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Sales grow as diamonds flow again

DEMAND for rough diamonds has improved following the Central Selling Organisation's decision at the beginning of the year to restrict supplies to the market.

The clearing house, which handles the sale of more than 80 per cent of the world's rough diamonds, said yesterday that its policy of holding back stones to 'stabilise' the market had worked. 'As a result of this policy confidence in the trade improved and sales at the fourth and fifth sights of the year were able to be increased.'

The CSO, which is run by the giant De Beers diamond mining group of South Africa, sold dollars 1.79bn ( pounds 950m) worth of stones in the first half of the year, as expected a fall of 14 per cent from the same period last year. But De Beers, which is responsible for mining around a quarter of the gems that pass through the CSO, said recently that it expects second-half sales to be higher than last year.

'That would mean that full- year sales would only be down around 6 per cent, about the same as in 1991, which isn't bad in the worst recession since the war,' Michael Spriggs, an analyst with SG Warburg, said.

Drawing conclusions about the underlying market from CSO figures is difficult in view of the ability of the CSO and De Beers to limit supplies. The CSO does not release details of the number of stones sold or the purchasing requests made at its 'sights' - monthly meetings with authorised buyers at which it says what stones it is prepared to make available.

But an indication that De Beers may be stockpiling rather than selling into a soft market comes in its 1991 accounts, which showed diamond stocks of around dollars 3bn, a 13 per cent year-on-year increase.

CSO sales are indicative of the manufacturing pipeline and provide little guide to high street sales. But the CSO said it had registered 'some encouraging signs from the US retail market'.

The US and Japan are the biggest consumers of diamonds, each accounting for more than 40 per cent of the market. Demand has been sustained in Japan while slowing in America.