De Beers’ Executive Says Synthetic Diamonds a Threat to Profitability and Sustainability

According to a newsreport appearing in the Botswana Guardian on February 23, 2015, De Beers Group’s Executive Head of Strategy, Corporate Affairs, Business Development and Technology, Bruce Cleaver, addressing reporters from London, during a teleconference held recently, following the release of preliminary results for 2014 of Anglo American, De Beers’ parent company, said that the penetration of synthetic diamonds in the industry is disturbing because the “duds” threaten profitability and sustainability in the long run. He said while the synthetic diamond manufacturers are capable of producing diamonds, De Beers’ continues to teach its clients on how to differentiate between synthetic and real diamonds. However, he said the impact of synthetic diamonds can become even more severe, if manufacturers do not disclose them to the market, for differentiation purposes.

CVD Synthetic Diamonds produced by Gemesis Corp. Photo by Robert Weldon
CVD Synthetic Diamonds produced by Gemesis Corp. Photo by Robert Weldon

It is estimated that the annual market value of synthetic diamonds is around US$9 billion. In contrast the annual global rough diamond market value is around US$14 billion, of which 30% is controlled by De Beers’ the world’s number one producer of natural diamonds by value. Continuing further, Bruce Cleaver said that the company is not sitting back as its market share declines due to synthetic diamonds, and other factors. According to Cleaver, the company has developed devices that can detect synthetic diamonds, and the company through its International Institute of Diamond Grading & Research (IIDGR), continue to educate diamantaires, diamond dealers and other stakeholders in the industry on how to differentiate between the real and fake diamonds.

Bruce Cleaver’s rather pessimistic assessment on the effect of synthetic diamonds on the profitability and sustainability of the natural diamond industry, seem to confirm a report released by Botswana Institute for Development and Policy Analysis (BIDPA) last year, that disclosed that both De Beers, which is a joint venture between Botswana and Anglo American, and its Russian rival Alrosa, are at risk. The report compiled by Professor Roman Grynberg, Masedi Motswapong and Margaret Sengwaketse adds, “De Beers, the former cartel operator and currently the dominant oligopolist in the industry, has seen a long decline, thereby restricting its ability to control prices and the advance of new synthetic technologies as was the case in the past.”

The report further stated that synthetic diamonds, especially Chemical Vapour Deposition (CVD) diamonds, are difficult to segregate into a particular market. De Beers, like other diamond producers in the world, depends mainly on the United States and Japan for its market. However, the arrival of synthetic diamonds has led to the fall in unit prices in these countries.

However, statistics reveal a fairly optimistic picture for the near future. For the year up to December 2014, De Beers production stood at 32.6 million carats, up by 5 percent compared to the year before. Demand for rough diamonds is expected to increase, enabling the more than century old group to marginally increase output. Industry experts predict demand for diamonds to rise in the medium term. However, supply is likely to let customers down as fewer new mines are found. De Beers Chief Executive, Phillipe Mellier, says he expects prices to rise this year too. “I definitely see some potential for a price increase this year too,” Mellier said. Prices increased by 7 percent last year.

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