India's Diamond Exports to Fall 18-19% in FY25: Report

Mumbai, Sep 26 (PTI) With continued decline in demand in key markets like the US and China, cut and polished diamond (CPD) exports are likely to decline by 18-19 per cent in 2024-25, a report said on Thursday.

CPD exports are estimated to decline 18-19 per cent year-on-year to decade-low levels of USD 12.5-13 billion in FY25, led by a 13-14 per cent fall in volumes, along with the softening of average realisations by 5-6 per cent, Rating Agency Icra said in its report.

According to the Icra report, CPD exports from India contracted by 28 per cent in FY24 due to the worsened global macroeconomic conditions and increased competition from lab-grown diamonds (LGD).

With sustained subdued demand conditions in the two key consuming markets - the US and China - the downturn in exports continues as the industry is witnessing a 19 per cent contraction in CPD exports in the first four months of FY25.

The US demand contracted due to inflationary pressures and in China on account of changing consumer preferences away from diamonds.

While some sequential improvement in volumes is expected in the coming months, driven by the onset of the festive season, the same will be offset by continued pressure on polished prices, especially given the current high inventory levels, the report said.

The rating agency has thus retained its sector outlook at 'Negative'.

"The CPD players have been facing a persistent demand slowdown in the US and China due to weak economic conditions and continued inflationary pressures. Demand from China has been additionally impacted by the renewed popularity of gold amid economic uncertainties prevailing in the country.

"Besides, geopolitical tensions and restrictions imposed by G7 countries on Russian diamonds have impacted demand across Europe," Icra Vice President and Sector Head - Corporate Ratings - Sakshi Suneja said.

Further, she said, lab-grown diamonds, priced significantly lower than natural diamonds, continued to impact the demand for large-sized diamonds in the range of one to three carats.

"India remains the only bright spot globally, with increasing preference for diamond-studded jewellery," she added.

The polished prices have been declining since April 2022, following a demand slump, dropping to an all-time low in August 2024, the Icra report said.

The pressure on the polished prices is expected to continue in H2 FY25 despite the onset of the festive season, as CPD players offload their high inventory, it stated.

Rough (diamond) prices, which saw some correction in recent months, are now expected to remain firm as most miners have announced production cuts in FY25 to match the demand.

This, coupled with intensified sanctions on Alrosa PJSC - the third largest roughs supplier, by G7 nations should restrict any further price correction in roughs (diamond), the report added.