As part of my research effort, I’ve created several news alerts on Google, which is why you’ve seen some unusual, diverse and, I hope, interesting news stories come your way through this blog. These news alerts include such terms as “Rembrandt van Rijn” and “Amsterdam” and “Spinoza” and “vampire.” There’s another term I’ve included because it has to do with the vocation of my main character’s family: the diamond industry. As such, as an outsider, I’ve been given an closer view to an industry most people don’t follow, much less think twice about.
And, guys? It’s not going well. At all. That is to say, don’t expect to see prices on diamond rings and necklaces plummeting at your local retail stores just in time for holiday sales. I’m pretty sure the companies that control global supply keep a tight hold on supply to ensure that won’t happen. But for the people who make a living buying and selling diamonds in the rough, who take them from unformed pieces of stone and shape them up into the things you and I might prize? These are really, really tough times.
How bad? India is the center of the diamond industry these days, and employs about million people in the diamond business. One million! Think of it – that’s like twice as many people who work at Amazon or half as many who work for the U.S. government or Wal-Mart. Or, at least that was the case until recently.
A slump in the diamond polishing industry centered in the Indian city of Surat has led to the layoffs of upwards of 100,000 people, and that situation is expected to get worse this fall. No one is exactly sure what’s gone wrong – or more likely, several things are to blame. In any case, the situation has become dire for the people who eke out a living shaping the stones people around the world pay top dollar to put on their fingers and hang around their necks.
Again for comparison, that would be like every coal miner in the U.S. plus an extra 22,000 people losing their jobs all at once. And we know how excited people here get about coal miners and their jobs.
Have Millennials killed the diamond industry?
Whenever a trade goes belly up these days, the favorite scapegoat of late has been the Millennial generation. To date, they have played the hangman for napkins, cereal, home ownership, retail stores, bar soap and banking. Some would argue diamonds belong on that list, too. But is that fair? (Leaving aside the argument if any of that is fair for another time.)
In a word: no. In “The Global Diamond Industry 2018” report from Bain & Co., no alarm bells were sounded about the preferences of Millennials. Quite the opposite, in fact. It forecasts growing demand for non-bridal diamond jewelry among U.S. Millennials. Plus, dear fellow citizens, we have to remember not to be Amerocentric. Millennials do exist in other countries. In growing and developing economies like China and Asia, Millennial-age young people are fueling demand for diamonds. As Bain reports:
Global retail sales of diamond jewelry increased in 2017 due to a strong economy in the US, the world’s largest diamond jewelry market.
A resurgence of luxury spending among Chinese millennials also contributed to the increase.“The Global Diamond Industry 2018 ,”
Bain & Co.
So give the kids a break. But if it’s not the Millennials, then what is it?
Peak diamond is upon us
Some industry watchers point to the rise in lab-created diamonds. Lab diamonds are chemically the same as the diamonds taken from the earth. While lab-grown diamonds have been around for decades, the technology to produce them at an affordable rate is only now coming online, making them a real contender for the market. At the very same time – and quite possibly because of the advent of affordable lab-grown diamonds – some industry analysts believe we’ve reached “peak diamond,” the point at which we’ve seen the greatest volume of carats mined from the earth in a single year, after which point the volume will decrease annually.
According to Bain & Co., “We believe that 2017 was the pinnacle production level for the natural diamond supply. From here on, output is expected to remain stable at best. Miners’ plans and actual production volumes in the first half of 2018 suggest production may even decline in the near future.” the company wrote in its report.
Exactly how this will affect the industry has yet to be determined, but it has a lot of players jittery. Most of all, of course, the diamond miners. But those who shape and polish the stones are also nervous.
“This is first time in many years that diamond export is witnessing continuous fall … Also, competition by lab-grown diamonds is becoming stiff for the diamantaires in Surat,” said diamond industry analyst Aniruddha Lidbide in India to the Times of India.
Others point to more global causes for the trouble.
Collateral damage in the trade war
Some analysts believe the diamond trade is collateral damage in the trade war between the U.S. and China. For one, both countries are big players in the global demand for diamonds. These two 600-pound gorillas have been busy slapping tariffs on everything from pork bellies to gold. Donald Trump’s 10 percent tariff on diamonds and jewelry imported from China took effect Sept. 1, and this includes diamonds that may have been cut and polished in India but then set into jewelry in China. I don’t care what Trump has told you, the consumer is going to end up paying for that. Or not paying for it, as the case may be, and feeding a slump in the global jewelry trade.
