In the first diamond sales of the year, the world's largest producer, De Beers, which works in the Botswana and South African markets in particular, aggressively raised its prices. Is this good news for producing countries?
The South African diamond conglomerate – although based in Luxembourg and London – De Beers, of the wealthy Nicky Oppenheimer, pulled off one of the most aggressive diamond price increases in recent years.
Taking advantage of extraordinary demand for gemstones, De Beers raised prices for larger stones by 5%, while smaller, pure rough diamonds saw their prices increase by almost 20%.
Overall, the increase in selling prices is estimated at 8% for total sales at the start of the year. Never seen. The biggest increase in diamond prices took place in 2013 and did not exceed 2%.
The disrupted global market
This confirms, if necessary, the control of De Beers – 85% owned by Nicky Oppenheimer's Anglo American – on the world diamond market. In Africa, the conglomerate controls the entire production chain in the two leading producing countries on the continent and in the world, Botswana and South Africa.
For specialists, this price increase is probably temporary. Business media believe that De Beers could not go to war with other producers over the world price of diamonds. If the price increase theoretically suits all producers, it risks creating discontent, from De Beers' competitors who would see their customers abandon the big corporations for more reasonable local producers, to customers who would boycott the purchase and might even be tempted by sale. Especially given the upheaval in the market and its financial implications.
Which would also explain De Beers' silence. This is one of the few times when big diamond sales make the headlines. And the diamond conglomerate would have preferred that this information remain confidential. Contacted by Reuters and Bloomberg, De Beers representatives all declined to comment on industry news.
Botswana, the loser in history?
In the jewelry market, rising prices are also likely to put several major brands unable to stock. Smaller diamonds have been popular in recent years due to oversupply. But their price fell sharply at the end of 2021.
However, retailers such as Bvlgari, Cartier or Tiffany do not have the necessary stocks to meet demand. And the price increase decided by De Beers could theoretically push them to buy at a high price, which, inevitably, would have a negative impact on their profits.
But the brands are not the only ones not to gain from the change. In Botswana, the rise in prices is of little benefit to the State.
Worse, if De Beers decides to increase its production, it will be at the expense of Botswana's reserves. Such a decision would be perceived by the authorities as a provocation. Especially since the conglomerate is already profiting too much from its monopoly on diamond mining. The stones are indeed often sold abroad, and De Beers pays only 15% tax on its income in Botswana.