Tiffany, the famed jewelry chain on Fifth Avenue in New York, is struggling even after lowering prices. In Botswana, at one of the biggest diamond mines in the world, the effects are being felt by workers who have been told to remain on an extended Christmas vacation to help De Beers, the giant producer, adjust to the sudden slump.
After enjoying more than two decades of almost uninterrupted price increases amid buoyant demand, the global diamond business is suffering along with many other luxury businesses. Retail sales dropped as much as 20 percent over the year-end holidays in the United States, which is responsible for about half of the world’s demand for diamonds.
But the industry is different from other luxury businesses because it is based on a commodity. And that commodity is no longer entirely under the control of De Beers, which used to be able to maintain high diamond prices by restricting supply.
Hopes that the growing wealth in India and China would fill the demand gap were dashed once recession spread to Asia, prompting prices for diamonds to drop by roughly 30 percent from an August peak.
“The whole industry has stalled as it has been hit by the recession,” said Christine Gordon, an independent diamond industry analyst in London. “This is going to go on for a while and in the meantime production cuts will be necessary.”
De Beers, the world’s largest diamond producer, said Friday that sales in the fourth quarter slowed and that 2009 would remain “challenging.”
Strong demand for diamonds in the first three quarters of last year helped De Beers increase yearly sales to $6.89 billion, from $6.84 billion. But sales in November and December were “below expectations,” Gareth Penny, the company’s group managing director, said.
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