Surat’s lab-grown diamond industry, which has been struggling with oversupply issues following a shift from natural diamonds, is bracing for further turmoil after De Beers recently announced a significant price cut for its Lightbox brand. The De Beers Group, a global leader in diamond mining and retail, has slashed prices of its IJ color lab-grown diamonds by 37.5%, offering them at $500 per carat.
This move has intensified the existing oversupply crisis in Surat, where diamantaires had pivoted to lab-grown diamonds amidst a slowdown in the natural diamond trade. Local manufacturers are now facing heightened competition and potential margin squeeze due to De Beers’ pricing disruption.
‘In the past two years, almost half of the units involved in cutting and polishing natural diamonds have partially shifted their operations to lab-grown diamonds. This has already led to a slowdown, and prices have already declined. There is a vacation in the industry for now, so we must wait around two months to assess the actual impact,’ said Babubhai Vaghani, president of the Lab-Grown Diamond Association.
Surat is a major contributor to India’s gems and jewelry exports, valued at approximately Rs. 3 lakh crore, and employs nearly 800,000 people in its diamond industry. Gujarat accounts for 80% of India’s diamond exports, with 90% of the state’s diamonds cut and polished in Surat. The city is home to over 5,000 diamond-cutting and polishing units.
De Beers’ strategic decision to maintain competitiveness amidst declining prices could trigger a ripple effect, forcing further price adjustments and consolidation within Surat’s lab-grown diamond sector, which has witnessed substantial investments, said an industry leader based in Surat.
Lab-grown diamonds, created using advanced technology that replicates the natural diamond-growing process, are chemically, physically, and optically identical to those formed beneath the earth’s surface. India contributes around 15% to the global production of lab-grown diamonds, primarily from Surat, according to industry experts.
‘The prices of diamonds have been consistently falling over the last two years. Additionally, there has been an overall decline in demand for various reasons,’ said a top executive of a leading lab-grown diamond company in Surat. ‘India exports lab-grown diamonds to the USA, Hong Kong, UAE, Israel, and Belgium, with the USA accounting for nearly 70% of India’s exports. With many natural diamond cutting and polishing companies in Surat now also producing lab-grown diamonds, De Beers’ move is creating pressure.’
Beyond the jewelry industry, lab-grown diamonds have applications in semiconductors, satellites, and 5G networks. The overall gross exports of cut and polished diamonds at US $15966.47 million (Rs. 132,128.29 crore) showed a decline of 27.58% in the 2023-24 financial year compared to US$ 22046.9 million (Rs. 176,716.06 crore) for the same period in the previous year, according to data compiled by the Gems and Jewellery Exports Promotion Council of India (GJEPC).
The gross export of Polished Lab Grown Diamonds for the period April 2023 to March 2024 at US $1402.3 million (Rs. 11,611.25 crore) indicates a decline of 16.54% over the comparative figure of US $1680.22 million (Rs. 13,468.32 crore) for the previous year, the data showed.
The diamond industry in Surat has been facing difficulties since the 2022 Russia-Ukraine war. In February this year, the US government further tightened restrictions on polished diamonds made from Russian rough stones. On March 1, the US Office of Foreign Assets Control (OFAC) announced the banning of imports regardless of whether they were processed in Russia or substantially transformed in a third country.
This decision has adversely impacted the diamond industry of Surat, which heavily relies on the import of roughs from Russia that are polished and processed locally, according to industry experts. Surat imports 4% of diamonds directly from Russia, while the remaining 29% from Russian mines makes its way to Surat through other countries now under sanctions.
Vaghani of the Lab-Grown Diamond Association expresses hope that the industry will receive some new direction from an upcoming diamond exhibition in Las Vegas later this month by the Natural Diamond Council.
