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Reeling Japanese consumers to affect diamond demand for 'a couple of years'

15th March 2011

By: Matthew Hill

  

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TORONTO (miningweekly.com) – The Japanese natural disasters will have a “significant impact” on diamond demand in the country that consumed 11% of the gems in 2010, Paradigm Capital analyst David Davidson said on Tuesday.

“This is certainly going to have ramifications for a couple of years. It will have an impact [on the global diamond market],” he said in an interview.

Though Japan’s overall market share for diamond demand has shrunk to 11% – the same level De Beers predicted the Chinese market share to be last year – it is still a large buyer of gem diamonds.

Davidson said the 11% figure was of the total carats consumed, and that if expressed in dollars, Japan’s market share would be much higher, as consumers there tended to buy bigger, higher value stones.

“The last thing they want to do is rush out and buy a handbag or a diamond ring,” he said, adding that survival was putting luxury goods at the back of the priority list of Japanese consumers.

Davidson said that rapid growth in diamond demand elsewhere in Asia would help to offset reduced sales in Japan.

“China and other parts are picking up the slack pretty quickly but will take a couple of years to overcome this.”

Still, he added that there was not a lot of new production coming into the market, and that this would prevent a large oversupply situation.

“It’s not as if we’re going to end up with huge glut of stones,” Davidson told Mining Weekly Online.

RBC Capital Markets analyst Des Kilalea said that diamond shares could continue to show weakness in the near term.

Aim-listed Petra Diamonds closed nearly 10% lower on Tuesday, at £14,25 a share, while Gem Diamonds slid 4,62% on London’s main market.

North American junior Stornoway rose 0,92% to trade at C$2,15 by 15:30 on the TSX.

Diamond companies have so far been punished far less harshly than uranium producers, many of which have seen one-third of their market value wiped out as a result of worries that the Japanese crisis could damage future demand for the fuel.
 

Edited by Liezel Hill

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