War Pushes India Towards Lab Growns
August 25, 22
The war in Ukraine is inevitably nudging India towards lab grown diamonds. Things were already moving in that direction before Russia's tanks rolled in six months ago, but subsequent events have been a catalyst. Sanctions, supply shortages and banking restrictions led to factory closures and redundancies. Add US inflation, Covid in China and weakening consumer demand into the mix and you have a perfect storm. An industry built on a steady supply of mined diamonds had little choice but to consider the only viable alternative.
Needs must. Necessity is the mother of invention. Where there's a will, there's a way. Between a rock and a hard place. We're spoiled for choice when it comes to expressions for a situation in which we have little or no choice. The diamantaires of Surat may have been reluctant to break with a long-standing tradition and work with diamonds grown in a lab, but circumstances have given them a forceful nudge.
Europe and the US imposed sanctions on Russian rough, gem-quality diamonds shortly after the invasion. The ban didn't cover stones that were "substantially transformed" - namely cut and polished in another country - but the US government subsequently urged its traders not to buy any diamonds mined in Russia. Alrosa, the state-controlled diamond miner was added to the US's list of Specially Designated Nationals (SDN) list, excluding it from the US banking system and barring it from trade with US citizens. Manufacturers in India, which did not impose sanctions, were forced to cut their output, and in many cases to reduce their working days because they simply didn't have the raw materials.
In April, industry bosses at the GJEPC (Gem and Jewellery Export Promotion Council) issued dire warnings that as many as 1.5m people in Gujarat - diamond workers, their families and others with links to the industry - could be affected by the sanctions.
As inventory reached critically low levels - especially for the smaller goods where Alrosa dominated the market - manufacturers were forced to look elsewhere,
By June, maufacturers were reported, in some cases, to have switched to lab-grown diamond for for a fifth or more of their production. "Some of the units that are into natural diamond cutting and polishing have converted 20-30 per cent of their production into lab-grown diamonds," said Ramesh Zilariya, president of the Diamond Workers' Union in Gujarat at the time. "This is generating jobs for the diamond workers in Surat."
But India hasn't just been cutting and polishing lab growns. It's increasingly been producing them. Earlier this month the State Bank of India (SBI) announced a move that could open the floodgates. It said it would start lending to help manufacturers buy the machinery it needs. That's a significant move from a financial sector that has always been wary of the diamond industry. Other banks are likely to follow, and the number of lab grown diamond manufacturers in India, currently around 25, is likely to increase as a result.
"The industry has widely accepted lab grown as a category, we need to move with time and technology," said Nirav Vithalani, of Indian lab grown Starblue.
"Lab grown will run side by side with mined diamonds. Both have their audience, and consumers in India, especially the Gen Z and Millennials, are shifting more towards buying lab growns as fashion jewlery.
"China produces most of the HPHT (older process - high pressure, high temperature) India is moving at a very fast pace to capture CVD (newer process - chemical vapor deposition production, out of approximately 7 to 8 million carats worldwide. India produces approx 1.5 million carats but this is rising at a 100 per cent rate."
Total exports of polished lab growns remain low - $622m from April to July of this year - compared to the total for all diamonds of $8.2bn. But Vipul Shah, vice chairman of the GJEPC expects that figure to double in the financial year from April 2022. "We have a huge potential to grow exports to $7 billion to $8 billion in the next few years on the back of US demand and acceptability in the UK and Australia," he said.
Have a fabulous weekend.