Somewhere here on the boards I remember reading that the “scarcity” of diamonds was a fiction cooked up decades ago by DeBeers, and that DeBeers had lost control of this fiction, and that diamonds were consequently about to become ridiculously inexpensive.
Is this true? If so, how soon will the prices begin to fall?
And if it happens, will some other genuinely rare and “precious” stone replace diamonds on the fingers of trendsetters worldwide?
I think that the fact that DeBeers has been stockpiling diamonds, keeping the supply low to drive up the price, has been an ‘open’ secret for years. I remember reading a sci-fi story, pre-Apollo, (probably pre-Sputnik,) that had as a plot point the main character going to the diamond cartel, (not named but probably a clear debeers reference,) and selling them the distribution rights to any and all lunar diamonds discovered by his space mission, should there be any… and hinting that if there were vast quantities and they didn’t buy up the rights now, their cash cow would be gone.
The thing is that, barring any drop in demand, or a source of supply becoming available that deBeers cannot control, the fact that the scarcity is a fiction doesn’t affect the price. (And, of course, nobody who has spent a lot of money on diamonds really wants to see the price of them fall either.)
You mean the deBeers diamond cartel and it alleged dubious practices?
DeBeers influence HAS been declining, mainly due to stepped up production by the Russians. Russia happens to have very extensive diamond deposits. At one time Russian diamond dealers worked hand-in-hand with the DeBeers cartel, selling most of their output to DeBeers, but have been increasingly selling directly to various other buyers and telling DeBeers to get stuffed.
It hasn’t really changed the situation, however, since the Russians don’t want the price to fall any more than DeBeers does. But there are other players in the game, now, such as Canada:
http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=A1ARTM0012509
As more players enter the game, the chance that somebody will get either pissed off or stupid, and do something like flood the market increases.
DeBeers once controlled 80 percent of the world’s diamond production. It’s down to about 50%. BTW, DeBeers is no longer a separate corporate entity - they are owned by DB Investments, a consortium largely owned (45%) by Anglo-American, PLC, of South Africa.
Gem grade synthetics may become commercially viable, as well. There was a discussion on the Unaboard about this subject recently, as well as non-gem uses for cheap diamonds:
http://65.69.77.33/forums/showthread.php?s=&threadid=8294
All in all, I wouldn’t expect them to become dirt cheap, but in the long run, you have to wonder what’s going to hold the price up at current levels.
The speculation in several SDMB threads about an inevitable fall in the price of diamonds has to do with the fact that developers are getting closer and closer to being able to manufacture gemstone quality diamonds in the laboratory. This would be the “source of supply…that deBeers cannot control” to which chrisk refers. We have debated whether, even in the event that diamonds indistinguishable from mined ones could be created, the mined ones would still have some sort of status value that would keep their price high, but it seems inevitable that a large, readily-available supply of cheap(er) man-made diamonds would have to have an effect on diamond prices.
Much more information about the potential for manufacturing diamonds in the Wired article which sparked some of the earlier threads.
In related news, the US Justice Department may be prepared settle the US goverment’s price fixing charges and let DeBeers reenter the US market with its own direct retail presence:
http://www.buzzle.com/editorials/2-24-2004-50941.asp
(Although DeBeers ADVERTISES in the US, they have operated only through intermediaries for the last 50 years because of the ongoing lawsuit)
…will some other genuinely rare and “precious” stone replace diamonds on the fingers of trendsetters worldwide?
Emeralds and rubies have already done this to a certain degree. There are artificial rubies being made but I believe the maker so far is doping them so they glow under ultraviolet and can easily be distinguished from mined rubies. I’ve read of artificial emeralds in the works but as yet I haven’t heard of them being marketed. This is all just from casual reading, I am not an expert in gems by any stretch of the imagination.
Mutually Assured Destruction: If anyone floods the market, we all go down the same way.
