Diamonds start to lose their luster to Chinese

The gems purchased there are already selling at heavy discounts in the secondary market, they said.

Between miners and jewelry retailers, the diamond-industry chain is impenetrable to outsiders and has been dominated by family-run firms that do business based on personal relationships.

De Beers recognizes there are challenges at the moment and that it is a difficult time for its customers, a company spokesman said.

There is still client demand for diamonds and the producer expects to see a gradual improvement as inventories clear, the spokesman pointed out. The company has been flexible with its customers, allowing them to defer purchases.

Rio Tinto Group, the third-biggest producer, became the latest miner to respond to China's slowing appetite, cutting its 2015 output target by 10 percent.

Rough-diamond prices have fallen about 15 percent this year, according to data from WWW International Diamond Consultants based in the United Kingdom.

De Beers needs to reduce them further. "If they continue with these prices, it will lead to a very bad place," Harari, of Bluedax, said.

"Prices will have to go down or they will not sell them. People cannot buy at this level."

The diamond industry has ridden the Chinese wave as demand increased 16 percent a year from 2009 to 2014.

Prices for rough stones gained more than 20 percent for three straight years from 2009 to 2011 as Chow Tai Fook and other Chinese retailers opened thousands of new stores, all needing to be fully stocked with gems.

In September, De Beers said that Chinese demand would grow as much as 4 percent this year, compared with 6 percent in 2014.

The company, in recognition that demand was softening, announced in August a "major" investment to advertise diamonds in the US and China, the two biggest markets, during the year-end holiday season.