Diamond Price Reductions 30-40% in Upcoming Months - Opinions?

[grayaug]

Here's an interesting Reuters article predicting large price drops of 30-40%. The article states that DeBeers took a $500 million dollar loan.....

http://www.mineweb.com/mineweb/view/mineweb/en/page37?oid=79840&sn=Detail


DIAMONDS AND GEMS
30-40% CONTRACTION POSSIBLE
Indebted diamond sector set for shakeout as demand collapses
With low prices along the value chain, the diamond industry is suffering as never before with major failures anticipated.

[Article removed by Moderator] See forum policies

 

[strmrdr]

They arent talking about prices they are talking about 30%-40% of the trade going out of business.
Which I think is possible.

 

[John P]

The practice of memo has been predicted as a massive Achilles heel for many years. About a year ago Ben Janowski put debt in the top 3 concerns for our industry (his "Top 10" list is 14 posts down in this thread). At the same trade show Brad Huiskin was predicting 35% of jewelers to be out of business by 2018 (6 posts down, same thread).

There was a discussion on PS not too long ago about retail models and why they are forced to rely on memo/credit.

Upstream entities who withdraw and call in their markers right now might believe they're defending themselves, but cutting off your selling arm isn't the solution. In fact closer cooperation between cutters and jewelers is what's needed, with more support & cooperation from both sides.

 

[oldminer]

Prices can fall in relationship to lack of demand. That''s a certainty. No one large entity will absorb all the new diamonds which could be produced at some arbitary or unrealistic price. Diamonds have proven to be a decent way of protecting assets for the very wealthy who live in markets where the banks and government might not be highly trusted. Although the price could fall greatly, there are many good reasons why it may not fall so far in a general way. There will be isolated opportunities to buy some diamonds for way off, deep discounts, but I doubt it will be an entire market in panic selling everything for huge losses. Things are very slow, but it is not the end of the world, either.

 

[Rockdiamond]

I think it''s also a fact that diamonds did experience somewhat of a "bubble" over the past 18 months.
At one point, about 6 months ago, the prices were, IMO, unrealistically high.
There''s no question that prices have softened since then, but there is a real lessening of supply right now- I don''t see prices moving all that much over the next months....

 

[strmrdr]

Date: 3/30/2009 1:07:29 PM
Author: Rockdiamond
I think it''s also a fact that diamonds did experience somewhat of a ''bubble'' over the past 18 months.

At one point, about 6 months ago, the prices were, IMO, unrealistically high.

There''s no question that prices have softened since then, but there is a real lessening of supply right now- I don''t see prices moving all that much over the next months....

The PS charts support that. just a slight dip this month.

https://www.pricescope.com/community/threads/price-hike-a-hype.15538/page-3

If GM or Chrysler go under all bets are off however.
That is going to bounce everything down if it happens.

 

[CaratMan]

"Cut and rough prices have fallen by around 15 and 50 percent respectively from mid-2008 peaks so anyone holding diamonds as prices collapsed would face problems." - Quoted from article


This might be a stupid question, but if the cut and rough prices have fallen by these amounts, wouldn't retail prices go down in a similar fashion (less than 15% obviously)?

 

[strmrdr]

Date: 3/30/2009 1:25:35 PM
Author: CaratMan
''Cut and rough prices have fallen by around 15 and 50 percent respectively from mid-2008 peaks so anyone holding diamonds as prices collapsed would face problems.'' - Quoted from article



This might be a stupid question, but if the cut and rough prices have fallen by these amounts, wouldn''t retail prices go down in a similar fashion (less than 15% obviously)?

They have, since the internet operates on low margins they have moved down less than more traditional stores. When you have a 50% markup you can drop it a lot but when you have a 8% to 15% markup you can not drop it as far.
Traditional market prices are getting closer to internet prices and have dropped a larger percentage as they lose markup.

Right now rough prices are somewhat disconnected from polished prices because the trade is saturated with polished and many mines and cutting factories are being shut down some for good and some for a short time.

 

[DiamondFlame]

Date: 3/30/2009 1:25:35 PM
Author: CaratMan

''Cut and rough prices have fallen by around 15 and 50 percent respectively from mid-2008 peaks so anyone holding diamonds as prices collapsed would face problems.'' - Quoted from article


This might be a stupid question, but if the cut and rough prices have fallen by these amounts, wouldn''t retail prices go down in a similar fashion (less than 15% obviously)?

There is a trickle down effect and time lag. If you''re selling retail, you don''t slash prices unless no one is buying your diamonds because they think you''re ''pricey'' relative to your competitors. Otherwise you''re just screwing your own bottomline. Many retailers would probably adopt a wait-and-see approach, or take their cue from industry leaders.