It’s reported that over the past six months, approximately 70 Indian diamond trading enterprises have closed their operations in the HK region.
This downturn is primarily attributed to a shift in Chinese consumer preferences towards plain gold jewellery and a notable decline in polished diamond prices.
Causes of the Recession
Shift to Gold Jewellery
Chinese buyers, seeking a secure way to store wealth, have increasingly favoured plain gold jewellery rather than diamonds.
The China Gold Association reported a 7.97% rise in gold jewellery sales, reaching 706.48 metric tons in 2023. Innovations in lightweight designs have further bolstered this demand. This shift has led to a reduced appetite for diamonds, significantly impacting the diamond trade.
Decline in Diamond Prices
Over the past three years, the price of polished diamonds has plummeted by over 40%. This price drop has made it challenging for traders to sustain their businesses. Dinesh Navadia, Chairman of the Indian Diamond Institute, highlighted the severe downturn, noting, “There is no demand as the prices of available diamonds plummet.”
Impact on Indian Diamond Traders
Office Closures in Hong Kong
Hong Kong, the world’s largest diamond trading hub, has seen a considerable number of Indian diamond trading offices shuttering. There are approximately 600 Gujarati diamond merchants in Hong Kong, but the economic strain has forced over 70 offices to close. Many traders are now considering relocating back to India, with some already preparing to transition to new businesses in Surat or Mumbai.
Economic Pressures
The cost of living and operating in Hong Kong is another significant factor contributing to the closures. Monthly expenses for traders, including housing and office rent, transportation, and food, can total around Rs 7 lakh. The sustained losses from declining diamond sales have made it increasingly difficult for smaller traders to meet these financial obligations.
Broader Implications for the Diamond Industry
Global Market Conditions
The diamond industry’s challenges extend beyond Hong Kong. The demand for diamonds has also decreased in key markets such as the United States, affected by geopolitical conflicts like the Russia-Ukraine war and ongoing tensions in the Middle East. These factors have contributed to a 30-35% decline in polished diamond prices over the past three years.
Future Outlook
Traders and industry stakeholders are cautiously optimistic about a potential market recovery. However, the shift in consumer preferences and the economic pressures faced by traders suggest that significant challenges remain. As natural diamond demand faces an identity crisis, particularly in China where man-made diamonds are gaining popularity, the industry’s path to recovery remains uncertain.
