BHP Billiton

A Holiday Slowdown for Diamonds?

Isaac Mostovicz writes...

Economic difficulties are hitting the diamond market. Will there be a holiday slowdown? Let’s look at some recent industry news:

DeBeers production of rough diamonds is slowing slightly, down 4.3% in the 3rd quarter of 2008 compared to the 3rd quarter of 2008. However, the prices they’ve been able to achieve for their rough diamonds at auction recently have held up (unlike BHP Billiton, whose prices have dropped 35-40%).

An industry trade group (India’s Gem & Jewellery Export Promotion Council [GJEPC]), a large producer (Alrosa) and a whole country (Botswana) have all said that the economic crisis is affecting them. GJEPC asked producers to offer fewer rough diamonds over the next few weeks so that the market could stabolize; similarly Alrosa said it would cut its supplies. Botswana has also said that the economic crisis has affected its diamond exports; the country is solvent for now but could be hurt if the recession lasts for a long time.

What does this mean for the holiday season? RBC Capital Markets is predicting disappointing diamond jewelry sales in the US for the holidays. The International Council of Shopping Centers predicts that chain store holiday sales will grow, but the focus will be on basic goods.

All this news suggests to me that a holiday slowdown is on the horizon, though DeBeers being able to hold its prices suggests that those companies with the right offerings will be able to weather the storm.

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