Diamonds are in the rough
A 101-carat diamond is displayed at Christie's auction house in London ahead of its May 28 auction in Hong Kong.
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Bill Radke: The recession has curbed American demand for diamond jewelry, and some people say that's a healthy thing. But there are people all along the diamond chain who are suffering, as our Gretchen Wilson reports from Johannesburg.
Gretchen Wilson: At Intergems jewellery store in downtown Los Angeles, the glass cases are stocked, but foot traffic is well down. Proprietor Steve Pheng says business has seldom been so bad.
Steve Pheng: The only thing that I can compare it to was that sales were really down after 9/11. People, you know, are not as willing to part with their money as they used to. That's a hundred percent fact -- people don't have the disposable income like they used to.
The U.S. has long been the main market for diamonds. But Americans are now pinching pennies, and that's taken the shine off the entire global diamond industry.
John Bristow is CEO of Rockwell Diamonds in Johannesburg:
John Bristow: The diamond industry, like every other mineral commodity in the world, has taken a hit, and quite a substantial one, courtesy of the credit crunch.
Since Americans aren't buying diamonds, jewelery stores have lots on hand. So they're not buying new diamonds from auctions in New York. Which means the auction houses aren't buying from diamond polishers in India, who in turn aren't buying the rough diamonds that come out of the ground here in South Africa.
Rockwell Diamonds has had to layoff hundreds of people, cutting its workforce by a third.
Bristow: It's not a pleasant situation, but you know, it's an economic necessity at this point and time.
Even South African mining giant De Beers is halting some of its operations. Spokesman Tom Tweedy insists, however, that streamlining in recent years will keep De Beers alive.
Tom Tweedy: So while the challenges are real and enormous, they are not challenges we cannot over come. We're fit for business.
Thousands of miners have lost their jobs. But the reasons are so clear, even the National Mineworkers' Union isn't putting up much of a fight. Lesiba Seshoka is the union's spokesman:
Lesiba Seshoka: Unfortunately, it's a dire situation. There's nothing that we can do.
Nothing directly, at least. They can only hope that the global recession will lift and that Americans will start spending on diamonds again.
In Johannesburg, I'm Gretchen Wilson for Marketplace.