A glimmer of hope for the diamond market

By Leia Michele Toovey- Exclusive to Diamond Investing News

As the economic recession increased its stronghold on consumers, plunging jewellery sales sent the diamond industry into a tail spin. At the onset of the slowdown, the industry seemed immune, as sales of top tier goods overshadowed the decline in mid-grade diamond sales. However, as the recession’s reach increased even wealthy consumers curbed their spending. It was this development that spelled tragedy for diamantaires across the globe.
In the Diamond Trading Company‘s (DTC) third diamond sight of the year, which ran from March 30 through April 3, there was a glimmer of hope. In this sight, the amount of goods trading hands doubled compared to the previous three flights. However, the sales were still only about a third in value compared to last year’s year on year period. Cumulatively, in Q1 DTC sales dropped 76 per cent to $410 million, versus last year.

“We saw a slight return to demand-driven buying,” said one industry observer who attended the London event. “There’s a lack of rough in the market at the moment and everyone is looking at the goods much more seriously than previous months.” Participants were quick to point out that their purchases were curbed by the fact that DTC’s prices are still high relative to other sources in the market. Diamantaires dramatically scaled back their rough diamond purchases toward the end of 2008 after global economies fell, due to a lack of orders and the banks’ tightening of credit to the industry. DTC responded by committing to smaller sights until market conditions improve.

The world’s largest diamond miner, DeBeers, has responded to the drop in demand by mining fewer diamonds. It is anticipated that the company will drop production by around 30 per cent this year. DeBeers said in February it suspended mining at a Botswana venture responsible for a fifth of global diamond supply and would borrow $500 million from shareholders. As an additional cost cutting measure, De Beers has implemented sporadic temporary shutdowns at most of its operations.

De Beers maintains that diamonds are better positioned to weather the current economic crisis “because even in a recession people continue to get engaged, married, and celebrate special anniversaries, which diamonds are inherently linked to.”