Uncertain future for global diamond trade as profits vanish – by Tova Cohen and Ari Rabinovitch (Reuters U.S. – June 24, 2015)

http://www.reuters.com/

TEL AVIV – The family businesses that make up the global diamond trade have seen their profits wiped out over the past five years, hit by shaky financing, increased costs and uncertain demand from customers who prefer hi-tech gadgets to bling.

Manufacturers who cut and polish diamonds have found themselves caught between giant mining companies charging high prices for rough stones, and big retail chains that demand gems at low margins to keep sales moving.

While the $80 billion overall spent on diamond jewelry last year was a record, the manufacturers are expected to share a profit of just $100 million in 2015. That is half last year’s total and down from $900 million in 2010, according to Chaim Even-Zohar of Tacy Ltd and Pranay Narvekar of Pharos Beam in Mumbai, two of the industry’s top consultants.

Even-Zohar estimated that 300,000 Chinese and Indian workers had been laid off out of nearly 1 million employed in gemcutting in those two countries, where most manufacturing takes place.

“The rule of supply and demand doesn’t necessarily apply to the diamond sector,” said Yoram Dvash, a high-end polisher in Israel who outsources his rough stones to smaller Israeli polishers.

Over the past year he has been sending his subcontractors 20 percent less volume.

“Manufacturing is not just work, it’s out of love – taking the rough stones, with all their odd shapes, and bringing out the most precious thing in the world. But this love costs a lot of money. And rough prices have been going up and up with no connection to demand.”

In the longer term, the industry needs to sustain consumer demand at a time when the prized possession of many people with disposable income is more likely to be a smartphone than a piece of jewelry. The hottest wristwatch this year does not have diamonds on its face – it has an Apple touch screen.

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