Diamond Demand Declines

October 10, 2000

Diamond Demand Declines

Diamond prices are low, De Beers' sales are down and many people in the diamond community are worried. De Beers' first two sight allocation in the second half of this year totaled between $400 million and $500 million, down from an average of $700 million in the first half, The Wall Street Journal reports. Diamonds traded at 5% to 20% above De Beers' prices in the first half, but now many cheaper, smaller diamonds trade at discounts, diamond dealers tell The Journal.

Some diamond dealers blame the lower prices on a surplus of diamonds. Antwerp bankers, on the other hand, say it results from diamond-dealer and manufacturer debt, currently in excess of $7 billion. If dealers have too much debt, they don't have as much borrowing power to buy more diamonds, bankers tell The Journal.

De Beers doesn't appear worried. "We are adjusting sales to match market demand, and the remaining three sights are also likely to be lower than first-half sights," a De Beers spokesperson told The Journal. She also said De Beers' sales usually decline toward the end of the year anyway because manufacturers complete their Christmas orders earlier. Record sales in 1999 and the first half of 2000 allowed De Beers to cut its diamond stockpile from $4.8 billion to $2.7 billion.

Martin Rapaport, publisher of The Rapaport Report, a diamond industry publication, told The Journal he has positive feelings also. Despite the volatile stock market, there's still considerable wealth in the U.S., and that will translate into another strong Christmas season for diamond jewelry, he said. Then retailers and wholesalers will need to replenish their inventories, which will lead to more demand for diamonds in the new year.

- by Julia M. Duncan