LUANDA (Reuters) - Some African diamond producers such as the Democratic Republic of Congo are losing money as the global economic crisis weighs on prices, the head of African Diamond Producers Association (ADPA) said on Thursday.
The downturn in the industry has hit some leading diamond companies that were once riding high on the luxury boom in markets like China, Russia and India.
And with the United States — which buys about 45 percent of the world’s diamonds — facing a recession amid a record low in consumer confidence levels, the drop in demand for diamonds is set to continue to raise red flags in the industry.
Prices for polished diamonds dropped 13 percent since reaching a peak in August of 2008, according to independent news and price list provider to the diamond industry Polishedprices.
Edgar de Carvalho, secretary general of the Luanda-based diamond association, said he expected all sectors of the industry to be affected by the sharp decline in prices.
“The Democratic Republic of Congo, which produces almost 34 million carats per year, is selling diamonds at $27 to $30 per carat. That price doesn’t compensate for its production costs,” he said in comments broadcast on Radio Nacional de Angola.
Carvalho said ADPA was in talks with several diamond producing African countries about ways to reduce the impact of the global economic crisis on their faltering diamond industries and economies.
In the case of Angola, he said ADPA had proposed that the Angolan government help state-owned diamond firm Endiama buy up to $100 million of its own diamonds to enable them to hold on to these diamonds until prices recover.
“We are proposing the purchase of these diamonds ... at 2.5 to 3 perent below current market prices to allow the company to profit (from the sale of these same diamonds) in the future,” he said.
Despite falling diamond prices, Angola’s diamond industry still makes money as the southwestern African nation produces some of the world’s highest quality diamonds, he said.
“Angola can sell its gems at $150-200 a carat, therefore, it still compensates to sell diamonds.”