The impact of COVID-19 on the gems and jewellery industry

The coronavirus pandemic has crippled India’s economy. Like many industries, the jewellery industry too has been hit hard owing to a long list of cancelled or postponed events, shows, exhibitions, and weddings for the next few months. Major jewellery brands had anticipated 2020 to be a doorway to a plethora of business opportunities. The production, supply, and export were aligned to meet the desired goals towards the end of the year. 

However, coronavirus was a big factor that turned the smooth operations upside down. The business dipped significantly as six to 10 carat diamond pieces and high-end chunky jewellery, which are widely popular in the Middle-East, suffered a major downfall. As businesses lost their profitability, the managements of key players duly intervened to firefight the crisis.

ALSO READ

Making 5 million polyester swabs a week for COVID-19 tests, this Delhi business says it can alone meet India’s requirements

The gold rates have fallen significantly and the world’s second biggest gold consumer has tumbled down as it is witnessing the slowest pace of growth in the last 11 years. The health authorities are discouraging people from venturing out for business or leisure which has brought exports and imports to a grinding halt. 

Various avenues for investments that have not been explored due to the inactivity in the industry has led to serious liquidity crunch. The businesses were thriving on constant demand before the pandemic broke out. The gems and jewellery industry has suffered major disruption in its operations across the globe. 

No footfall

The industry is witnessing no footfall at jewellery stores and despite the ongoing peak wedding season, mass shopping has come to a standstill. While the businesses are still navigating financial challenges, the aftermath of coronavirus on the gems and jewellery industry seems to be daunting. 

Technically, the rough diamond prices from the miners were predominantly high while polished diamond prices in the market were nominal, leading to a noticeable gap. Hence, the businessmen were already incurring huge losses in the Asian market. The existing trade war between China and the US has further triggered the downfall of the diamond business. In Hong Kong, almost half of 2019 resulted in losses owing to the riots in the city that largely affected the business.  

As China and Hong Kong make up 25 to 30 percent of world’s consumption of diamonds, the business witnessed a major breakdown. These factors coupled with COVID-19 in the beginning of 2020 has severely impacted the smooth operations of the business. The three main hubs of diamond market, China, Europe, and the US have been under complete or partial lockdown due to the preventive measures undertaken by the governments. 

Dependence on weddings

As the coronavirus scare gripped potential buyers and existing clientele, the gems and jewellery industry lost its shine. As a precautionary measure, the government has encouraged the citizens to postpone wedding functions and only venture out for essential commodities during lockdown. The Indian jewellery market thrives on weddings. The industry further lost its lustre on Gudi Padwa which fell during the lockdown and again a great opportunity to clock high sales was lost. 

On the brighter side, the industry is likely to pick a steady pace post July 2020, starting from China to Europe to the US, but the volumes are set to dip by about one-third. Prices will not be influenced by any factor as the supply has been obstructed for the whole of April, May, and June. It is anticipated that price point for smaller stones will more or less remain unchanged whereas the larger stones above five carats are slated to experience strained sales. 

The future

Towards the third quarter of the budget year, it can be expected that the demand for goods will scale up prominently as the operations are likely to resume in full swing. Although the first quarter was unfruitful, it is hoped that the second quarter will make the industry flourish. 

Therefore, demands will grow manifold in the third quarter followed by impressive sales by the end of fourth quarter of the financial year 2020-21. While the businesses are eagerly waiting for the curve to flatten, this crucial time can be judiciously utilised to lay out a coronavirus action plan that can be executed in the near future.

While the industry is staring at major losses this year, the need of the hour is sustainability in the long run, driven by a well-laid-out plan.