The market for diamonds is showing signs of cracking as medium-term supply growth is just over 1% per year. Demand, on the other hand, has been growing about 5%, which is causing prices to jump over 30% since 2003.
Although, there are supply growths seen in Canadian and African mine, but their production is merely offsetting the decline in Australia.
About 50% of all gem diamonds and industrial-grade diamonds are being gobbled up by the United States. However, falling confidence in the American economy has already affected the market for the diamond industry.
De Beers, the world's largest diamond producer, is coping up with rising production costs and a weakening business outlook not just in the United States, but across the globe as well. The impending crisis has also caused wobbles to the world's number two producer, Rio Tinto.
Analysts are saying that there will be some cushioning to take place in the diamong industry. The industry is so concentrated, and therefore, it can exert market power.
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