The diamond industry was almost entirely controlled by diamond giant De Beers in the last century, with 80% of all the world’s rough diamonds in its possession. Therefore, they attempted to monitor global demand and, consequently, prices as well. These days, De Beers’ share has dropped to 20%. The current world leader, Alrosa, has assumed its leading position with 28% of the diamond market. How has the price of diamonds evolved? What role does De Beers continue to play today?
Who is De Beers?
De Beers dominated the diamond industry for a long time. The company influenced the diamond market by reducing production with lower demand to artificially drive up prices. They are also largely responsible for the diamond’s current status of emotional value. They were the ones who coined the slogan “Diamonds are a woman’s best friend” and also introduced the idea of the diamond engagement ring costing two months’ salary. De Beers is involved throughout the diamond industry. They are active in mining, selling, and rough and cut diamonds to businesses and individuals, and in recent years, the company has also invested in synthetic diamonds.
How did De Beers set prices in the diamond market?
How does it work with property rights to diamond mines?
Most diamond mines have multiple owners but are managed by a single entity, which also assumes responsibility for the sale of the diamonds. This distinction is very important, as the pricing potential can only be utilized with a significant portion of the global supply. Furthermore, the price of a diamond will increase with the number of parties involved in the sales process. Although the ownership rights to these mines are split 50-50 between De Beers and the government of the country where the mine is located, nearly all diamonds produced are sold through De Beers’ DTC (Diamond Trading Company) distribution system.
How are diamonds sold?
DTC sells the vast majority of its diamonds to a select group of buyers through ten organized sales events each year. These aren’t exactly auctions, as De Beers sets the selling prices, which buyers can take or leave. But buyers are loyal even without price flexibility, as the quality and quantity of diamonds can’t be found anywhere else.
What does this mean for the rest of the diamond industry?
De Beers adapts the supply introduced to the market through DTC to match demand. This allows the company to maintain very stable prices, although possibly with a slight upward trend. Although De Beers is no longer the market leader, the company still holds a huge share of the diamond market. Therefore, its influence on the rest of the industry may no longer be absolute today, but it is no less important.
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