hour workdays as the demand for cut and polished diamonds has gone down. In October, I earned only Rs 6,000. I have to go back home for Diwali with hardly anything in my hand,” says Chotaliya. He is giving up the rented shelter which he shares with three other workers for Rs 5,000 a month, as their unit owners have not said when they can rejoin after Diwali.

Around 500 small and medium diamond units have asked their workers to proceed on an early Diwali break, says Ramesh Zilariya, president, Diamond Workers Union, Gujarat. 

A diamond worker’s pay is decided by the amount of work he does and can range from a few thousand rupees a month to a few lakhs. Holidays mean no earnings. 

About 15 km away, right off the Hazira highway, nestles the Gujarat Hira Bourse (GHB) Gems and Jewellery Park that houses several diamond units —both natural and lab-grown. 

Kurjibhai Makwana, a 45-year-old diamond polisher who works at Greenlab Diamonds, cultivators of chemical vapour deposition (CVD) diamonds, is only getting a week off this Diwali. 

“Our holidays begin right before Diwali and we are getting a week off. There is a lot of work right now, and we are doing 10-12-hour shifts,” says a visibly happy Kurjibhai, who is making Rs 2 lakh per month polishing CVD diamonds. 

Kurjibhai recently shot to fame when he polished the 7.5 carat CVD diamond that Prime Minister Narendra Modi gifted to US first lady Jill Biden. India is now trying to position itself as a CVD diamond hub.

A silent change is slowly but steadily changing the dynamics of the Surat diamond hub. As the demand for natural diamonds declines in the major markets of the US and Europe, diamantaires are waking up to the potential of lab-grown diamonds which come at one-tenth the price of natural diamonds, and where the demand is thus relatively stable. 

As a result, about four-five large CVD diamond units have come up in Surat, and most cutting and polishing units are already working with CVD diamonds.

What worries the $21-24 billion diamond hub in Surat, which houses over 6000 diamond polishing units and employs around 800,000 workers, is that like the 2008 downturn and the Covid 19 pandemic, this time, too, no one knows when the crisis will end.

Says Shreyans Dholakia of Shree Ramkrishna Exports, a leading natural diamond unit in Surat, “The geopolitical situation this time is complicated. First, we were hit due to the Russia-Ukraine war, and now there is the Israel crisis. To top this, demand in the key markets of the US and Europe are down. Whenever there is geopolitical or economic uncertainty, people tighten their purse strings.”

The numbers tell the same story. The overall gross exports of cut and polished diamonds have declined by 28.76 per cent (or 25.12 per cent in rupee terms) to $8702.23 million between April and September 2023. At the same time, the import of rough diamonds declined by 20.81 per cent year-on-year to $7461 million for the April-September 2023 period, according to data from the Gems and Jewellery Exports Promotion Council (GJEPC).

The export of polished lab-grown diamonds have also reported a decline. The provisional gross export of these diamonds for the period of April to September 2023 shows a 26.28 per cent YoY decline to $695.61million.

But lab-grown diamonds may find takers not just in the jewellery industry, but also in the fashion industry, says Dholakia, thus opening up a huge market potential.

Meanwhile, Sanket Patel, director at Greenlab Diamonds, has a wait-list of 850 diamond workers who have applied for jobs at his unit that employs around 3000 people. Greenlab’s facility at Ichhapore is powered by solar and wind energy. “We have a 24 MW solar power plant and a 17 MW wind power plant that supports our operations 24X7. The machine needs to maintain a temperature of 1700 degree Celsius for the carbon seed to develop into a diamond,” Patel says. His facility has close to 1000 machines and can make 125,000 carats of CVD diamonds every month.

Dinesh Navadia, regional chairman – Gujarat, GJEPC, says that CVD diamonds are a great help for the labour problem in Surat. “The demand for the finished product is down in all major markets – US, Europe, China. The demand for lab- grown diamonds is growing, and that can take care of the worker problem as the skill sets required are the same. India is also trying to position itself as a CVD diamond hub as part of the Make-in-India initiative, where we are making the product from scratch,” Navadia says.

He adds that the industry has unanimously decided to stop the import of rough diamonds till mid-December this year. This was done twice before – once in 2008 and then again in 2021. “We had seen demand spike after the brief lull when we stopped importing roughs. We are positive that from December-January onwards the demand for cut and polished diamonds will rise,” Navadia says.

Colin Shah, founder and managing director of Kama Jewellery, a leading jewellery manufacturer and exporter, says that since gold rates are up and inflation is hurting, the consumer has less money in his pocket. Shah too feels  that fresh demand is likely only around December-January.  

The reason for the optimism is that jewellers who have not placed Christmas orders will run out of inventory, and place orders. Zilariya says that this year Christmas orders are hardly 25 per cent of what they are in a normal year.

Mid-December is also when the Surat Diamond Bourse, near Ichhapore will open. Spread over 6.7 million sq feet, it is set to be the world’s largest office building when it becomes operational. Housing over 4700 offices, the SDB is now getting the final touches.

As one takes the turn to reach SDB, a gate on the highway says ‘Dream City’. Surat’s Diamond merchants say that the idea is to develop the adjoining areas of SDB as a showcase city – connected with metro, high-end residential apartments, commercial and recreational complexes, among others. A metro station is getting built right outside the SDB, and the surrounding barren land is full of possibilities.

Surat is looking at 2024 with a lot of hope.