The Diamond Business Continues to Lose Its Shine As De Beers Loses Value by $2.9 Billion

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Anglo American has written down the value of De Beers by $2.9 billion, marking a second consecutive year of devaluation. The diamond business, once synonymous with luxury and stability, now faces declining demand, market saturation, and competition from lab-grown alternatives. Anglo’s struggles to offload De Beers highlight the industry’s changing landscape and the difficulties of diamond investing.

The Diamond Business: A Struggling Industry

De Beers, which once controlled 90% of the global diamond business, is now grappling with declining revenues and shifting consumer preferences. Diamond prices have dropped over the past decade, with rough diamond sales declining nearly 50% in just two years. The rise of lab-grown diamonds, which are significantly cheaper and marketed as sustainable, has further disrupted the natural diamond market. Consumer spending slowdowns, particularly in China, have also contributed to De Beers’ financial troubles.

Anglo American's plan to sell or list De Beers is now uncertain. CEO Duncan Wanblad admitted that weak market conditions are delaying the divestment process. Botswana, which owns 15% of De Beers, has expressed interest in increasing its stake, but no formal process has been initiated. Meanwhile, Anglo American is restructuring its business to focus on iron ore and copper, leaving De Beers and its diamond business in limbo.

The History of the De Beers Monopoly of the Diamond Business

De Beers was founded in 1888 by Cecil Rhodes, who consolidated smaller mining companies to create a single dominant player in the diamond industry. Throughout the 20th century, De Beers controlled an estimated 80-90% of the global diamond supply. By tightly regulating production and distribution, the company maintained artificially high prices and controlled the market with its famous slogan, “A Diamond is Forever.”

The monopoly began to weaken in the early 2000s as new producers such as Russia's Alrosa entered the market. Antitrust concerns forced De Beers to change its business practices, and by 2011, the company had officially abandoned its supply control model. Today, De Beers' market share has declined significantly, and the rise of lab-grown diamonds has further diminished its dominance. Now valued at approximately $4 billion, De Beers struggles to maintain relevance in a rapidly changing industry.

The Challenges of Diamond Investing

Diamonds have long been marketed as a safe-haven investment, but the new reality is far more complex. Unlike gold, diamonds lack a universal pricing standard, which makes their valuation highly subjective. Prices fluctuate based on consumer demand, market trends, and geopolitical factors. The recent market downturn has shown that diamonds do not hold value as reliably as other commodities.

Another issue is liquidity. Unlike stocks or gold, selling a diamond often requires working through dealers or auction houses which charge high fees. Market trends also impact resale values, with many investors struggling to get returns on their purchases. The rise of synthetic diamonds has only made resale more difficult, as consumers become less willing to pay premiums for natural stones.

Future Outlook for the Diamond Business

The diamond industry is at a crossroads. De Beers and other traditional players are cutting production to stabilize prices, but demand remains weak. Industry analysts believe that lab-grown diamonds will continue to take market share, forcing natural diamond producers to adapt. Companies like De Beers may need to reposition themselves, emphasizing the rarity and long-term value of natural stones to differentiate from synthetic alternatives.

Despite current challenges, some investors see opportunities in the downturn. If De Beers can successfully restructure and stabilize sales, it could regain investor confidence. However, the market’s future remains uncertain, and those looking to invest in diamonds must navigate significant risks.

Is the diamond business still a viable investment in today’s market? Tell us what you think!

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