Last Updated : 06 February 2009 at 05:45 IST

Gold, diamond sales crash by 40% in Russia

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Commodity Online
SURAT/MUMBAI: Even as diamond traders in Mumbai and Surat are struggling to keep their business afloat, the situation in Antwerp and Russia is not different.

Antwerp, world headquarters of diamond rough trade, is feeling the pinch now with demand falling to unimaginable levels. Russia’s diamond trade is also suffering huge losses and there are not takers for diamonds now.

It is a clear hint that during the time of crisis people have decided to say bye to luxuries. But, Gold has still managed to stay afloat because of its investment safe haven tag.

According to media reports, Russia is registering the biggest fall in diamond production in the world.

Moreover, several big diamond majors are also slashing production. Trigger for this decision was 40-per cent decline in De Beers’ output.

In Russia, following the global meltdown, gold and cut diamond sales dropped by 40 per cent.

According to reports quoting Antwerp World Diamond Centre, an organisation representing the Belgian diamond industry, the cut in financing would Lead to the world’s top miners, De Beers and Russia’s Alrosa, slashing production of rough diamonds by up to 40%.

Banks usually finance two parts of a diamond business balance sheet, the receivables and purchases — in these present circumstances, it is extremely difficult for the banks to finance both.

Antwerp handles around 80% of the world’s rough diamonds and half of all polished diamonds each year.

ABN Amro, the world’s biggest diamond financier, came under the Belgian government in October after its parent company Fortis Bank had to be bailed out.

Another big diamond financier, Antwerp Diamond Bank, said last month the company was already seeing a recessionary impact on consumer spending and the capacity to service debt could come under strain.

De Beers, which accounts for about 40% of global rough diamond supply and is 45% owned by mining group Anglo American, said last month it will cut output at two of its new Canadian mines by 10% to 20%.