Diamond industry associations ask members to temporarily stop import of rough diamonds

Mumbai: The gems and jewellery industry has asked its members to stop import of rough diamonds for two months starting from October 15 amid slowing global demand and rising inventories of domestic players.

"...demand for loose polished diamonds and jewellery from large consuming economies such as the USA and China have been materially affected over the last many quarters, on the back of all-time highs of 2021 and 2022, with a visible slowdown in orders.

"As a result, our country's exports have declined by 25 per cent during January-August, with a similar trend in September. Due to such factors, our inventories in polished diamonds have increased over the past few months and prices are softer as an effect of this mismatch in demand vs. supply," according to a circular.

The circular was issued jointly on Tuesday by the Gem Jewellery Export Promotion Council (GJEPC), Bharat Diamond Bourse, Surat Diamond Bourse, Mumbai Diamond Merchants Association and Surat Diamond Association.

Mining companies are regularly selling the rough diamonds that are being mined, irrespective of the state of demand in the midstream segment, the circular said.

Broadly, midstream segment refers to polishing and manufacturing activities in the diamond industry.

"They believe that the midstream is a mature segment of the pipeline and they will only purchase rough diamonds if there is a real demand.

"In other words, they rely on the midstream to gauge the demand for rough diamonds and are happy to respond with corresponding levels of supply. This puts the onus on the midstream to transmit real levels of demand by translating our need for supply of rough diamonds to all mining companies," it added.

To protect the interest of the industry, particularly the small and medium enterprises, the circular said there is a need to take additional measures.

"Members may be advised to halt the import of rough diamonds beginning October 15 to December 15, 2023. It was assessed that halting imports of rough diamonds will help the industry better manage the balance between demand and supply, thereby protecting the value of assets and increasing consumer confidence," it added.

The situation will again be reviewed in the first week of December 2023.

According to the circular, the appeal is for voluntary suspension of import of rough diamonds while allowing diamond manufacturing factories to continue their operations without interruption.

GJEPC said it is dedicated to rejuvenating demand in significant markets with the help of all other trade bodies, the government, the Natural Diamond Council, the rough diamond mining companies and like-minded bodies in the US.

"Simultaneously, we are also exploring alternative markets such as GCC, Vietnam, Cambodia, Myanmar, Thailand and others ...this year, we successfully established a dedicated diamond section within the India International Jewellery Show (IIJS), resulting in a noticeable boost in demand of diamonds in the Middle East and the Indian subcontinent," GJEPC added.

Former GJEPC chairman and Kama Jewelry managing director Colin Shah said the voluntary ban on natural rough diamonds is a remedial measure that will help diamond traders, especially the small and medium-sized, to ease their inventories and, at the same time, help the Indian diamond industry derive a fair price.

"The diamond industry has incurred voluntary bans in the past with the only motive of bringing stability in the overall demand and supply dynamics and fostering the economic growth of the country by promoting robust exports. This may have some impact on the Indian diamond polishing business in the immediate phase but will eventually be beneficial for the overall industry in the long run," he added.