With natural diamonds not so hot, De Beers is venturing into man-made diamonds with a price war.
By Mining.com via Safehaven.com:
Anglo American’s De Beers, the world’s No.1 diamond miner by value, has just had the lowest sales for its seventh cycle since it began releasing data in 2016, as it let customers delay acquiring smaller stones for the first time.
Sales for the cycle stood at a provisional $505 million, down 5.5 percent from the $533 million obtained in the previous cycle of the year and 0.4 percent from $507 million for same period in 2017.
“De Beers Group provided Sightholders with the opportunity to re-phase the allocation of some smaller, lower value rough diamonds.” chief executive officer, Bruce Cleaver, acknowledged in the statement.
The unusual move (De Beers is known for requiring buyers to take what’s offered) says lots about the state of the low-end diamond market. The last time the company did something similar, in fact, was two years ago, when India’s move to ban high-value currency notes pushed down demand.
Sales were down $134 million, or 21 percent compared to the same cycle in 2016, when De Beers began releasing this kind of data.
The diamond giant has about 80 handpicked clients called Sightholders who are allocated parcels of diamonds sorted and aggregated in Gaborone. The 10 annual sales events are known as sights.
De Beers’ new strategy for small stones, paired with its looming entry into the lab-grown stones market, have many in the industry worrying about prices.
Cheaper diamonds, which are often small and low quality, are selling for a lot less now than five years ago. And when it comes to synthetic stones, De Beers’ entry in the market will create a big price gap between mined and lab diamonds, pressuring rivals that specialize in synthesized stones at the same time.
A 1-carat man-made diamond sells for about $4,000 and a similar natural diamond fetches roughly $8,000. De Beers new lab diamonds will sell for about $800 a carat. That’s a fifth of the price of existing man-made stones and one-tenth of the cost of buying a similar natural gem.
No wonder competitors are worried. The lab-grown industry has filed a complaint with the U.S. Federal Trade Commission, accusing De Beers of price dumping and predatory pricing.
In 2016, De Beers recorded sales of $639 million for the seventh of its tenth annual sales events. That is $134 million or 21 percent more than what it just made after letting buyers reject small, low-quality stones. That means that, to date, 2018 is shaping to be the worst in terms of sales for the Beers in the past two years, with combined sales of $3.93 billion against the previous year’s $4 billion and 2016’s sales of $4.12 billion (chart courtesy of De Beers).
The dip is sales comes despite demand has remained stable ahead of the Hong Kong Jewellery & Gem Fair, at least according to what Cleaver said. The exhibit, which takes place from Friday this week to Tuesday next week, last year reportedly attracted 3,695 exhibitors and 59,122 buyers. By Mining.com via Safehaven.com.
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Diamonds and Bitcoins, like everything else, are only worth what someone else will give you in exchange.
Diamond has several important industrial uses in science and industry. Disks made of synthetic diamond are quite reasonably priced today.
For Bitcoin, this is not so.
The price is still inflated. Just like pharma drugs.
For those interested in high-end analog audio, the stylus of a cartridge is diamond, but the cantilevers are typically made of aluminum alloy. Other options are boron, gold plated boron, ruby, sapphire and a select few cartridges have diamond cantilevers.
“Diamonds Are a Tonearm’s Best Friend” (apologies to Carol Channing)
Supplies greatly exceed industrial demand.
Spot on … ! And both are bullshit fantasy crap ……
The entire luxury fashion market has gone mass market. Nothing is rare anymore, so why pay more. The financial crisis has forced me to downscale what I can buy, but the difference in quality between average and luxury is small to non existent, so I have no incentive to pay more for luxury. Most luxury brands only sell fake jewelry anyway, so women are used to fake everything now.
I’ve had a similar experience… The quality difference between luxury and mainstream products is almost non-existent in many categories. Only status seeking consumer can justify the premium. From cars to fashion to furniture.
** unpaid endorsement **
I’m near the middle of wolf’s memoir Big Like, just past the point where he shops for a jacket in a Tokyo mall. The take away is that, at least back in the late 1990s, Japanese fashion / status sensibilities were such that the “best” purchase option was to pay top dollar for the top name. Which in their culture was unimpeachable, socially.
Do I have that right, Wolf?
