The diamond sector fears lower prices

The diamond sector is worried that prices for rough diamonds are set for a downward spiral, the Financial Times (FT) reports.

The fears arise because of the US economic slowdown and uncertainties about the effect of De Beers, the dominant supplier, abandoning its public listing.

Demand for diamonds has slowed in the past few months and prices for most ranges of polished diamonds, for which the US is the main outlet, have fallen. This is now filtering through to rough diamond prices.

Sightholders, or approved dealers, say that prices for some ranges of larger rough sizes were cut by about 5% at last week’s ”sight” or sales of rough by producers, FT reports.

Ascorp, the single marketing channel for all Angola’s diamond production, has lowered its prices in Angola in line with the market by some 5%, FT reports. Argyle, which has a monopoly on Australian diamonds and BHP, which is the only producer of Canadian diamonds, are coming under pressure to do the same.

The pressure on prices is being compounded by buyers sitting tight in anticipation of cheaper prices, FT reports. There are reports of liquidity problems in the main diamond centers such as Antwerp and New York where most of the goods are sold on credit.

In addition, the market fears that De Beers will be forced to sell more of its inventory now that it is a privately owned company with $3.7 billion of debt.

De Beers, which controls 65% of the world’s rough diamond supplies, said it anticipated sales for the first half of this year would be lower than the Dollars $3.5 million figure posted in the same period last year.

However, despite sluggish demand, some manufacturing sightholders have felt obliged for the last three sights to buy from De Beers as they wait to learn whether they will continue to be De Beers’ sightholders following the company’s Supplier of Choice review. Many are selling their goods at up to 10% discounts, FT reports.

The Supplier of Choice review, which was due on July 12, has been postponed until the EU competition authority has ruled on the group’s joint venture with LVMH.