So, let’s reduce it to you and me:
[ul]
[li]Assume we’re both rational. The only rational play is to not flood because the Good Times can Roll On Forever.[/li][li]Assume one of us is irrational. The only rational play is to flood the market first and catch the steep increase in sales right before the irreversible drop in prices. The Good Times last a very, very short while.[/li][/ul]Now, the irrational play would give immediate satisfaction at the cost of long-term ruin. The rational play would give long-term prosperity.
Will it work? Was the H-Bomb ever dropped on Moscow?
There are other reasons to want cheap diamonds. Cheap diamonds could be used for everything from knife blades, to tooth coatings to nearly unbreakable semi-conductor chips.
Once diamonds are easy to make, they will literally be everywhere. ANd since there is no difference between natural and artificial anything, the value of diamonds will plummet.
You carried the ball so well through the first sentence, and then fumbled it in the second.
Ringmakers and jewelers don’t want to lose money any more than DeBeer’s does. Marketing is a very, very powerful force, especially when they can all but wave hot steaming sex under the noses of wage-earners. A ring will continue to be six months’ pay no matter how much six months’ pay becomes, regardless of how many diamonds we have in our knifeblades and CPUs.
I seriously doubt that. Sure, there will be greedy SOBs trying to keep diamonds overpriced, but in the long run they will fail. And marketing is only good as the marketer’s ability to fool the public. Once word gets out that diamonds can be made cheaply and easily in even higher quality than what’s found in nature, and diamonds are being used in everything that they can be used in, the best marketing campaign in the world would be useless to keep prices up. Diamonds will one day be almost as cheap as most other things made up of carbon.
Keep in mind, that there will be absolutely no way to stop unscrupulous diamond makers from making diamonds that are in all ways indistinguishable from natural diamonds. Once this knowldege gets out, do you really still think that diamonds will hold their bloated values? How would you tell a ‘fake’ from a ‘real’ diamond? Why would you even bother to try when there is no difference?
I can add to this that some mining engineers and international minerals economists I know have been predicting the “imminent downfall of DeBeers” for more than 30+ years now, each time coming up with different causes. Just saying, regardless of the the current situation people do like to speculate with a bit more enthusiasm than warranted sometimes on diamonds falling to the price of rock candy.
Of course, I never said that DeBeers would go out of business, nor did I anywhere imply it. I merely stated that they will someday lose the ability to charge many times what a diamond is worth like they can now. I’m very sure that they are looking into ways to get into artificial diamonds right now.
I can just see some beau in the near future driving up in a dump truck to deliver six months’ worth of his salary in diamonds to his sweetie.
I think you’re underestimating the invisible hand. In a free market, even with only two players on the supply side, it will be to one’s advantage to undercut the price of his rival by a little bit to increase his sales. Prices would inevitably spiral down.
Derleth, your forgetting one thing.
In the short term, you can make a lot of money flooding the market. A lot of money. Greed always gets the better of humans impatientness eventually.
Artificial diamonds of gem quality are already in production - at the moment, they are only able to make coloured stones (but they are making this a selling point). The artificial stones are currently quite easy to detect and the company selling them is making no efforts to pass them off as natural, however, DeBeers are noticeably very concerned.
The technology will probably improve to the effect that it becomes more and more difficult to detect the artificial product, which will be interesting.
Hmmm… just wondering now, if the price of diamonds crashes due to artificial imitations, will their place as the ‘six months’ salary engagement stone’ possibly be filled by artificial designer stones, created to appear even more remarkable than diamonds, in accordance with carefully designed trends?? “Show her she’s the only one in the universe for you— buy her a GALAXY SAPPHIRE… put all the stars in the night sky on her finger and she’ll love you forever.”
If they ever tow this baby home there’ll be a few peeved South Africans.
Six months pay? Is that take home pay or is that gross salary?
You’re going to have to do the math and prove that result. A dollar today is worth more than a dollar tomorrow, so it may indeed be beneficial to capture large gains now.