Home > Antwerp Articles > Top diamond prices slide as credit crunch bites

Top diamond prices slide as credit crunch bites

rss

Oct 14, 2008

By Eric Onstad

LONDON, Oct 14 (Reuters) - The prices realised for top-quality, unpolished diamonds are the latest victims of the credit crunch, industry figures showed on Tuesday, as even the world's super rich get choosy about what they buy.

Before the latest wave of economic turmoil, with the sector struggling under heavy debt, prices of top gems had held up while the price for smaller, mass market diamonds slumped.

However, diamond expert Martin Rapaport said in a recent report: "Plummeting stock markets and the severe credit crunch is reducing luxury demand."

London-listed Gem Diamonds (GEMD.L: Quote, Profile, Research, Stock Buzz), which specialises in high-value gems, said in a trading update on Tuesday that prices for its top-quality rough diamonds fell 14 percent at a recent tender in Antwerp, compared to average prices so far this year.

Trading in big stones had nearly lurched to a halt due to the financial crisis, Rapaport said.

"Diamond prices are under increasing pressure as the global economic situation worsens. Premiums for big stones are coming down with almost no trading as sellers refuse low offers and shocking financial market conditions create extreme uncertainty," Rapaport said.

The only sub-sector in which prices had held up was fancy coloured stones, Gem Diamonds said.

The well-off were still splashing out, but being more selective, Rapaport quoted research firm Unity Marketing as saying.

"They are still spending -- and spending quite generously -- on those choice luxury items they decided to splurge on, but they are splurging on fewer items overall."

On Sunday, an industry group appealed to diamond producers to reduce supply to stabilise the market.

"The mining companies can enhance stability at this point in time by reducing the volume of rough diamonds they are supplying to the market," said Avi Paz, president of the World Federation of Diamond Bourses, in a statement.

The Belgium-based federation was an umbrella organisation representing 26 member bourses that traded in rough and polished diamonds and precious stones.

HEAVY DEBT

De Beers, the world's biggest diamond producer, said in an e-mailed statement in response to the federation that it regarded the prospects for rough diamonds as sound despite the financial crisis.

The company, which controlled about 40 percent of the world's diamond supply, said prices were forecast to end the year higher than in 2007, but it did not say by how much or whether it would curtail supply.

"In this highly competitive market, we will continue to carefully balance these interests going forward in light of prevailing markets conditions," De Beers said.

De Beers, 45 percent owned by mining group Anglo American Plc (AAL.L: Quote, Profile, Research, Stock Buzz), said in August it had boosted rough diamond prices by 16 percent so far in 2008 due to strong demand.

It had said in July it was cautious about developments in the second half due to a downturn in the United States, the top diamond jewellery market.

Paz was quoted as saying by Rapaport that he was concerned about diamond traders and processors piling up debt when they were forced to take out loans to buy rough diamonds.

"The diamond industry operates with approximately $12 billion of collective debt, which raised concerns that it was over exposed," Rapaport added.

Complicating matters was the carve-up and nationalisation of troubled Belgian financial group Fortis, because it was the parent of Dutch bank ABN AMRO, the diamond industry's biggest lender, he said. (Reporting by Eric Onstad; Editing by Andrew Macdonald)
Source: Reuters

Latest Articles