The company's production of rough diamonds during the year according to one of its partners improved marginally to 40.8 million carats from 40.2 million carats in 1997. Despite the slight rise in output, Argyle exhibited impressive sales performance, thanks to its sale office in Antwerp which was able to revise its prices upward, while maintaining volumes. This was in sharp contrast to 28 per cent fall in CSO's sales during 1998 to $3.345 billion.

This performance contrast can be explained by the fact that continuation of growth in the US market translated into strong demand for moderately priced Argyle type stones, while the falling Asian demand adversely affected sales of costlier goods offered by others.

The strong demand for cheaper goods is also evident from the growth in imports from all sources into India which specialises in processing such cheaper roughs. In the second half of 1998these imports increased by nearly 50 per cent over the corresponding period of the previous year.

Fortunately for Argyle, arrivals of competitive stones from the Russian stockpile and from some independent African mines largely disappeared. This give the company an opportunity to raise the prices for its stones which enjoyed good demand.

World diamond jewellery sales contracted by around four per cent in 1998 despite the burst of consumer activity in the US market. The substantial rise in the demand for jewellery in the US market was offset by weaker demand from Japan and other East Asian markets. The world diamond jewellery sales in 1998 were estimated at $48 billion, with the US accounting for 45 per cent of the market.

Argyle also benefited form the shift in Asian markets to trade down to lower price points.

The demand for expensive polished diamonds remained subdued is evident from Israel's reduced export performance. In 1998 it was down by 11 per cent. Japanese imports in first 11 months of 1998were down by 29 per cent compared with those for the same period of the earlier year. Traditionally Japan was a market for costlier diamonds. The fall in its imports showed that the demand for such costly stones had waned for the time being at least.