China and Africa are destroying the DeBeers diamond cartel

Bullets:

For over a hundred years, DeBeers has dominated and controlled the global diamond trade.

But today, Chinese factories are mass-producing lab-grown diamonds, which are chemically identical to natural stones, and prices are collapsing worldwide for both man-made and natural diamonds.

DeBeers sources most of their rough diamonds from mines in Botswana, and the new government there is determined to move DeBeers' value chains to Botswana itself, thereby retaining billions of dollars in industry revenues in-country.

Anglo-American is DeBeers' parent company, and they are trying to divest their holdings. But even after writing off $4.5 billion in book value in two years, no buyers can be found.

Report:

Good morning. DeBeers is over a hundred years old, and for most of its history they have run the global diamond industry. 90% of the world’s diamond trade was controlled by DeBeers.

The company controlled the supply side of the industry, through their mine operations in Africa. DeBeers also controlled the pricing of diamonds, by restricting that supply, and managing a small number of large buyers across the world.

DeBeers was also one of the greatest marketing companies of all time. Many of us grew up seeing their ads in newspapers and magazines and on TV. The two-months’ salary rule, for example, which somehow established the expected budget for engagement rings—that was a marketing strategy from DeBeers.

Now the DeBeers empire is collapsing. The company is looking for a buyer, but nobody wants to take it, at anywhere close to the price DeBeers hopes to get. And that’s because there aren’t any institutional buyers who can see how to get around the China problem.

Demand for natural stones has fallen apart in China, down by half in five years. Chinese retailers are sending tens of millions of dollars’ worth of inventory back to DeBeers—every month. That supply coming back to the global markets is crashing prices everywhere else.

Young people in China prefer diamonds that are grown in Chinese labs, to natural stones hauled out of the ground in Africa and polished by DeBeers. So over $30 million per month of stones are coming back out of China, and moving to India, and blowing up markets there.

Across the world, prices for rough diamonds are down 50% in two years, and for finished stones, prices are down by over a third.

Lab-grown diamonds are the same, chemically and physically, as natural stones, and it’s a mechanical and industrial process to make them. Once perfected, it was simply a matter of time before lab-grown diamonds became just another commodity. Boston Consulting Group says that diamond production has gone up by 10 times in six years. Demand and pricing for natural stones are getting wiped out. Wholesale prices for the lab-grown stones are down over 90% in that time—five years—and now are slightly over the cost of production.

This is a perfect example of the Law of One Price. The diamond market is commoditized now, because of lab-grown diamonds from China. Diamond prices across the world fall, as Chinese production rises. Diamonds are small and easy to transport, so the lower prices in China translate immediately to lower prices in India and London and New York.

The United States is the largest retail market for diamonds, and over half the engagement rings sold in the US last year were grown in labs. Natural stones still enjoy a large price premium over lab-grown diamonds, but the premium is falling, just not as fast. A 1-carat stone grown in a lab is now $745, down 86% in ten years. A natural diamond is down 40% since that time, now just under $4,000. But that shows that there still is a big market for natural stones, and buyers are still willing to pay a premium for the prestige of natural stones.

But that, right there, is the problem. Markets are ignoring the retail price premium because they don’t believe that this these premiums will be captured by DeBeers, for much longer. DeBeers is owned by Anglo American, and they’re looking to offload the company. But they are aggressively cutting the book value of their DeBeers holding, from $10 billion to $5.5 billion in just two years. Even the accountants at DeBeers don’t think the profits are going to last.

There are two other big problems for DeBeers. Trump’s tariffs are already hurting them. The United States has no domestic diamond mining industry, so there is no such thing as a made-in America diamond, nor will there ever be. So this entire trade is coming from overseas, and it is all subject to new, high tariffs, and those are yet another hit to demand in their biggest market.

So DeBeers has lost control of pricing, and the entire demand side of the diamond market. Now they’ve got another huge issue from their supply side. Botswana is the world’s largest producer of rough diamonds, and 70% of DeBeers diamonds come from Botswana. DeBeers will cease to exist if things fall apart for them in Africa on the producer side, and governments in Africa know that too. In February a new deal was signed, which doubled the revenues that Botswana will receive from supplying DeBeers.

This agreement is the realization, on DeBeers’ part, that it’s trapped. African producers know that they can produce natural stones and still make markets, if they can get DeBeers and the middlemen out of the way. A third of Botswana’s economy and 80% of its exports flow through DeBeers, to global markets. But DeBeers is just the middle man, who has some vaults in London and a big marketing and advertising budget.

Botswana wants to move down the value chain, and move more of the industry in-country. Botswana wants for their domestic diamond industry what cocoa producers in West Africa have done there, by eliminating middlemen and brokers that book rent-seeking profits by managing brands and marketing in Western wholesale and consumer markets. The new Minerals Minister wants to increase even more the country’s ownership in DeBeers to gain control over those parts of the industry.

The implication here is that DeBeers doesn’t exist without Botswana’s stones, and their new president knows it. Botswana wants to get a much bigger chunk of that markup—the 4 times difference between what comes out of the ground in Botswana, compared to what DeBeers makes for selling the finished stones. Move the high-skill jobs to Africa and take control of the value chain, and go directly to buyers. Each percentage point that Botswana can capture for themselves is millions of dollars in GDP and government revenues that can be used domestically. Diamond producers in other African countries are paying close attention. This paragraph again, here—the premium between extraction in Africa and retail in the United States is still enormous, and producers in Africa are demanding more of it for themselves.

So there is no way out for DeBeers. Producers of lab-grown diamonds in China are smashing prices down to just above their cost of production, and diamond wholesalers in China are sending $30 million a month of unsold inventories back to global markets, and that blows up pricing even further. Trump’s tariffs mean even higher prices for natural stones for DeBeers customers in the US, which damages their sales there. Buyers of natural stones in the US don’t even get to enjoy those falling prices nearly as much as in other markets. And now African countries understand that it will be they who can take over the industry, no matter what happens in China and no matter who is in the White House, as soon as they get rid of DeBeers.

Resources and links:

World map of diamond exports

https://howmuch.net/articles/world-map-of-diamond-imports

Wall Street Journal, Are Diamonds Even a Luxury Anymore? De Beers Reckons With Price Plunge

https://www.wsj.com/business/retail/de-beers-diamonds-price-lab-grown-468b33ab

Mining.com Botswana, De Beers sign overdue diamond deal

https://www.mining.com/botswana-de-beers-sign-overdue-diamond-deal/

Botswana’s Strategic Takeover of De Beers Diamond Empire

https://discoveryalert.com.au/news/botswana-controlling-stake-de-beers-2025/

Bloomberg, The $80 Billion Diamond Market Crash Leaves De Beers Reeling

https://www.bloomberg.com/news/features/2025-02-04/de-beers-turmoil-is-symptom-of-diamond-industry-crisis

Law of One Price: Definition, Example, and Assumptions

https://www.investopedia.com/terms/l/law-one-price.asp