De Beers Don't Make (Natural) Diamonds Expensive (Anymore) | The Deep Dive

Summary

The video explores the complex reasons behind the high prices of diamonds, tracing their historical significance and the impact of monopolies, particularly the De Beers corporation. Initially rare due to limited sources, diamond supply surged after discoveries in South Africa, yet prices remained high due to De Beers' marketing and monopolistic practices. Despite losing control over the market and facing increased competition, diamonds have continued to rise in price, driven by growing demand in China and India, as well as the finite nature of diamond deposits. Ultimately, real and perceived scarcity plays a critical role in their value.

Takeaways

• 😀 Diamonds were once rare due to limited sources in India and Brazil until significant finds in South Africa in 1866 increased supply.
• 😀 The De Beers corporation established a monopoly in diamond production by merging small operations and controlling supply and pricing.
• 😀 Despite De Beers' past dominance, their market share has decreased from 90% in the early 1900s to around 22% by 2019.
• 😀 New mining ventures in countries like Botswana, Namibia, and Russia have reduced De Beers' control over the diamond market.
• 😀 The rise of synthetic diamonds has challenged traditional diamond prices, although De Beers markets mined diamonds as more valuable.
• 😀 Economic growth in China and India has significantly increased global demand for diamonds, keeping prices high.
• 😀 The concept of scarcity is crucial; while diamonds aren't particularly rare, the perception of rarity drives up their price.
• 😀 Environmental regulations and negotiations with indigenous groups can delay new mining projects, affecting supply.
• 😀 The closure of major mines like Argyle has led to concerns about long-term supply shortages in the diamond market.
• 😀 Analysts predict a widening gap between diamond supply and demand in the coming decades, likely resulting in higher prices.

Q & A

Why are diamonds considered expensive?

Diamonds are considered expensive due to a combination of factors, including historical monopolies, marketing strategies, and recent supply-demand dynamics.

What role did De Beers play in the diamond market?

De Beers established a monopoly over diamond production in the late 19th century by controlling supply, merging small operations, and implementing aggressive marketing campaigns linking diamonds to love.

How did the discovery of diamonds in South Africa change the market?

The discovery of diamonds in South Africa in 1866 greatly increased the supply of diamonds, challenging the previous scarcity and altering market dynamics.

What are some historical factors that contributed to the diamond monopoly?

Historically, De Beers muscled out competition, formed exclusive contracts, and restricted supply, which allowed them to maintain high prices despite increasing production.

How has De Beers' market power changed over time?

De Beers' market power has declined significantly; they controlled 90% of the diamond market in the early 1900s but only about 22% by 2019 due to new competitors and changing global dynamics.

What external factors have affected diamond prices in recent years?

The rise of the middle class in countries like China and India, along with the introduction of synthetic diamonds, has impacted demand and pricing in the diamond market.

What is the significance of kimberlite in diamond formation?

Kimberlite is an igneous rock that forms deep in the Earth and can contain diamonds. It is brought to the surface through geological processes, making it essential for diamond mining.

Why is diamond mining considered challenging?

Diamond mining is challenging due to the finite nature of diamond deposits, lengthy exploration and approval processes, and significant environmental and regulatory hurdles.

What is the Kimberley Process?

The Kimberley Process is a certification scheme that aims to prevent conflict diamonds from entering the market, ensuring that diamonds are sourced ethically and legally.

What future trends are expected in the diamond market?

Analysts predict that rough diamond production will plateau or decline in the coming decades, while demand, especially from China and India, continues to grow, potentially leading to higher prices.