Is it still that way?
Wow! Fake diamonds, fake luxury, fake butts, fake boobs and fake news!
Don’t forget the fake money that pays for it all.
After Gen X, Y (Millenials) and Z, now Gen F.
Man made diamonds are not fake, they are as much a diamond as one dug out the ground. In fact one could argue they are better as they are typically faultless and they don’t come from dodgy countries so they will appeal to the snowflakes. With no new significant and economic pipes being found in decades this route is logical and one De Beers should have done long ago but as usual they catch on slowly. Production of natural diamonds can be slowed to ensure their rarity and with the right marketing the ‘real’ diamonds can be sold at substantial premiums to rich folk while the rest of us buy man made. De Beers thought they should instead discredit man made which was a grave error, now being reversed.
Blast From The Past:
Supposedly, the rule for what a guy should pay for an engagement ring is 3-months GROSS salary. If you make $80k, you need a $20k ring.
Who makes this crap up & was anybody (other than Richard Burton) stupid enough to actually do this?
Yes, you should study the whole “diamonds are a girls best friend” scam that De Beers invented to sucker the American public.
You should be able to find sources on places like youtube, etc. Very interesting story.
Diamonds were heavily cultivated as a status symbol by the few producers, and yes people took it up. Personally I like diamonds for what they are, but not THAT much. They are not supposed to be a good investment as a whole, even if you know what you are buying and achieve a street price are not really ideal …but they are not worthless either…the idea is that they are forever and so resale is not the question…maybe the number of dissolved marriages effects that whole sentiment? There is a slight quality difference with fabricated diamonds, I don’t think the average person would notice it, so natural diamonds are maybe a purist endeavour. Even well cut cubic zirconia is not too far off but you can usually tell even from a distance if you know how diamonds are, has not the charm diamond has.
What a load of BS.
I remember when the guideline was a month’s salary. Years later they were pushing two months. Three is really pushing their luck.
When you can produce something in a lab or factory with as good quality of what you can find in nature…guess what happens to price?
Especially for something that has little value outside jewlery.
Off the top of my head – sponges, lamp oil, rubber, etc
Gemstone-quality artifical diamonds have been very hard and expensive to produce until 2011-13. But once the practical problems were solved, they have become more and more commonplace: Gemesis (now PGD), a US artificial diamond producer, offers cut artificial diamonds up to 10 carats. Industrial-quality diamonds are another story, albeit they consist of over 90% of the worldwide diamond market.
Forgive me here if I’ll go a bit technical.
There are three financially viable methods for producing diamonds: High Pressure High Temperature (HPHT), Chemical Vapor Deposition (CVD) and microdetonation. A fourth method, using cavitation of a graphite solution, is not considered financially viable at the moment.
If somebody wants the gory details, I’ll try to fill in without boring the leggins off him. Chemistry is not all wacky and zany.
HPHT, originally invented by General Electric, is the oldest method to obtain artificial diamonds, and the only “dual use” one, meaning it can be used to obtain both gemstone- and industrial-quality diamonds.
De Beers, despite openly waging an all-out war against articial diamonds for decades, has a rather nice artificial diamond operation in the UK, mostly using HPHT cycles. While De Beers has only sold industrial-quality artificial diamonds so far, it’s a sector where competition is ferocious.
Prices of industrial diamonds have fallen off a cliff since China entered the game: please know that as processes are fully automated, industrial artificial-diamonds made in China are exactly the same quality as those produced in Sweden, the US and Russia. What makes Chinese producers so competitive are chiefly energy costs, as growing diamonds is quite the energy-intensive process.
For a company like De Beers securing the relatively small capital required to adapt the HPHT cycles to make gemstone-quality diamonds is cheap and easy. Plus gemstones can be sold at a higher premium and in a much more restricted market which De Beers largely control.
On the paper it’s a win-win situation but how long will it last? The technology is out there: De Beers doesn’t “own” it and China has a lot of really smart people who can implement it.
Please humor me, what’s microdetonation? I know about CVD, microdetonation sounds like blowing stuff up. How does it work to make diamonds.
Yes, microdetonation is exactly what it sounds.
