By ADAM GOLDMAN : AP Business found at heraldsun.com Jan 28, 2007

NEW YORK -- On a recent afternoon at the venerable Diamond Dealers Club, many of the chairs and long tables remained empty on the vast trading floor as a few dozen men haggled over precious stones. 

The cafeteria's dining room had a ghost town feel and only a couple of men drank coffee at the food counter. Most of the hustle and bustle was happening in the club's synagogue and an area where retired members could play backgammon. 

"I miss the activity that used to go on here," said Ray Perlman, chairman of the club's board of directors. "I worry about the diamond business. I think in the future it's going to be a different kind of business." 

These aren't the best of times for brokers and smaller dealers within the diamond industry as it evolves. Merchants are under increasing pressure from overseas operations in India and China and there are concerns about the introduction of cheaper, synthetic diamonds. 

One of the biggest changes has come thanks to the Internet, where diamonds are now bought and sold, squeezing out the minor players that help populate the $143 billion jewelry business.  And more recently, the industry took a public relations hit with the successful release of the movie "Blood Diamond," which portrays diamonds fueling a brutal civil war in West Africa -- despite the fact conflict diamonds represent fewer than 1 percent of all diamonds sold worldwide.

New York Diamond Dealers Club 580 Fifth Avenue at 47th St. New York, NY  10036 USA Fax: 1-212-869-51-64 Email: mhochbaumATddcny.com Mr. J. Banda  -  President

"The industry is still very healthy but the people making the money has changed," Perlman said, noting that the Indian community for instance was doing the vast majority the diamond polishing business. "The Americans are in competition. They are fighting for their lives." 

For decades, Manhattan's Diamond District has been a bustling center of commerce in New York City -- and a huge contributor to the nation's diamond business. More than 2,600 businesses operate in or near the one-block stretch on 47th Street between Fifth and Sixth Avenues. Much of the diamonds that enter the country flow through New York City, with many winding up being sold in district. 

Every day, the diamond merchants do what they've been doing for decades: cut, buy and sell the precious stones. But underneath this veneer of a seemingly stable business, plenty of challenges lie ahead for one the city's most recognized streets. 

"People know there is less business," said diamond cutter Moshe Brach, 29, who works in the district at Robert Klein Diamonds. "People are afraid to come work in the Diamond District because it's much, much slower than it used to be. Only the very good cutters make a decent living." 

The Diamond Dealers Club, comprised of manufacturers, dealers, brokers and rough diamond merchants, is arguably the heart of this district. Since it was founded in 1931 -- the club is one of more than two dozen sprinkled around the world that form the World Federation of Diamond Bourses -- it has provided members a safe and secure environment to do business. 

Over the years, the club has fought off repeated challenges such as sinking prices. Today, the club has more than 2,000 members but a decreasing number of them use the club's facilities as they operate out of nearby offices, Perlman said. And membership numbers have remained steady but essentially flat for several years. 

One reason the club's ranks haven't swelled in the 21st century rests with the nature of the business. Perhaps more than any other business, this a family one. 

Traditionally, sons would follow fathers into the diamond business and eventually become club members. But that is happening less. 

Younger diamond merchants view the club as anachronistic, club executives said. Deals are still cemented with a handshake and each member agrees to go to in-house arbitration if there's a problem with another member. Such experiences are foreign to eager entrepreneurs who grew up in the Internet age. 

The club is working hard to counter an impression that it, perhaps like the district, is an outdated place of business. The club has begun to modernize its business practices, including its Web site, where members can search more than 240,000 diamonds for the right stone. 

Club executives also argue that the it is still the safest way for members to buy and sell stones -- not to mention getting a good price, says Jacob Banda, president of the Diamond Dealers Club. 

Recently, the club decided to stay put at its current location in the World Diamond Tower on Fifth Avenue, where it has been a tenant since 1984. Banda said the club signed a long-term lease, helping to ensure the district's vitality. 

But experts say the district's diamond dealers are in a tough spot because the current state of the business. Brokers and dealers are facing single-digit margins, Perlman said. 

"What you hear on the commercial side is what someone called the bookends being more healthy than the middle part," said Ralph Destino, chairman of the Gemological Institute of America. "The mining is doing very well and so is the retail selling. But in the middle you have the diamond cutters and diamonds dealers. Their margins are being squeezed" by the growth of the Internet. 

But Destino doesn't think diamonds or the districts that sell them will be made obsolete. 

"As the sentiment of diamonds endures so too will districts where the sentiments can be purchased," he said.