Diamond Industry, de Beers

Topics: Diamond, De Beers, BHP Billiton Pages: 8 (2828 words) Published: September 29, 2012
Diamond Industry. De Beers.

In the beginning of 1870s, the Afrikaner brothers, J. N. de Beer and D. A. de Beer discovered diamonds on their farm and unable to deal with the effort of protecting the farm from the diamond seekers, they sold the land to the diamond traders. Today, the name De Beers represents the world’s largest diamond company, which has a presence in 25 countries. The powerful and productive epoch of diamonds began with the establishment of this company. Who knows what role a diamond would play in people’s lives if not for its monopolization by this company. It was formed as a group of diamond producers whose goal was to fix prices, control supply and limit competition, and this is exactly what De Beers has done historically with the trade of diamonds. If the goals didn’t succeed, the diamond’s role in our life would be little. First of all, the diamonds are not as rare as people think they are. Up until the late nineteenth century, a diamond was rare stone. They were found only in a few river beds in India and the jungles Brazil, and the entire world production amounted to only a few pounds a year. In 1870, however, there was a radical change: diamond pipes were discovered near the Orange River in South Africa. Now, rather than finding by chance occasional diamond in a river, diamonds could be scooped out of these mines in mass quantity. Suddenly, the market was deluged with this flood of diamonds, and the British organizers of the South African mines quickly realized that their investment was endangered because the price of diamonds depends entirely on their scarcity. They realized that they had no alternative but to merge their interests into a single entity that would be powerful enough to control the mine’s production and, perpetuate the scarcity and illusion of diamonds. This plan has lasted for over one hundred years, and a very small group has managed to expand the control of this jewel over not only Africa but also Asia and South America. Today they still control where the diamonds are mined, how they are cut and polished and where they are sold. This empire has used the forces of war and marketing to make its wealth grow. The De Beers company has had serious threats to its monopoly when diamond mines were discovered by others in different parts of the world. One of the biggest threats it had to overcome was the discovery of large quantities of diamonds in Siberia, 1957. Eventually, Russia ended up joining the De Beers cartel in order to have an inflow of foreign currency. They were persuaded by DeBeers that it would be more profitable to let De Beers sell them then it would be if they merely flooded the market and dropped prices to both parties. Another threat to the cartel materialized in Australia. Australians realized that their colored gems are not an important part of the De Beers’ marketing plan. Therefore, they broke away from the cartel in 1996 creating their own market for colored gems and worked in close cooperation with the Indian diamond cutting industry. A large volume of these gems was now available. The response was immediate: the price for the type of stones marketed by Argyle (Australian diamond company) fell sharply in 1996. The next major producer to come into existence was Canada. Recent news is that three new mines are about to open. De Beers is opening two of them (Francis Diane). Having to deal with the appearing competitors, De Beers are trying hard to hold control over the diamond production, and it’s becoming harder and harder for the company to maintain its power of a diamond monopoly. A diamond’s value depends on its future supply, and if the market has a lot of competitors, the value would substantially decrease.

For the diamond industry, it was necessary to create a mass mentality in which women would perceive diamonds, not as precious stones that could be bought or sold according to economic conditions or fashions, but as an...
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