Basically you have a ballistic-quality sealed chamber (similar to those used after WWII to dispose of unspent ammo and mines) where an oxygen-poor atmosphere is created. The oxygen content is usually between 8 and 10%.
In this chamber small charges (5g each at most) of a variable composition mixture of TNT and RDX (also known cyclonite or hexogen) are inserted and detonated.
Immediately after the detonation the chamber is cooled by injecting either CO2 or pressurized water into it.
The resulting soot, extremely diamond-rich, is then boiled in acid (usually sulfuric acid, but mixtures of nitric/hydrochloric acid are also used) at high temperature and high pressure for at least one day to remove impurities, which mostly consist of metal from the chamber walls.
While yields are extremely high (over 50% and up to 80%), the diamonds obtained are very small indeed, so much they are sometimes called “detonation nanodiamonds”. As can be imagined most of the diamond powder used in industrial processes, from lapping to electroplating, is produced this way.
I think 70% of microdetonation diamonds are produced in China, and the rest in former Soviet countries. It has nothing of the elegance of CVD or of the Baroque complexity of HPHT, just brute force, but it gets the job done and yields are extremely high.
What is the upper limit on the size of man-made gemstone-grade diamonds: you mentioned 10 carats but can we likely go higher someday? Will we ever see a man-made Regent or Koh-i-Noor?
Diamond purchases just aren’t a large priority of younger generations unable to afford moving out of their parent’s basements. Also I think people aren’t getting married as much anymore.
That takes the price of man-made diamond to the same as moissanite, the previous closest man-made alternative to diamond, besides man-made diamond itself. Not surprised that other producers of gems are not happy
Diamonds are a great example of artificial scarcity. Boxcars full of diamonds stashed by DeBeers. Outside of industry uses, it’s been the ad promoting to women that “if he really loves you he’ll pay thru the noise for one of our rocks”, that’s kept this scheme going. Women fall for this nonsense. Instead of getting a house full of appliances and furniture, for the same price, she opts for the diamond ring to flash around to friends and family “proving” what a great guy she has. I would like to see somebody educate the public on this craziness. The only value besides the hardness for industrial use, is the cutters skills. Not the diamonds per se. Diamonds are the worst capital sinkhole the average family ever pays for outside of Vegas gambling losses.
Ever tried to sell a diamond? – No market.
Because no bride-to-be wants a second hand ring. Because what does that say about her guy’s feelings for her?
Dan, you may be surprised to learn that most precious stones around these days have already been recycled once or twice with the buyer often not suspecting a thing.
Gemstones can be reused “as is”, but more often they are either cut into several smaller stones or recut in a more fashionable shape.
Before you ask me how I know, both my mother and my grandmother have a true passion for gemstones and jewels. It must be the reason I’ve never even thought about marrying. ;-)
There’s little market for loose gemstones, albeit if the price falls low enough they’ll eventually find a buyer, but there’s always a very strong market for so-called “vintage” jewels.
These old jewels can be sold by down-on-their-luck families wishing to get some hard cash, but more often than not they are trade-in’s as jewels become outdated and go out of fashion.
My mother has had several gemstones recut and cast into new jewels: it’s an expensive process, but cheaper than buying a new jewel. That’s another road you can take, especially if you have a clear idea of what jewel you want.
When an old gemstone gets “repurposed”, the end result is always a considerably smaller gemstone, or to be more precise one somewhat smaller gemstone and several considerably smaller gemstones. I can assure you no bride-to-be (or expert from De Beers or the Diamond Trust of Russia) could tell the difference, for the simple reason that’s the genuine article.
diamonds have always had 1 important usage.
If purchased at a realistic “TRADER’S” price, they have always been a reliable means of carrying money about.
Any real trader will buy stones “at the wright trade price”.
Beyond that price they are just like scam coins (Now down 80%) a scam, as may others have mooted.
Didn’t I read about stuff like this in a comic book? Ah yes in Dillbert.
Diamonds are an older scam than US dolllars. And artificial diamonds means the scam has the days counted.
…and if even now they are really secretly cooking up $800 per carat man-made diamonds for cents ?
I bought a diamond ring with a 1 ½ carat manmade diamond for my wife (this was not my wife’s engagement ring). Cost was $200 twenty years ago and this price included a platinum setting. Quality even then was excellent. The ring passed the “my Mother Test” and fooled a jeweler friend of mine. At that time, 20 years ago, the ring would have run around $15,000 because the quality was perfect.
