Diamond Industry Starts Cutting Back, Bracing for a Tough Season

In what are probably both advance cautionary moves as well as a reaction to existing business difficulties, companies in the diamond industry have started to fire staff, cut back on purchases and even return goods to suppliers. The defensive actions take place when the industry should be seeing the fruits of its year long work as retailers enter the holiday selling season.

Diamond companies in Antwerp, Ramat Gan and New York are reacting to the financial crisis, by reducing expenses. At least two large companies based in Israel, both Diamond Trading Company (DTC) Sightholders, have fired employees. They are joining Mumbai headquartered companies that have been scaling back staff for a number of months.

A number of firms, wholesalers in Israel and in New York, are returning goods to suppliers. One of them, a medium size company with offices in the two centers, is asking to defer payments by 60-90 days, another is also currently facing large arbitrations.

Many companies are cutting back on marketing activities such as ad campaigns. In Antwerp, many traders are refusing to extend payments, eyeing with suspicion such requests from retailers as tale-tell signs of possible financial problems.

Traders in Mumbai are off for Diwali and in Hong Kong, while sales continue, they are at a reduced volume.

Trading levels of larger polished diamonds sized two carats and over are very low, and those who have lowered their asking prices on smaller goods are reporting a “wait and see” situation and no increase in demand. The only items that are in demand are the “bread and butter” half, third and quarter carat goods, especially in commercial qualities.

A common discussion topic among diamond traders in the centers concerns finding out who is hurting and speculating about a possible collapse that everyone fears.

This reflects the confusion and uncertainty many in the market feel. According to a large Antwerp diamond trader, the impression he got is that many are acting on a day-to-day basis instead of executing their long term strategy.

But with all that is happening, and while the industry is waiting to see how retail sales in the U.S. turn out in the coming two months, it is easy to forget that the current financial downfall is part of a larger economic cycle.

While a very large Indian Sightholder called the current situation “a tsunami that will wash away anything that is not good and stable,” clearly the situation will improve at some point, with those that kept their finances in order and reassessed the market with realistic eyes on top.

When will this happen? According to IDEX Online analyst Ken Gassman, in six months we will see things start to turn around. “The tide comes in, and the tide goes out,” he says. The able captains will ride them, the good ones will turn them into successful opportunities.