The Price of Diamonds Is Too High
The price of diamonds has been controlled, up until recently, by cartels. Cartels are formed when suppliers of a particular product or service formally agree not to compete with one another. Cartel agreements usually determine the price, output and supply levels as well as where and to whom the product will be distributed to. De Beers is one of the commonly heard names with regard to diamonds. Up until recently De Beers controlled the diamond industry. It both created and lost the most powerful monopoly in history. Through a discussion of how the cartels operate and the laws of demand and supply, one will be able to determine whether the price of diamonds is too high.
History of De Beers
Cecil Rhodes created De Beers, which became the owner of most of the diamond mines in South Africa. De Beers Consolidated Mines Ltd., was formed in 1888. This created a monopoly on all production and distribution of diamonds in South Africa . Many other diamond suppliers joined forces with De Beers as to create scarcity of diamonds, once again, as to increase their price. De Beers and its Central Selling Organization established exclusive contracts with producers and consumers, which made it impossible to trade diamonds outside of the De Beers Empire. De Beers would determine the price and quantity of diamonds for the year. Therefore each one of its producers would receive a part of the total output to be sold at the predetermined price. When the monopoly was threatened through the discovery of diamonds in other countries, De Beers bought the diamonds increased their inventory and therefore their complete control through funneling all sales through single channel. When rebellions against De Beers occurred, th...
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...er’s diamond cartel, the world’s most powerful monopoly, no longer exists, the company itself is still a billion-dollar business. The demand for diamonds is still great and the supply scarce. Diamond engagement rings are no longer seen as the only accepted form of engagement rings; therefore people look to cheaper alternatives. Although substitutes for diamonds are increasing in popularity and diamonds are no longer seen as the only symbol of love, are still in high demand. The interdependence of firms in the oligopoly market structure stabilizes diamond prices and still allows for the firms’ profits to be maximized. De Beers and the Central Selling Organization monopoly managed to set the price of diamonds extremely high. Although the oligopoly market structure regulates diamond prices, in relation to the useful value of a diamond the price of diamonds is too high
Also, the competition between existing players in this industry is high. There are about 619,000 metal enterprises in the USA in 2005 (IBISWorld, 2007).There are many companies that produce different kinds of metal products in the market. Besides, the bargaining power of buyers is high because product difference for the buyers of the metal products is small. It is not easy to differentiate the quality of one metal product from another. In addition, the cost of switching for the buyers is low. The number of substitutes of metal products is also high thus the buyers have great bargaining power.
...sumption, creates emission of greenhouse gases and other harmful chemical materials. Once released into the air, it can cause environmental problems, which in turn threatens not only the environment, but also the health of the people who live in it. In order to reduce the use of energy to help protect our planet and our health, the diamond mining industry has implemented renewable energy programs to monitor energy and carbon emission. Since its beginning, mining company PHP Billiton program has saved an equivalent of one million liters of diesel fuel per year at their Ekati Diamond Mine in Canada’s Northwest Territories. The health of the environment and the health of humanity are as one. Whatever we do to our planet, we do to ourselves. Reducing energy consumption of diamond mining not only helps protect our planet, but also helps protect the health of our people.
Diamonds were not bought as a store of value, they could not be traded in the same w...
Some of the highest producing diamond mines are countries in Africa. Countries that had some of the highest rate of conflict were Angola, The Democratic Republic of Congo, Sierra Leone, and Liberia. The ...
The century old diamond empire, reached a height of over $4 billion in sales 1998. Eventually, De Beers changed hands to a German, Ernest Oppenheimer, at the turn of the 20th century. De Beers’ most formidable opponent was not another diamond company, but rather the U.S. Justice Department. Constantly faced with Anti-trust regulations, De Beers managed to elude all charges over the course of thirty years, by selling only indirectly to the U.S. All their business went through London first. As De Beers’ supply chain indicates (Exhibit 1), their relationship with U.S. diamond dealers and the U.S. government is unique among international companies as they remain at arms length from the U.S. with the intent to keep the government at bay. That relationship came to a halt when the U.S. Justice finally prevailed and De Beers pleaded guilty to price-fixing. The cartel was fined $10 million1. This, even now, has paved a new opening to “re-enter” the U.S. diamond market. With Nicky Oppenheimer and Gary Ralfe as the new De Beers leaders, this was an opportune time for De Beers to reinvent themselves on the U.
It’s hard to imagine that a mineral could be fueling wars and funding corrupt governments. This mineral can be smuggled undetected across countries in a coat pocket, then be sold for vast amounts of money. This mineral is used in power tools, parts of x-ray machines, and microchips but mostly jewelry. Once considered the ultimate symbol of love, the diamond has a darker story. "Blood" diamonds or "conflict" diamonds are those mined, polished, or traded in areas of the world where the rule of law does not exist. They often originate in war-torn countries like Liberia, Sierra Leone, Angola, and Côte d'Ivoire were rebels use these gems to fund genocide or other questionable objectives. Even with a system known as the Kimberly process which tracks diamonds to prevent trade of these illicit gems, infractions continue as the process is seriously flawed. The continuation of the blood diamond trade is inhuman, and unethical, and in order to cease this illicit trade further action to redefine a conflict diamond, as well as reform to the diamond certification prosess is nessasary.
