Home Others The downfall of De Beers from the Diamond Monopoly Industry

The downfall of De Beers from the Diamond Monopoly Industry

by Sangam Adhikari

Diamonds are extremely rare. People who aren’t in the business of discovering them believe they aren’t uncommon. They may seem popular to others because the systems that have evolved to supply diamonds of any scale, cut, or grade to consumers are so effective that almost any request can be fulfilled in a relatively short period of time.

For many years, De Beers’ CSO (Central Sales Organisation) was in charge of the market’s diamond supply. They did so despite significant difficulty and numerous challenges from independent miners.

When prices were low, De Beers would release very few diamonds for sale, and more when prices were significant. This certainly has an impact on prices in the medium term, but consumer demand has always been the primary driver.

In the late 1990s, demand was so low that De Beers kept $5.5 billion in diamonds in their basement vaults. This was costing the company approximately $500 million per year in opportunity costs, insurance, and inspection fees.

However, the company’s marketing clout and vast resources were insufficient to reverse the drop in demand, which lasted until China and India emerged as rapidly growing diamond markets.

However, diamonds were discovered in large quantities in Argyle, Western Australia, in the 1980s. This deposit was not owned by De Beers, and it was eventually taken over by Rio Tinto, a large mining corporation.

They participated in the CSO for a time but were dissatisfied with the prices they were receiving, so they began marketing their diamonds on their own. This marked the beginning of De Beers’ loss of control over the diamond market.

Diamonds were later discovered in the northern parts of Canada, as well as other locations. De Beers had no control over these as well.

By the turn of the century, an anti-trust case against De Beers had been filed in the United States, and De Beers had agreed to disassemble what remained of its market dominance. It ceased marketing activities on behalf of Alrosa, the world’s largest diamond miner.

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De Beers’ market share of diamonds has dropped from around 90% in the late 1980s to around 30% today, and the fad is continuing. Diamonds are currently freely traded on the market place. The diamond market is not controlled by a single company or consortium as of now.

The market value of diamonds has steadily increased seeing as De Beers agreed to depart the diamond marketing business.

It could be argued that De Beers kept diamond prices low so that they wouldn’t have to fall in the event of another Great Depression, but the recession of 2008 did little to lessen public interest in diamonds.

Although the diamond industry has recently faced challenges, this has been largely central to the growth of higher-quality synthetic diamonds than were previously available.

Synthetics, on the other hand, are likely to affect only a small portion of the diamond market, just as they have in the past only a small portion of the emerald and ruby markets.

It is safe to assume that diamonds now are freely traded, as they have been for several decades, and are no longer controlled by De Beers.

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