Top diamond prices slide as credit crunch bites

By Eric Onstad

LONDON, Oct 14 (Reuters) - The prices realised for top-quality, unpolished diamonds are the latest victims of the credit crunch, industry figures showed on Tuesday, as even the world's super rich get choosy about what they buy.

Before the latest wave of economic turmoil, with the sector struggling under heavy debt, prices of top gems had held up while the price for smaller, mass market diamonds slumped.

However, diamond expert Martin Rapaport said in a recent report: "Plummeting stock markets and the severe credit crunch is reducing luxury demand."

London-listed Gem Diamonds (GEMD.L), which specialises in high-value gems, said in a trading update on Tuesday that prices for its top-quality rough diamonds fell 14 percent at a recent tender in Antwerp, compared to average prices so far this year.

Trading in big stones had nearly lurched to a halt due to the financial crisis, Rapaport said.

"Diamond prices are under increasing pressure as the global economic situation worsens. Premiums for big stones are coming down with almost no trading as sellers refuse low offers and shocking financial market conditions create extreme uncertainty," Rapaport said.

The only sub-sector in which prices had held up was fancy coloured stones, Gem Diamonds said.

The well-off were still splashing out, but being more selective, Rapaport quoted research firm Unity Marketing as saying.

"They are still spending -- and spending quite generously -- on those choice luxury items they decided to splurge on, but they are splurging on fewer items overall."

On Sunday, an industry group appealed to diamond producers to reduce supply to stabilise the market.

"The mining companies can enhance stability at this point in time by reducing the volume of rough diamonds they are supplying to the market," said Avi Paz, president of the World Federation of Diamond Bourses, in a statement.

The Belgium-based federation was an umbrella organisation representing 26 member bourses that traded in rough and polished diamonds and precious stones.

HEAVY DEBT

De Beers, the world's biggest diamond producer, said in an e-mailed statement in response to the federation that it regarded the prospects for rough diamonds as sound despite the financial crisis.