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Thursday, 6 February, 2003, 11:20 GMT
Diamond market faces tough year
Diamond cutters
The diamond market faces a "challenging" year
Gem giant De Beers has forecast a difficult year for diamond sales, as economic and political uncertainties weigh on big spenders.

De Beers, which supplies 60% of the world's diamonds, said that sales of diamond jewellery held up "reasonably well" in 2002, despite a fall in global consumer optimism.

De Beers still sold $2.3bn of diamonds in the second half of the year, so it has not been too painful for them

Daniel Major, mining analyst, JP Morgan
But the firm said that 2003 was "likely to prove a challenging year for the diamond industry in view of continued geopolitical concerns and greater economic uncertainty".

Prospects would depend largely on "the timing and scale of global economic growth, a recovery in consumer confidence".

James Allan, analyst at Barnard Jacobs Mellet, said: "I am looking for flat sales this year."

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Sales early last year were boosted by a gem squeeze following a stronger than expected Christmas.

"Inventory of polished diamonds held by the retail trade had been significantly reduced," De Beers, 45% owned by AngloAmerican, said.

But fears of deflation, rising unemployment and war against Iraq, and falling share prices, conspired to hit retailers in the second half of 2002.

De Beers credited marketing drives, and a "marked increase" in advertising spending, for resilience in the important US market, where diamond sellers outperformed general retailers over Christmas and Thanksgiving.

While "good growth" was also reported for British, Indian and Chinese markets, Continental European sales were "disappointingly flat" with diamond sales in Japan continuing a long-term decline.

The comments came as De Beers reported headline profits of $570m for last year, 12% higher than for 2001, once investment in AngloAmerican were stripped out.

Daniel Major, mining analyst at JP Morgan in London said: "[De Beers] still sold $2.3bn of diamonds in the second half of the year after a monster $2.8bn in the first half, so it has not been too painful for them."

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Nicky Oppenheimer, chairman of DeBeers
"We're certainly moving away from being the ultimate controller of the diamond business"
See also:

22 Nov 02 | Business
01 Nov 02 | Business
12 Aug 02 | Business
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