LONDON Reuter: After its worst recession since the 1930s the world’s diamond industry is set for a glittering comeback.
In the first half of this year world diamond sales were 62 per cent up on the same period last year and De Beers Consolidated Diamonds Ltd reported diamond derived income up 41 per cent.
Diamonds never went out of fashion As Anita Loos wrote in Gentlemen Prefer Blondes. “Kissing your hand may make you feel very good but a diamond and sapphire bracelet lasts forever”.
It wasn’t a drop in demand from film stars Sheiks or Casanovas which established the market but sudden intervention by speculators followed by an equally rapid sellout.
The late 1970s as low interest rates and high inflation stimulated demand and pushed diamond pries up the speculators moved in.
By 1981 though interest rates were rising inflation was falling the dollar reached record highs and speculators sold their stocks.
De Beers sales of rough gems and industrial diamonds slumped to 1.47 billion dollars in 1981 from a record 2.72 billion dollars in 1980.
According to Lawrence Graff who specializes in the top end of the market with prices in his London showrooms ranging from 5000 sterling (7500 dollars) to many millions the problem is finding large quality diamonds not selling them.
“There are very few gem stones of the right quality around” he said. A 70.38 carat heart shaped yellow diamond recently spent only 24 hours in Graffs hands before it was sold for an undisclosed amount.
“It is the bread and butter market” though that De Beers stresses as the key factor. “We believe diamonds should be bought worn and enjoyed” said spokesman Andrew Lamont.
To this end De Beers spends 400 million sterling (150 million dollars) a year on promotion. Even during the recession years the advertising budget grew.
In 1939 De Beers coined the slogan A Diamond is forever which has found its way onto every diamond advertisement since as well as providing Tan Fleming with inspiration for the title of one of his James Bond spy novels.
The big expansion did not start until the 1960s though when De Beers began to target new markets experiencing most success in Japan.
In 1966 only six per cent of Japanese brides wore diamond engagement rings now 70 per cent do and Japan has replaced the United States as the largest market for diamonds.
In an attempt to shore up prices the central selling Organizations De Beers marketing arm through which 85 per cent of the world’s diamonds pass withheld vast stocks.
De Beers reduced its 200000 employees by 25 per cent and halved its dividend and by mid-1986 the company was able to allow itself some discreet gloating.
Chairman Julian Ogilvie Thompson described De Beers handling of the diamond crisis as particularly gratifying in view of the problems experienced in other market stabilization schemes a veiled reference to the rather less successful tin council and organization of petroleum exporting countries.
“Looking ahead the prospect is that the recent sharp fall in the oil price would bring about lower inflation and higher growth in the industrialized countries and hence higher sales of diamond) jewelry” he said in an optimistic announcement of De Beers half yearly results.
De Beers is still sitting on a substantial diamond stockpile but says it is soundly financed getting smaller and poses no threat to the stability of the market
Lower interest rates a cheaper dollar falling oil prices and a consumer spending boom in the United States and Western Europe have all boosted the jewelry business
The Japanese are also willing to spend more on average twice what a US. Customer pays and five or six times as much as the British.
Advertising campaigns vary according to the country in which they run. The British working man is urged to spend three or four week’s wages on his beloved’s engagement ring while Americans are invited to part with two months’ salary.
European director Peter Burke admits a diamond for men promotion is expanding the market slowly. “We see it as a long term cam he said but mindful that the very first diamonds were worn by men Indian Maharajas the company is determined to persevere
Even the threat of western sanctions against South Africa has done little to dent the new confidence. Lamont noted that the industry was far less dependent on South Africa than popular perception suggested.
According to company figures South Africa now accounts for only some 15 per cent of diamond production ranking behind Australia Zaire Botswana and the Soviet Union.
The cutting and polishing centers are in Belgium Israel and India. De Beers itself is centered in London.
Sanctions would also be particularly hard to impose in the case of diamonds described by Lamont the most portable of assets
Article extracted from this publication >> September 19, 1986
