Debt in the Downturn Dries up Demand for Diamonds

Isaac Mostovicz writes that the diamond industry has been brought to its knees by over-burdening itself with debt...

Photo by mafic

Another doom and gloom story about the diamond industry, this time from Reuters. Its highlights (or more accurately lowlights):

  • (Anecdotally) trade in Antwerp’s diamond district is down to a tenth of usual levels
  • Several Israeli diamond houses have failed
  • In India, the center of manufacturing, about 500,000 (out of around 800,000) workers have been laid off
  • Top-end demand from the rich and super-rich, such as Russian oligarchs or Arab sheikhs, has dried up completely and only smaller gems for engagement rings are keeping the market alive

These are not encouraging observations. The article also touches on the amount of debt in the industry–it peaked in mid-2008 at $14-15 billion. The article implies that the industry has always relied on debt. This is incorrect–the diamond trade used to always be on cash or on short terms (up to 30 days). People started to use the banks heavily since the collapse in 1980–and now we can see what this reliance on debt has brought to the industry.

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