Moti Ganz, head of the International Diamond Manufacturers Association, has told IDMA members that the time has come for other parties than the manufacturers to carry some of the the burden of the supply chain.

Ganz said that in the first few months of 2009, demand for polished goods dropped between 35-40% compared to last year. And last year was not a great year either, he commented.

Indian manufacturers were said also to have been dealt a severe blow. According to figures from this large diamond manufacturing centre, in the past six months some 400,000 diamond industry workers have been laid off.

Of course, these figures may not be altogether correct, as some manufacturers may have simply extended workers' leave after the Diwali Festival, while others have shortened the work week.

Still, this reduction in the work force constitutes a very serious set-back for the Indian diamond manufacturing base; indeed, an unprecedented one, he added. (a factor impacting on the Indian cutters was the decision by troubled Rio Tinto to put the huge Argyle diamond mine - provider of most of the smalls for the Indian market - into mothballs for several months, and that Australian project's big open cut operation is coming to an end - while the underground mine's future is now under question).

Ganz said the problem for diamond manufacturers is that most are holding stocks and are trying to sell them, while reviewing their manufacturing capacities and capability. The question now is: how long can we hold out, without letting our workforce go?

And then what will we do when business improves? While the crisis is still there, demand will return, perhaps not as fast as it dropped, but it will return.

I believe that will occur faster than in most other luxury products. When the rebound happens, we cannot be caught without a viable workforce in place!

The question he asked IDMA members was do you have the tools and means to ride out the storm?

The short answer was not to fall back into the same old pattern of buying rough for cash, extending absolutely unreasonable and uneconomical credit terms to buyers.

Ganz said diamond manufacturers need to go back to the basics.

What is, or should be, the genuine role of diamond manufacturers in the diamond supply pipeline? We buy rough, we produce the most beautiful and profitable stones we can, and we sell the polished.

To make it simple and economically viable again, manufacturers, need to try and disengage themselves from the problems of the other players - the consumers, the retailers, and even the rough diamond producers.

We must stop bidding up and buying rough diamonds at any price, and not let ourselves be fooled once again by speculation.

The IDMA chief said that over time, diamond manufacturers generally have paid a heavy price due to the lack of responsibility of the jewellery retailers, particularly retail chains in the United States. There, retail chains are in trouble because of their business models.

Diamond manufacturers have also become dealers and distributors and, in these times, have become unsecured clients.

Ganz said maybe IDMA members should also look at the polished dealers for a solution and perhaps they should extend credit to the downstream market.

Manufacturers could sell the goods to the polished dealers for cash. The polished dealers would provide credit to retailers.

We, the diamond manufacturers, simply cannot any longer bear the burden of the market -- about 80% of financing of the credit that is extended in the diamond pipeline.

Currently manufacturers come to the market with polished products only to find that the price model on which they justified buying rough and obtaining credit has become irrelevant because prices have dropped.

Ganz said once diamond manufacturers take this route banks will begin treating them differently, more favourably, because they have changed their business model.