Surat diamond industry pins hope on new mines amid staggered work

With some mines in Botswana being put to work, rough diamond trade could ease by 10% amid US sanctions on Russia's Alrosa which commands 27% global supply

With some of the hitherto inoperative mines in Botswana being made to work, the rough diamond trade could ease by about 10 per cent amid US sanctions on Russia's Alrosa, even as the Surat diamond industry continues with staggered work hours. Alrosa controls as much as 27 per cent of the global supply.

Since it could take 4-6 months for the entire process, starting from mining the rough diamonds and ending with their landing on India shores, the Surat diamond industry is planning to continue with staggered work hours.

"There are some inoperative mines in Botswana where fresh rough diamond mining is being initiated. With US sanctions on Russia's Alrosa leading to a 27 per cent dip in rough diamond supply, the same could be offset by at least 10 per cent in near future. However, till then, the industry has decided to continue with staggered work hours," said Dinesh Navadia, regional chairman-Gujarat of the Gems and Jewellery Export Promotion Council (GJEPC).

In May, 70-75 per cent of units were almost shut due to the annual vacation period wherein the industry has sent over 25 per cent of workers on leave. However, as the Surat diamond industry resumed work, it resorted to staggered work hours to manage the restricted flow of work due to shortage of rough diamonds.

Known for polishing nine out of ten diamonds in the world, Surat houses roughly 6,000 diamond polishing units that employ nearly one million workers and clock up an annual turnover of $21-24 billion or Rs 1.6-1.7 trillion. The industry had so far sent over 250,000 workers on 15 days leave till June even as production took a hit due to lack of rough diamonds.

While the Indian diamond industry, which is highly dependent on Alrosa's rough diamonds, was hoping for the sanctions to end, the same has continued forcing diamond polishers and exporters to cut production due to lack of raw materials.

"The fall in rough diamond supply has not only meant that prices are up but also that the growth plans for this year have been hampered. Till the supply and sanctions issues resolve, staggered work will have to continue," said Vipul Shah, vice chairman of GJEPC.

However, on a long term basis, the industry is also looking at ramping up work on lab grown diamonds processed through two ways including chemical vapor deposition (CVD) and high pressure high temperature (HPHT).

Industry sources estimate that there are currently 3000 CVD reactors with each reactor carrying a capacity of churning out 175 carats per month which is currently minuscule compared to the demand. On the other hand, the industry and government are working towards a policy that could help boost investment in HPHT technology, in which China is already a leader.

According to latest figures by GJEPC, polished lab-grown diamonds witnessed a growth of 105.58 per cent to Rs 2499.95 crore (97.82 per cent at US$ 325.45 million) for April–May 2022 as compared to Rs 1216.06 crore (US$ 164.52 million) during April-May 2021.

However, exports of cut & polished diamonds registered a growth of 4.42 per cent to Rs 32601.84 crore (0.52 per cent in dollar terms to USD 4248.82 million) for April–May 2022 as compared to Rs 31,220.89 crore (USD 4226.82 million) during April–May 2021.