India’s diamond industry losing sparkle in Covid-19 nightmare
By Atul Ranjan
NEW DELHI, NNA - India’s western city of Surat, also known as the country’s diamond capital, is staring at tough times ahead as many gem traders in China and Hong Kong have stopped operations following the deadly outbreak of novel coronavirus Covid-19.
Both are India’s biggest export markets for processed diamonds.
According to industry estimates, mainland China and Hong Kong together account for around 35 to 41 percent of India’s overall cut and polished diamond (CPD) exports, mostly processed in Surat.
India's processed diamond exports to China are mostly routed via Hong Kong, Dinesh Navadiya, Gujarat regional chairman of Gems Jewellery Export Promotion Council, told NNA in a phone interview last Friday.
“If the situation continues, it will hit the diamond industry in Surat, where almost all the imported raw diamonds are polished and then exported to various markets,” he said.
According to Navadiya, India exports polished diamonds worth over 450 billion rupees ($6.2 billion) to Hong Kong and China annually.
He said the Covid-19 crisis, which hit the shopping peak for Lunar New Year celebration and busiest time for jewelry sales in China, further compounded problems facing the industry.
“Around 600 Indian diamond trading offices in Hong Kong have been shut and traders have returned to India,” said Navadiya.
Last month, rating agency ICRA Ltd. lowered the outlook for India’s CPD industry from "stable" to “negative” as trade was suspended in parts of China and Hong Kong. There has been a complete closure of retail stores in some areas of the worst-hit Chinese provinces while some retailers elsewhere halted operations temporarily.
China accounts for 14 percent of global polished diamond sales in 2018, the second largest after the United States which buys up 49 percent, ICRA said.
The report also added that disruptions in supply chains have also impacted jewelry manufacturing.
India’s overall diamond exports could shrink by 20 percent, from $24 billion in the last financial year to March 2019 to $19 billion in current fiscal year if global demand continues to fall, according to Crisil Ltd., another rating agency.
Navadiya also pointed out that with many offices closed or operating on thin staff in China and Hong Kong, it has become difficult for customers to make timely payments to Indian traders.
This could adversely affect the cash flow of diamond polishing companies and their ability to repay bank loans if the Covid-19 impact continues to persist after February, ICRA noted in its report.
The postponement of March-scheduled Hong Kong international jewelry show to May has also added to the woes of Indian exporters, said Babubhai Kathiriya, president of Surat Diamond Association.
India continues to dominate the cutting and polishing industry in the world but sluggish sales and stretched working capital have already hurt the sector’s profitability, according to a Bain report on the diamond industry for 2019. And that's before the arrival of the Covid-19 menace.
As of Monday, 88,913 people across 62 countries and regions have been infected, while the death toll has reached 127 outside China, according to the World Heath Organization. So far, 2,943 people have died in China where 80,151 cases were reported by Monday, China's National Health Commission said Tuesday.