India Rushes to Meet US Holiday Demand

RAPAPORT... Indian diamond manufacturers are planning a curtailed Diwali break as they scramble to fulfill US holiday orders amid a shortage of polished.Factories will shut for five to 12 days instead of the usual two to three weeks, aiming to offset months of inactivity due to Covid-19, manufacturing executives said this week. Demand is growing ahead of the Christmas and Chinese New Year seasons, while workers are keen to limit their vacations after receiving reduced pay during the pandemic. "Business has picked up and this is the season time, so people don't want to miss out on the orders," explained Rahul Jauhari, senior vice president of global sales and marketing at Star Rays, a Mumbai-based manufacturer. "For two months during lockdown, sales were negligible. People are looking to compensate in some way."Diwali, which this year occurs on November 14, traditionally kicks off a vacation period lasting several weeks. In recent years, cutting firms have been in no hurry to return from the break as there were already enough diamonds on the market. However, this year businesses are focused on making up revenues after an unprecedented slowdown in production and sales.Workers in the diamond-cutting hub of Surat usually return to their home villages for the festival, but this year many will remain in the city because of the risk of spreading the coronavirus and the desire to recover lost pay. While some companies paid basic salaries during the outbreak, most workers did not have access to the bonuses they receive for good work, which can add 30% to their income.At the same time, the manufacturing shutdown has led to shortages in sought-after polished categories.Enough diamonds for Christmas?Polished production has returned to between 70% and 90% of capacity as social-distancing rules have eased and demand has risen, industry insiders said. Rough supply has also increased as De Beers and Alrosa sold larger quantities at their contract sales in August and September.But Indian cutters are still unsure whether they'll be able to provide American retailers with the goods they need to meet resurgent consumer interest."In some areas there is a shortage, [and] in some areas there are enough goods and no demand," an Indian manufacturer said on condition of anonymity, noting that 1.50- to 3-carat stones in I1 to I2 clarities were hard to source. "So it's pretty much lopsided at this point." US buyers might have to pay "a little extra" to secure the items they want, he added.US clients have two approaches to this situation, according to another executive who observed shortages of 0.50- to 3-carat, F- to H-color, VS1- to SI1-clarity diamonds.A few retailers who have been selling strongly in recent months are now trying to stock up. Others have yet to acknowledge the supply situation, he explained."Some are worried and are trying to be aggressive," he noted. "Some are not worried and they're still taking things easy."Promising outlookLast week's virtual India International Jewellery Show (IIJS) reflected the rebound in demand, with approximately INR 10 billion ($137 million) of transactions taking place, organizers at the Gem & Jewellery Export Promotion Council (GJEPC) reported."Slowly and gradually, the industry is gaining momentum to revive exports to the pre-Covid-19 level," said GJEPC chairman Colin Shah.The industry is confident the uptick can continue, even beyond the US holiday season. Domestic retail demand has picked up ahead of Diwali, which marks the start of the Indian wedding season, traders noted. More importantly, the Chinese New Year is around the corner on February 12, lowering the risk that the surge in production will backfire."I don't think there's going to be an oversupply, because we are entering the Chinese New Year [season]," one of the manufacturers said. "So there is going to be sustained demand from China." In addition, he continued, a lot of the rough purchases in the past two months have been in higher-quality stones, which are more in demand.Things may also be looking up for Surat's diamond workers, who have borne the brunt of the crisis, commented Vipul Sutariya, director of sales and marketing at manufacturer Dharmanandan Diamonds. The company will only shut for five days at Diwali, at the request of its workers' committee."If you look at the entire industry, those three, four months [of lockdown] were very difficult for everyone," Sutariya pointed out. "But at the end of the year, [the workers] might be happy." Image: A diamond grader at De Beers Industry Services in Surat, India. (Ben Perry/Armoury Films/De Beers)