A diamond is forever. Too bad the market for it isn’t.
Prices of the precious gems have dropped like a rock in recent months as the worldwide economic downturn strikes fear in the hearts -- and wallets -- of investors, collectors and prospective bridegrooms.
That, in turn, has enshrouded this little corner of Europe in an abiding gloom. Antwerp, a city of charming streets and exquisite centuries-old architecture, sits at the heart of the global diamond industry, and is now suffering because of it.
The “50% off” signs in one jewelry store window after another point to grim economic times. So do the downcast glances of traders in the diamond quarter, an impressive agglomeration of shops and offices where even idle chitchat buzzes with references to the “Four Cs”: carat, clarity, cut and color.
Missing these days is a fifth: customers.
“The diamond business is in a deep slump. . . . Business is very slow,” said Alex Weber, a jeweler with more than 25 years’ experience. His store motto is “Service with a smile.” But there haven’t been too many of those recently.
The industry has been on a downward spiral for several months, in tandem with the credit crunch and the global recession. Virtually no link has gone untouched in an international supply chain that encompasses miners in Africa, cutters in India and retailers in Europe and the U.S.
As in other sectors, the suddenness and swiftness with which things soured has left people reeling.
Diamond prices that last summer had hit extremely high levels fell steeply -- as much as 50% in the case of rough stones. Although the situation has leveled off to some extent, the plunge in value forced big names such as DeBeers Group and Alrosa Co. to announce in November that they would be cutting production to keep prices stable. Mines have temporarily shut down, putting thousands of people out of work.
“For diamonds that have been under the ground for millions of years, why dig them up right now when demand is so low?” said Philip Claes, spokesman for the Antwerp World Diamond Center.
The decision was instantly felt here: An astonishing 80% of the world’s rough diamonds and 50% of all polished ones pass through Antwerp before winding up on the tips of industrial-strength drills or on the necks, fingers and ears of (mostly) women.
Total diamond imports and exports into Antwerp totaled $45 billion in 2008, Claes said. Although that was more than the $43 billion posted in 2007, the figure masks the precipitous drop in the market in the final few months of last year. From October 2008 to February 2009, imports and exports of rough diamonds were down 60% compared with the same period a year earlier.
“Things are not going good,” Claes said. “We are affected by the financial crisis. But we find some comfort in the fact that it is not our industry alone that is in crisis.”
That comfort feels positively frosty for many of the traders and vendors squeezed together in Antwerp’s diamond district, which abuts the central railway station. Visitors arriving by train can’t help but be struck by the profusion of jewelry stores vying for attention the moment they exit the station, a panoply of store windows with all manner of sparkly goodies winking coyly at them.
On a recent morning, shop owner Ilan Michale sat chatting in Hebrew with two other dealers, both of them fellow Israelis. The diamond market here is dominated by Jews and Indians; it’s not unusual to see Orthodox Jewish black hats and Sikh turbans bobbing down the same street.
Except for his friends, Michale’s jewelry store was empty. A year ago, it was starkly different: No one had the time then to stop and visit with a neighbor because the tourists and other customers were abundant.
That’s when prices started climbing, spiking around August, and the eyes of sellers and traders glinted like the gemstones that moved through their hands at a good clip.
“It was a balloon getting bigger and bigger,” Michale said, adding: “The balloon blew up six to seven months ago.”
The holiday season provided scant relief.
“Christmas is normally good,” Michale said. “You have a week or two where you tuck in. But this Christmas was no Christmas.”
The drop in demand in the U.S., where about half the world’s polished diamonds end up in jewelry, was a particular blow for the industry.
Jewelry retailers are getting shellacked. Zale Corp. of Irving, Texas, said it would shed jobs and close some stores after it posted a net loss of $23.6 million for the three months that ended Jan. 31. Net income at New York-based Tiffany & Co. plunged 76% in the same period.
But rich people and rich nations aren’t the only ones affected by the slump. Claes said that as many as 300,000 cutters in India, most of them in the western state of Gujarat, have lost their jobs. The African country of Botswana, which relies on diamonds for half the government’s revenue, has closed several mines, at least temporarily, because of weak worldwide demand.
Bowing to new economic realities, DeBeers has switched tack in its advertising. The company behind the famous slogan “A diamond is forever” is now pitching “Fewer, better things.”
There may also be fewer, though not necessarily better, diamond merchants by the time the recession ends. The unwillingness of banks to lend money during the credit crunch has been especially hard on diamond dealers, who depend on loans to survive in such a capital-intensive industry.
Some analysts say prices may start picking up again now that the market has stabilized.
Claes isn’t counting on it.
“We are one of the last industries to recover,” he said. “A diamond is a luxury product, and that’s what people tend to skip from their list. On the other hand. . . . stranger things have happened. Some people like spending in times of crisis, and there’s always an occasion where it’s good to buy a diamond.”