Global diamond supply chains convulsed by the coronavirus pandemic and most workers in India’s diamond industry switched to other jobs. Miners seek new supply deals to boost margins and mines from Canada to Lesotho are still shuttered.

Demand for diamonds has plummeted during the pandemic, freezing sales and squeezing prices. With temporary mine closures at risk of becoming permanent, diamond miners are seeking ways to extract more value from their stones. The lone bright spot has been steady demand for large, high-quality diamonds from affluent investors, according to financiers and sales data.  From carats to peanuts, that is the title given by analysts to delineate the way in which the pandemic destroyed the global diamond industry. South Africa’s biggest city Johannesburg and India’s business capital Mumbai are hit by the weakness in diamond trading.

As the pandemic upended the global diamond industry, shuttering mines from Lesotho to Canada and disrupting supply chains, Rajen Patel swapped diamond polishing for peanut farming.

Patel, who worked for a decade in India’s Surat, Gujarat state, where about 80% of the world’s diamonds are polished, joined the exodus of gem workers leaving the city as cases of the virus shot up. After taking up farming in his home village, he has no plans to return in the coming months. “I won’t earn as much I was earning in Surat, but I won’t starve and there is no fear of getting infected with coronavirus,” he said.

“There are a lot more enquiries from people seeking to buy these luxury stones as a hedge,” said Chris Del Gatto, CEO of the DelGatto Diamond Finance Fund, the largest non-bank lender to the diamond, jewellery and watch industries. Prices for high quality one-carat diamonds are rising steadily and are currently around 12% higher than at the start of the year, in contrast to still-depressed prices for lower-quality stones of the same size, data from trading platform RapNet shows.

“If you are in that top end, the demand is still there because the people who go for these type of goods feel the pressure of the market downturn less,” said Gus Simbanegavi, CEO of Bluerock Diamonds.

But only a few miners are lucky enough to have deposits of large, high-quality diamonds, leaving some producers at risk. COVID-19 has forced miners to cancel or delay sales, with major diamond shows scrapped due to health and travel restrictions. The few sales that have taken place showed rough diamond prices down between 15% and 27%.

“What has happened in the second quarter, I have never seen in my life,” De Beers Chief Executive Bruce Cleaver told Reuters.

“There was no really properly functioning rough market.” Indian imports of rough diamonds plunged from $1.5 billion in February to just $1 million in April, data from the Gem & Jewellery Export Promotion Council shows.

Reuters