Does De Beers have a diamond monopoly?

During the last century De Beers obtained, and subsequently lost, an 80% stake in the diamond sector. Practically controlling the entire diamond industry, supplying 4 out 5 rough diamonds worldwide. In an attempt to control worldwide demand and prices, the market reacted and today their share has been reduced to 35%.

Their monopoly has been broken, for in a monopoly one player dominates the market. In an oligopoly, a small amount of suppliers dominate the market. This allows them to individually determine their production capacity and prices. Although not monopolists, they remain very influential.

Setting prices for diamond

Most diamond mines have multiple owners but are run by a single entity selling the product. This distinction is very important because you can only set a price if your stake in the worldwide supply is substantial.

Most De Beers mines are property of their subsidiaries and the governments of the country they are located in. Mostly joint ventures like Debswana (De Beers and Botswana) of Namdeb (Namibia and De Beers).

Even though the property of these mines is split 50-50, practically all diamonds are sold by De Beers’ distribution system DTC (Diamond Trading Company). The governments may have a stake in DTC but only DTC can influence the prices because it sells 35% of all diamonds worldwide.

The vast majority of these diamonds are sold to a select group of buyers, via ten organized sales events every year. Unlike auctions, De Beers sets its prices and you take it or leave it. Although De Beers is a very inflexible supplier, its customers are very loyal because the quality and quantity of their diamonds are unmatched.

Loyal customers, stable prices

DTC has earned the loyalty of its customers by a very stable offering. This loyalty gives them control over prices. De Beers supplies diamonds in relation to the markets demand. Resulting in very stable prices albeit in a slightly upward trend. Whether or not De Beers still has a monopoly is up for debate. We would let you decide for yourself. And if you decide to invest in diamonds, please contact BAUNAT’s diamond experts. Let us guide you to a viable investment with our experience and know-how.  

Author: Lynn Van Acoleyen

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