Johannesburg — DIAMOND industry sources predict varying levels of slowdown in the industry, ranging from more cautious buyers to a downturn in prices caused by global economic upheaval.

This contrasts with expectations two or three years ago that long-term fundamentals for the diamond market were extremely favourable. The shortfall in diamond supply by 2012 was predicted to be $5bn-$7bn -- the equivalent of De Beers production.

According to the latest monthly tracking survey from the US-based Jewellery Consumer Opinion Council, which canvasses the views of about 2000 US consumers of various ages and income levels, the percentage of consumers who believe it is a bad time to buy jewellery now has risen to almost 40% from 30% a month ago.

In every survey for the past six months, about 90% of respondents said they had not bought any jewellery in the past month.

Rockwell Diamonds said yesterday in its review of the six months to August there were major price increases in both rough and polished diamonds in the first half of the year. This, together with a shortage of better quality rough diamonds, had fuelled speculation among diamond traders, which buoyed prices artificially.

"The downfall in the world economic situation saw a correction in diamond prices overall and, particularly, an end to the speculation between traders," Rockwell said.

De Beers had been able to increase diamond prices 16% so far this year, and the Diamond Trading Company's selling prices had risen more than 70% since 2000.

All indications were that interest in large stones would continue, but economic issues would introduce a level of caution, particularly among US consumers, it said.

Rockwell expected prices to remain firm for the rest of this year.

But Gem Diamonds, owner of the Letseng diamond mine in Lesotho, noted for its large fine diamonds, said in its interim trading update this week that prices for large, top-quality rough diamonds at the company's recent tender in Antwerp had softened 14% compared with the average for the year so far.

Prices were even weaker for smaller stones, it said. More dramatically, Reuters reported diamond expert Martin Rapaport this week as saying: "Premiums for big stones are coming down with almost no trading as sellers refuse low offers and shocking financial market conditions create extreme uncertainty."

On Sunday, the World Federation of Diamond Bourses appealed to diamond miners to reduce their supply of rough diamonds to restore stability.

Federation president Avi Paz said: "The quantity of rough diamonds that is marketed worldwide greatly affects the stability of the industry, and in particular the industry's global bank debt."

Reducing supply of rough diamonds was "imperative and necessary not only for the diamond industry, but also the rough producing countries, the global banking system and the diamond mining companies themselves," he said.