The global economic crisis will weed out Italy's jewellery industry and prepare grounds for consolidation in the strongly fragmented sector, jewellers and industry officials said at a trade fair.

The Italian jewellery sector, the world's leading exporter, has been hit by increasing competitive pressure from China, India and Turkey in the past few years. The number of manufacturing companies dropped 12 percent to 11,649 in 2008 from 2002, according to industry data.

The crisis, which has sapped consumer demand and tightened global credit markets, has hit the Italian sector hard.

We have an economic crisis on top of the structural one. We are losing small and weak companies ... There will be a considerable fall (in the number of companies), Domenico Girardi, general manager of the Vicenza fair, organisers of the international jewellery fair, told Reuters.

I believe there will be a sector consolidation, the companies will unite, Girardi told a news conference there.

Massimo Carraro, chief executive of Morellato & Sector which has grown into a leading Italian watch and jewellery maker from a watch strap maker thanks to a string of acquisitions, said the time was yet to come for mergers and acquisitions.

You cannot take two small entities and make one strong out of them ... We need to take a pause for now and wait until the dust settles, Carraro, tipped by many insiders as one who could be a possible consolidator in the sector, told Reuters.

Carraro confirmed his group's strategic goal to list shares on the stock market but would not peg down its timing. In the the past, he indicated 2010-2012 as a likely time frame.

Only two Italian jewellers, Bulgari and Damiani, are listed.

LOOKING FOR STRONG PARTNERS

Analysts have said outside investors, such as equity funds or fashion groups, would drive consolidation in the Italian jewellery sector. But jewellers say outsiders would not understand some particularities of their business, such as slower returns than in fashion.

Carraro said strong sector players would consolidate it when the dust settles.

Debt-laden and loss-making Italian accessible luxury goods maker Mariella Burani Fashion Group is now selling four Italian jewellers -- Rosato, Calgaro, Valente and Facco -- it bought a couple of years ago.

Monica Fin, chief executive of Calgaro which bought back the controlling stake in the company from Mariella Burani earlier this year, said a nearly two year tie-up has taught her new business strategies but failed to carry out development projects she counted on.

Fin said her small company, known for silky jewellery made from fine gold threads, would look again for an industrial partner to help it grow on international markets.

Calgaro has already received some offers, Fin said but she wanted first to boost the business after the buyout which cost the company an enormous effort as it came just in the middle of the economic crisis.

We had a double crisis. We need to put things in order ... It is like after a divorce, she told Reuters.

(Editing by Bernard Orr)

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