70 Indian diamond offices shut in Hong Kong

Surat : The Indian diamond sector has received some bad news from Hong Kong, the world’s largest diamond trading centre. Due to the prolonged recession, around 70 Indian diamond trading enterprises in Hong Kong have closed in the last six months. The fundamental reason for the recession is that Chinese buyers have turned to plain gold jewellery as a safe way to store wealth, and the prices of polished diamonds have dropped by over 40% in the previous three years. 

According to the China Gold Association, sales of gold jewellery increased 7.97 percent to 706.48 metric tons in 2023, supported by innovation and lightweight designs. According to Swiss trade data, a persistent spike in Chinese demand ahead of last month’s lunar new year boosted Swiss gold shipments to their highest level in seven years in January.

The diamond industry’s crisis is worse than the worldwide economic downturn of 20028. Surat is the world’s largest diamond cutting and polishing centre, with diamonds exported to Hong Kong, Dubai, Antwerp, and the United States via Mumbai. 

There are currently about 600 Gujarati diamond merchants in Hong Kong who work from their trading offices. However, in the last six months, more than 70 offices have shuttered owing to the recession. This is the first time in history that up to 70 diamond trade offices have shuttered. Chinese jewellers and traders used to purchase diamonds from Hong Kong. However, gold prices have been steadily rising over the previous 3-4 years, while finished diamond prices have fallen by 30 to 35 percent in three years, causing Chinese consumers to prefer plain gold jewellery over diamond jewellery.

The diamond market is hoping for an improvement.

Dinesh Navadia, Chairman of the Indian Diamond Institute, stated that the diamond business has been under and out of control for the past three years. There is no demand as the prices of available diamonds plummet. Diamond dealers are closing their operations in Hong Kong due to an inability to operate there. Diamond traders are looking forward to an upswing in the diamond market.

Around 350 merchants, including diamond merchants from Surat and Jain merchants from Palanpur, lived in Hong Kong with their families. Some own flats or houses, while others live in rented housing. Due to the drop in diamond prices over the previous two to three years, diamond traders are preparing to transition to new enterprises, with some relocating to Surat or Mumbai.

According to Hong Kong traders, natural diamond demand in China has decreased by up to 60% in volume since the pandemic began. 

“It is really difficult to do business in China because consumers prefer gold over diamonds. While consumers still prefer diamonds, man-made diamonds are sold alongside mined diamonds. “Natural diamonds are facing an identity crisis in China,” said a Hong Kong-based diamond merchant who will relocate to Surat next month. 

According to traders in Hong Kong, the monthly cost of living in Hong Kong for two people is estimated to be Rs 7 lakh, which comprises Rs 1.5 lakh for house rent and Rs 1.5 lakh for office rent, transportation, food, and other expenses. As Chinese buyers stop purchasing diamonds, Hong Kong traders have suffered massive losses and are unable to fulfill their monthly obligations. However, tiny traders who are unable to cover their monthly expenses are returning to India. 

The diamond business has been in a slump for the last three years. The demand for diamonds has declined in countries such as America, owing to the Russia-Ukraine conflict as well as the wars in Israel, Hamas, and Palestine. This has primarily impacted the diamond markets of Surat and Mumbai. According to diamond sellers, rough prices have risen over the last three years, but polished diamond prices have fallen by 30 to 35 percent.