Ass #2 -Evolution of the Diamond Industry

Diamond Industry Evolution

• India was the sole diamond source until the 18th century, then discoveries in South Africa surged demand.
• Global diamond jewelry sales exceed 72billionannually,withannualroughdiamondproductionexceeding72 billion annually, with annual rough diamond production exceeding 72billionannually,withannualroughdiamondproductionexceeding13 million.
• India's Deccan Plateau yielded diamonds from the 13th to 17th centuries, then production waned.
• Brazil became a major supplier in the mid-1700s, but was surpassed by South African discoveries.

Modern Diamond Industry

• The 1866 discovery of the Eureka diamond ignited a diamond rush in South Africa.
• Major discoveries like the Star of Africa (Dudley) diamond in 1869 led to the modern diamond industry.
• Miners initially focused on riverbeds, then shifted to "dry diggings" (Bultfontein, Dutoitspan) leading to De Beers and Kimberly mines.
• Cecil Rhodes and Barney Barnato consolidated mines, with Rhodes acquiring Kimberley mines and establishing De Beers.
• The 1888 establishment of De Beers Consolidated Mines standardized and stabilized market prices.
• The London Diamond Syndicate (later the CSO then the DTC) controlled diamond sales.

Great Depression & De Beers

• The Great Depression and WWII brought the diamond industry to a halt but there was strong growth as demand increased.
• De Beers recognized the need to increase consumer demand and created the slogan "A diamond is forever."
• This successfully established diamonds as the major engagement ring stone.
• Increased competition from Russia, Australia, and Canada challenged De Beers' monopoly.
• Other diamond producers emerged, creating a multi-channel market.

Global Value Chain

• The diamond value chain encompasses mining, rough sorting, cutting, polishing, trading, jewelry manufacturing, and retail.
• Mining is the most risky and fluctuating segment of the diamond value chain.
• The largest companies like Alrosa (Russia) and De Beers dominate rough diamond mining.
• Diamond mining is a lengthy process including exploration, evaluation, licensing, and capital investment.
• Diamond sorting classifies diamonds as gem or industrial based on quality (weight, shape, clarity, color)
• Physical trading is based either on long-term contracts or auctions.

Diamond Trading & Manufacturing

• Diamond cutting and polishing centers are primarily located in India, New York, Antwerp, Tel Aviv, Gaborone, Russia, China, South Africa, and Thailand.
• Diamond manufacturing is a value-added process, from design to production.
• Major jewelry manufacturing hubs include China's Guangdong Province and India's Surat.
• Vertical integration (controlling all stages of production) in diamond industry can be complex and expensive.

Consumer Markets

• The US remains the world's largest diamond market, followed by China.
• Other major markets include India, the Persian Gulf, and Japan.
• Secondary markets consist of the resale of used diamonds.
• Millennials and Gen Z are becoming increasingly important consumer groups for diamonds.

Diamond Marketing

• De Beers' promotion efforts and the slogan "A diamond is forever" were significant in establishing diamonds' demand.
• The Diamond Producers Association (now the Natural Diamond Council) was formed in 2015 to promote natural diamonds.
• The rise of internet and social media changed marketing channels.
• Online sales and direct-to-consumer strategies are becoming increasingly common.