Kiran Gems has announced a 10-day halt in production, offering an extended vacation to its 50,000 employees. This move aims to address the imbalance in the global diamond market, significantly impacted by fluctuating demand.
Response to Market Conditions
Kiran Gems, the world’s largest manufacturer of natural polished diamonds, will cease all cutting activities from August 17 to 27.
This decision is part of a strategy to align production with current market demands. “We want to follow the demand and supply conditions,” said Dinesh Lakhani, Global Director of Kiran Gems. The company has already reduced production by 50% in July and August.
The diamond industry is experiencing a slump, with weak demand from China and mixed conditions in the US leading to an oversupply of polished diamonds in India. This situation has prompted manufacturers to cut production and miners, such as Petra Diamonds and De Beers, to limit rough diamond sales.
Economic and Geopolitical Factors
Chairman Vallabhbhai Lakhani attributed the downturn to global economic challenges and geopolitical tensions, including the aftermath of the Russia-Ukraine conflict. “We are forced to announce this vacation because of the recession. I am tired of this recession now,” Lakhani expressed, noting that the global recession and embargoes have severely impacted the industry.
The US’s restrictions on Russian-origin diamonds and the G-7 nations’ embargo have further strained the market. This, coupled with a 15% decline in De Beers’ rough diamond production in the second quarter of 2024, underscores the severity of the situation.
Strategic Production Control
Kiran Gems’ decision to halt production is aimed at controlling supply to stimulate demand and potentially stabilise prices. This approach deviates from the traditional practice in Gujarat, where diamond firms typically extend breaks around Diwali. Lakhani stated, “We have declared a 10-day holiday so that the production of diamonds can be controlled.”
This move reflects a broader trend among diamond manufacturers to manage inventory levels during sluggish months. “Demand is still there, but compared with last year it’s less,” Lakhani noted, adding that historically, these months are slow, and production cuts should help balance inventory levels within a couple of months.
Employee Impact and Industry Implications
Despite the production cutback, Kiran Gems has assured that all employees will receive their salaries during this period, though some amounts might be withheld temporarily. This measure highlights the company’s approach to supporting its workforce during challenging times.
Jagdish Khunt, President of the Surat Diamond Association, emphasised the broader impact of the recession on the local diamond industry, which processes nearly 90% of the world’s diamonds. “This is the first time Kiran Gems has declared such a vacation for employees,” Khunt said, noting the significant downturn in the industry’s turnover from Rs 2,25,000 crore in 2022 to Rs 1,50,000 crore today.
