Regal Imports News for SEPTEMBER 2018
De Beers is no longer a friend of the trade; De Beers is the trades largest competitor. They have opened a company-operated Forevermark store in China and will soon be selling Forevermark online direct to U.S. consumers. This month De Beers' new Lightbox venture will begin selling laboratory grown jewellery direct to consumers. These new De Beers initiatives are part of a well-engineered plan to profit solely from their diamond production.
Buyers are finding it increasingly unprofitable to purchase and cut rough and sell the resulting polished diamonds to the trade. Since De Beers is currently contracting cutters to polish their laboratory grown production, it would be a logical progression for them to implement the same procedure for their natural rough; that is to contract cut their natural rough and sell it themselves to end consumers. This plan would enable De Beers to set retail selling prices for their natural production just as they are doing with laboratory grown diamonds. Following this idea to its conclusion, De Beers could control the market by setting retail polished diamond prices at a level where others would not be able to compete.
De Beers is once again speaking about a diminishing rough diamond supply. They want to demonstrate to anyone who will listen that less natural diamond production will inevitably lead to price increases. Their objective is to convince those selling and buying diamonds that limited quantities will equate to a natural diamond value proposition. I really don't know how this 'old line' is selling through to an increasingly dubious public.
When I speak about a dubious public, I am speaking of a younger generation that has not been exposed to years of diamond promotion. A generation that looks at the world with suspicion and questions the integrity of everything and everyone. De Beers needs to present a clear definition of what the term rarity means backed up with solid unbiased factual evidence of their rarity claim. They need to demonstrate that new methods of finding and extracting diamond deposits will not lead to increased production in the near future. Technological advancements are resulting in the recovery of much larger diamond rough than was able to be unearthed even a few years ago. It is reasonable to conclude that new developments in mining will result in lower costs, more accessibility to diamond deposits and better returns from older mines. Demonstratable uncertainties surrounding rarity claims support a skeptical view of De Beers rarity supposition.
What about recycled diamonds? These diamonds represent the world's largest diamond deposits. Diamonds have been popular for over 100 years. The Baby Boom generation were conspicuous spenders and they and previous generations have purchased a lot of diamonds. These diamonds are being passed on to a younger generation, many of whom may have either purchased their own jewellery or just do not appreciate diamonds. Unwanted diamonds are re-entering the market.
De Beers is also mining for these recycled diamonds. They are currently purchasing diamonds directly from the public. This new De Beers estate purchasing venture is called "The International Institute of Diamond Valuation". The wording on the front page of their website addresses the public saying, "You can sell your diamond jewelry directly to us". The formation of this company facilitates a De Beers attempt to control the purchase price of estate jewellery and diamonds. De Beers has stated that they want to set their price for purchasing estate jewellery higher than retailers are willing to pay. Given the direction of other De Beers initiatives, there is always the possibility they will sell their recycled diamonds and reconditioned jewellery back to the public through a web platform. This venture is another attempt to dominate every distinct aspect of the diamond industry.
Avi Krawitz condenses the whole situation like this, "De Beers has carefully placed itself in every corner of the diamond market. Beyond its core mining and rough trading operations, the company has retail stores and a diamond brand, grading operations, synthetics for industrial use - and now for retail jewelry as well - and synthetics-testing equipment. It dabbles in polished sales from its outsourced manufacturing, as well as third-party rough sales, and it buys jewelry from consumers and resells the polished to the trade."
Avi Krawitz is a professional diamond analyst. He is correct when he concludes that, "De Beers is setting the agenda in the industry, and it's not about rough production. With its fingers in many pies, the company appears well in control moving forward." I, on the other hand, have a personal stake in the diamond industry. When I look out my window today in Vancouver I see the clouds gathering, the sky is dark and the rain is falling. I see and feel what surrounds me and affects my business.
The weather is changing in the diamond industry. The change is trending towards a form of corporate domination. It may result in more diamonds being sold but if so they will certainly be sold in a different manner and by different players. As Avi Krawitz points out, De Beers is certainly making plans for its future in diamonds and they are deeply invested. De Beers parent company, Anglo American, is the eighth largest mining company in the world and has an available working capital of 33 billion U.S. dollars. If it is true that De Beers and Anglo American are becoming the trades largest competitors then they are a formidable foe! Their actions should be viewed with a degree of apprehension. It is clear that De Beers has a plan for the diamond industry but does the diamond industry have a plan to contend with De Beers?