By Leia Michele Toovey- Exclusive to Diamond Investing News

^[1]When 2008 started off, the world's mining industry ^[2] was in the midst of a boom, with never before seen prices being fetched for most of the metals, and miners raking in profits.  The way 2008 came to a close, it is hard to imagine that this was the scene just months earlier.

The world's wealth suddenly plummeted with the stock market crash ^[3]. Banks burned by the mortgage crisis stopped lending money, and an equity crunch spread around the globe.

This rapid change hit the diamond market hard.  In the retail sector, prices dropped drastically, as demand came to a stand still.  Companies were forced to sell their products at a loss and many household names went bust. The House of Taylor lost the license to its brand name and acknowledged an $11.2 million debt when it entered into a peaceful possession of collateral with New Stream Secured Capital. Friedman's jewelers, operators of 455 stores in the U.S., went into liquidation.  The company that purchased 78 of the stores, Whitehall, soon after filed Chapter 11. In an effort to save $65 million, popular American jewellery chain Zale restructured by closing 23 stores and cutting staff by 20 per cent at its headquarters. The Home shopping network's Jewelry Television restructured by cutting more than 200 jobs, and the Jewelry Channel closed its doors just 16 months after launching, laying off 106 workers in the process. Jewellery retailers experienced a lull in sales throughout the year and came to expect a disappointing Christmas. Their expectations were met. Jewellery was, by some counts, among the worst-performing categories during the holiday season, as sales ^[4] in the luxury category plummeted 34 per cent.

Problems in the retail sector trickled down to the mining companies, who were challenged just to sell their products.  The Diamond Trading Company ^[5] (DTC) saw rough prices increase by an average 15-to-25 per cent at the sights in the first eight months.  But, in the final quarter the DTC recorded its smallest sight in history in December, clocking in one-sixth its average sight value.  As the credit crunch spread, manufacturers cut their rough buying, preferring to concentrate on selling off existing stock. Manufacturing centers appealed for government assistance in December to help their respective industries gain easier access to credit.

The Israeli diamond industry was hard hit in the last quarter of 2008, seeing trading levels fall sharply and leading many to financial hardship. Now, the industry is appealing to the Ministry of Finance to be included in the credit allocation plan recently approved by the government. The industry is also asking for the ministry's support in bringing buyers to Israel.

In India, the industry is also reaching out for help. Gujarat Chief Minister Narendra Modi has demanded a revival and relief package for the diamond industry of the state. In a memorandum to Prime Minister Manmohan Singh Modi said that incentives should be given to the industry. He is asking for is a special relief package for the diamond workers and a liberal credit policy for the ailing diamond industries.  

Even the super wealthy curbed their spending habits as the year came to a close.  On the auction circuit both Christie's and Sotheby's held smaller sessions than usual in the latter half of the year. Some high end-diamonds failed to sell at auction, including the 71.73-carat emerald-cut Lesotho 1, and a 102.56-carat, fancy vivid yellow diamond necklace, both at Sotheby's.

So, what is in store for 2009?  Many industry leaders are optimistic, stating that that although the first quarter is bound to be weak as the full effects of the plight of '08 are continued to be felt, soon after a rebound will follow.  As the malaise spread last year many miners and retailers shut their doors; this has set the stage for a swift rebound, one that will be extremely beneficial to the pocket books of those left standing.