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Cape Town - Diamond demand will drop by 60% in 2009, Chaim Evan-Zohar, a diamond market analyst and principal of Tacy Consultants, said on Monday.
The diamond industry has been hit by the global slowdown, but the industry is also one in transition, Evan-Zohar told delegates at the Mining Indaba.
In 2001, diamond giant De Beers decided to "de-cartel" itself and let demand be the driver of its business, said Evan-Zohar.
But as part of this transition, De Beers has "dumped" all its stock into the market, leaving the diamond industry with a pipeline of between $45bn and $50bn.
This has means that rough diamond buyers are not only selling less because of the global economic slowdown, but they are also replenishing less, said Evan-Zohar.
"The global economic crisis is only part of the problem," said Evan-Zohar.
"The diamond industry has structural problems. It needed a clean-up, it needed consolidation and that is where we are now," he added.
Based on market reports in late January, global retail sales growth showed a drop of 14% to 18%. US retail numbers were expected to show a fall of greater than 22% and the ripple effect of de-stocking should see the polished demand from the retail sector fall by 33% this year.
"Prices of rough are also too high in relation to finished polished stones," said Evan-Zohar, pointing out that buyers of rough are anticipating a fall in the rough price, and are holding out till then.
Evan-Zohar said in a way the world was seeing a return to basics where the public was seeing the value of the goods.
But he warned that fewer and fewer diamonds mines were being discovered, which meant that the world was running out of diamonds.
"This may be the last generation where women may be given or buy a naturally formed diamond without having to mortgage their homes to acquire one," he said.
- I-Net Bridge