Diamonds symbolize wealth, success, power, and really all of the characteristics of living the good life. Shirley Bassey immortalized her love for the jewels as she sang “diamonds are forever, they are all I need to please me “are the first two lines of the song. Diamonds are forever is the theme song of the same name for the seventh film in the James Bond Franchise. Diamonds are forever was released in 1971, transitioning into the decade 2010 I believe we still have the same Obsession on the value we as consumers and a society place on Diamonds. People have a fascination with diamonds. Although these precious stones are visually captivating and highly valuable are they more precious than human life? If the answer is Yes, Then you support blood/conflict diamonds. If the answer is No, than become a conscious consumer by purchasing only certified diamonds. The trading and distribution of blood diamonds must have zero demand and zero tolerance if blood diamonds are to be complete if blood diamonds are to be completely and effectively eliminated.
Deep within African mines, elusive diamonds lay enveloped in the Earth’s crust. Possessing much influence, beauty, and tension, nature’s hardest known substance causes parallel occurrences of unity and destruction on opposite sides of the globe. Diamonds, derived from the Greek word "adamas", meaning invincible, are formed deep within the mantle, and are composed entirely from carbon. Moreover, only under tremendous amounts of heat and pressure can diamonds form into their preliminary crystal state. In fact, diamonds are formed approximately 150km- 200km below the surface and at radical temperatures ranging from 900-1300 C°. When these extremes meet, carbon atoms are forced together creating diamond crystals. Yet how do these gems, ranking a ten on Moh’s hardness scale, impact the individual lives of millions of people besides coaxing a squeal out of brides-to-be? These colorless, yellow, brown, green, blue, reddish, pink, grey and black minerals are gorgeous in their cut state, but how are these otherwise dull gems recognized and harvested? Furthermore, how and why is bloodshed and violence caused over diamonds in Africa, the supplier of approximately 65% of the world’s diamonds? (Bertoni) The environmental, social, and economic impact of harvesting, transporting, and processing diamonds is crucial because contrary to popular belief, much blood has been spilled over first-world “bling”.
The 1867 discovery of diamonds in Cape Colony, South Africa, prompted a rapid colonization by the British. The British sought to create a South Africa Confederation and bring the African people and diamonds under British control. They imposed strict taxes on the South Africans and sought to create a “South African Confederation” in an effort to better
There were fierce competitions among the producers that have scale and scope of operations which were similar to each other. For instance, the Pepsi Co. and Coca Cola companies have developed the strategy and infrastructure, which are hard for the local sellers to complete with them. However, there were still many producers including new entrants that try to access the market and compete seriously with low price and differentiation- strategies among rival...
iii. India dominates the world’s cut and polished diamonds (CPD) market. In value terms, the country accounts for approximately 55 percent of global polished diamond market and nearly 9 percent of the jewellery market. According to GJEPC's provisional estimate, cut and polished diamonds registered 19.06 percent growth in exports at US$ 7.11 mn.
The mineral diamond can be found in various places. Diamonds are found on planets such as earth, uranus, neptune, saturn, and jupiter. The atmospheres of these planets have the perfect temperature and air pressure conditions to host the carbon in form for the diamond. Diamonds must be in an area with very high temperatures and high pressure for the diamond minerals to be able to form. They need the high temperatures to allow them to become stable ad have a good foundation.
The film marker is trying to raise awareness of the illicit conflict diamond trade and reinforcing the Kimberley process1 and showing how it will stem the flow of conflict diamonds. This is successful mainly due to the public outburst after the movie. The great impact of the movie has caused diamond companies like De Beers2 to start a pre-emptive PR (public relationship) campaign, even before the movie was released to inform people that their diamonds are conflict-free.
A Diamond is one of the two natural minerals that are produced from carbon. The other mineral is Graphite. Even though both of these minerals are produced from the same element ,carbon, they have totally different characteristics. One of the most obvious difference is that Diamond is hard and Graphite is soft. The Diamond is considered to be the most hardest substance found in nature. It scores a perfect ten in hardness. Because of its hardness a tiny Diamond is used as a cutting and drilling tool in industry. Even the Greeks called the Diamond “adamas” which means unconquerable. Diamonds also conducts heat better than any other mineral .
The value of diamonds lies on their physical properties that make them suitable for many applications. Natural diamonds are only of high value if they are scarce in nature. Realizing this, De Beers Consolidated Mines was formed to control the supply of diamonds from mines across the world. The diamond market is influenced by mine production, rough diamond distribution, preparation/cutting, and retail markets. The project will be concentrating on the retail markets for diamonds and other high end jewelry.