The few key players in the diamond industry who control the mines and set the prices for rough diamonds may also be artificially keeping the wholesale prices of diamonds high.
There’s actually a glut of rough diamonds in the world right now. If market economics were left to do their thing, diamond polishing shops in India should be able to buy them up at discount prices. But that’s not happening, because the few mining companies that control the world’s diamond mines are in cahoots to make sure that won’t happen.
But according to The Hindu:
Among the main factors hitting the sector includes unabated price rise in rough diamonds, even as polished diamond prices stopped moving up because of dip in overseas demand affected by escalating trade war between two main markets: China and the U.S.
According to the market insiders, the top five global diamond mining players have been jacking up the prices without responding to the price trend of polished diamonds. On the other side, prices of polished diamonds have dropped 6-10% in the past four months due to weak demand, which is unlikely to see revival in near future.The Hindu
And now, to make matters worse, there’s a growing, unsettling feeling among would-be diamond buyers in the world. Fears of recession are settling in, and many people who might have otherwise thought of buying a loved one a diamond for Christmas may have second thoughts this year. Just last week, Bank of America Merrill Lynch said it’s consumer confidence indicator dropped to its lowest rating ever. Consumer confidence is an indicator that shows how likely people are to buy retail items, especially those that aren’t essential goods, such as jewelry, entertainment products and services and optional upgrades to their homes. Or diamonds.
But what about the little guy?
Lost in all this discussion of global economic forces, blowhard national leaders and price-fixing cartels are the million-or-so workaday people in India who scape by patiently grinding one facet after another into rough diamonds. They earn anywhere from $140 to $560 a month for the work, depending on whether they find a job in the big city of Surat or in one of the smaller villages, whether they land in one of the bigger companies or a small shop, and their skill level. For comparison, the average monthly wage in India overall is about $300.
They are bearing the brunt of this downturn in the diamond trade. A tenth of them have lost their jobs. A $400 or $500 a month job might not sound like much to you or me, but to them, it can mean the world.
“I lived in Surat for six years and earned around 25,000 Rupees ($351) a month. But now I have started cultivating my farmland,” says Janak, who has left his two children at a relative’s house in Surat so that their schooling will not be disrupted.
Every year, large number [sic] of youngsters migrate to Surat for better wages after getting primary training in Amreli diamond units. Amreli had nearly 1,500 factories functioning before the recession started a few months ago.
Sanjay Patel, who also returned to Amreli recently, added, “We can return to Surat only after the situation improves, but I don’t think it will happen this year. Some day we will have to return as we can’t depend solely on farming, which is totally dependent on rains.”Times of India
The story noted that even people lucky enough to keep their jobs at the smaller diamond factories in Amreli had cut wages. They used to earn $140 a month. Now, they’re getting closer to $28. Just $28. For a whole month.
So no wonder then that suicide has become a concern.
“Your existence is a blessing for your family!” It’s not just a hopeful reminder. It’s the title of a workshop for out-of-work diamond polishers in Surat offered by the Gujarat Chapter of the Gems and Jewellery Export Promotion Council and the Surat Diamond Association.
“The diamond sector is passing through a tough time with weakness in the global market and slowdown in Indian economy. It is facing big challenges. Amid all these, the diamond workers shouldn’t lose hope and sink into despair. To keep their morale up and not fall prey to the rumours in the industry about joblesses, we have taken an initiative to spread positivity and optimism,” Dinesh Navadia, Regional Chairman, GJEPC said.
Now, I’ve been in a dying industry before, and I’ve heard this speech. And so, I suspect, have the travelers on the Titanic. It’s time to head for the lifeboats.
Not that diamonds have reached the end of their line. I’m sure they haven’t, not by longshot. Nor am I suggesting that everyone should run out and buy one now to support the diamond polishers of Surat (but if you’re interested in doing so, I’m partial to the Assher cut).
It’s just that that business people at the top always look out for their own. Always have. Always will. It’s the people at the bottom who pay the price for their folly and bad decisions. Whether it’s the hapless newspaper reporter bearing the brunt of every bone-headed move made in Tysons Corners or the poor guy in Amreli trying to get by now on $28 a month while the suits who own the mines live the easy life.