Diamond market sees glimmer of hope after Sept. 11 attacks

A U.S. recession could hurt the demand for diamonds, but the head of De Beers, the world’s largest diamond company, said recently that a rising number of engagements following the Sept. 11 attacks could help restore some luster to an already weak market, Reuters reported.

“Since the 11th of September, engagements in America have shot up enormously, particularly close to the military bases,” Gary Ralfe, managing director of De Beers, said at a talk on the status of the diamond industry in Johannesburg, South Africa. “It is rather as though in those troubled times immediately after September 11, and which will still go on, that people should make the great declaration and commitment that engagements stand for,” Reuters reported.

The United States is the world’s largest diamond jewelry market, accounting for 50% of global sales.

The market for diamonds in the first half of the year had been weak in line with the economic downturn in the United States, and Ralfe warned that the market could worsen, Reuters reported. “If America goes into recession (diamond demand) will go down even further,” he said.

But De Beers, which controls 65% of the world’s trade in uncut diamonds and coined the phrase “A Diamond is Forever,” is trying to encourage consumers that diamonds remain appropriate even in times of trouble.

“What we are reassured about is that diamonds remain the ultimate gift of love,” Ralfe said, using a marketing slogan, which De Beers plans to use in the United States. “That is something we want to remind the consuming public off and remind them in the most sensitive way possible.”

De Beers plans to launch a strong advertising campaign in the fourth quarter of this year, Reuters reported. The fourth quarter is traditionally the strongest for diamond sales, when 40% of diamond jewelry is bought, he said.

De Beers, which announced a joint venture early this year with French luxury goods maker LVMH to launch a chain of upmarket jewelry stores, said the venture, De Beers LV, will be able to operate in the United States, Reuters reported.

Although De Beers diamonds are allowed into the U.S., De Beers officials are not allowed in the United States due to an outstanding anti-trust case in which De Beers was accused of fixing the price of diamonds.

“We have constructed De Beers LV very carefully with a new independent management, and particularly with a large input from LVMH, that our lawyers are perfectly happy that this will not be seen as De Beers trading in the United States,” Ralfe said.

He said that De Beers also wanted to “achieve peace” with the U.S. Justice Department on the outstanding anti-trust case, Reuters reported. Previous attempts at reconciliation were shunned by the Justice Department.