My wife opted to spend money for appliances and furniture, though those are all gone now………
20 years ago? That man-made “diamond” was indeed man-made, but not diamond. It was cubic zirconia. Only recently has the technology advanced to the point where gem quality man-made diamonds, in larger carat sizes, are possible. This will severely depress natural diamond prices over time.
“This will severely depress natural diamond prices over time.”
Premium “Natural stones” Particularly blues and pink’s will always have a “Value” above man made stones, just as natural and cultured pearls, have different values.
Discuss this with a good Jewish Jeweler.
If you are privileged enough to know one.
Why do you think this is so? Plenty of artificial creations have replaced the real thing when the artificial is of the same quality and much cheaper and that’s how it should be.
I wish this was true. The color in “fancy” diamonds (other colors than gem white) is related to minor impurities in the carbon structure, such as nitrogen (yellow) or boron (blue diamonds). Right now, a good gemologist (note: jeweler does not equal gemologist) can identify most synthetic colored diamonds, due to fluorescence and inclusions, but I can see the day that only GIA.edu with their Colored Diamond Identification Report will be the only ones to tell the difference.
One day, as manufacturing improves, even they will probably put a disclaimer in small print on the bottom of their reports to cover their ass on some of the stones they grade where there is doubt.
For every 100 jewelers, there is one or two certified gemologists, and when I was in the business years ago, I was the rarest of them all – a Goyim ;)
Wendy, I went and looked up the purchase date. I actually bought only 14 years ago, thought more time had flown by. Diamond being a 10 in hardness, this stone is rated at 8.5 to 9. But it looks nice and as I said, my jeweler friend was very impressed.
I agree on the quality sentiment.
Everything is mostly terrible these days with very few true premium consumer products.
The best VFM recently has been USA made import stuff.
A thick stainless steel ice cube tray and a few Lodge cast iron cook wares.
They’re relatively cheap and will last forever just like diamonds, but are priced very modestly given their last forever properties.
On diamonds, all those men/women who bought big ones to look flash will soon have a cheapskate image associated as everyone else assumes they bought a big artificial to look flash.
Or those idiots with old mobile phones covered in diamonds and so ‘worth’ $1,000,000 etc.
I now wonder if we’ll see even more excessive use of diamonds on pointless items so they appeal to the high price tag ‘luxury’ consumer.
May the diamond business and the hucksters who scam the masses with artificial scarcity and price gouging die in an agonizing and tortured way.
The ENTIRE industry was a marketing ploy at a time when demand dropped. It is one of the most successful scams in the history of marketing.
A quick google search is all one needs to learn the truth about diamonds (engagement rings/wedding rings). They do have industrial value.
This starts with smaller stones, how long until it gets to the 1-1.5 ct segment of the diamond market. If DeBeers doesn’t someone else will. Given the demographics of the Signet customer (Kaye & Zales) this is going to destroy revenue and profit for a SIGnificant portion of their business.
It’s illegal to pick up diamonds off the ground in South Africa, but you can still get away with it if you’re willing to risk being disappeared.
…are you allowed to sort of dribble them along ?
So for DeBeers demand is down… but for Alrosa it’s up…
Diamonds are a harmless thing to spend money on.
If there were no cartel controlling the price of diamonds they would be $100 per carat.
I worked for a NYC sightholder for the last 11 years. He also happens to have Four of his own indipendent mining contracts and cuts everything for DeBeers 5 carats and over as the dont cut stones. Back around 2008/2009 the Chinese poured millions of $$$ into the D Flawless Diamond Market 10.00 carats and above. Diamonds became so unfordable even rich clients from the west wouldn’t bite. When the heads of DeBeers group met with the owners of my company at our Madison Avenue Loction they said they did not care about the west as lee nd as Asia was consuming. Well around 2012 the Chinese moved onto to rate Colored Diamonds and Rare Ruby,Emerald and Sapphire and large whites collpased and took the whole market down with it. Now everyone in the Industry is scrampling to fix it and its probably to late. I tell my private clients to just follow the Chinesee now and het in early and purchase the best you can find.