Origin
Diamond is an important mineral resource. Diamond is one of the hardest minerals and enjoys the application in a variety of fields. The nature and value of a diamond make it a luxurious mineral. It is used in the making of jewelry and rings. Moreover, diamond is used in the manufacture of bits for drills.
Diamond is a rare resource, but it is mined in several countries. South Arica is a major supplier of the commodity. Diamond is considered as an important mineral due to its high thermal conductivity and hardness in comparison to other minerals.
Relationship between producers and traders
Diamond producers and traders have a unique relationship. De Beers is the main company that deals with a large percentage of diamond that arrives in the US. The risks that are associated with diamond mining and trading makes the diamond business a complex process, as barons are involved. Specifically, diamond has been a controversial mineral as it has been used in the funding of the war, thereby causing the mineral to be referred to as blood diamonds.
The World Federation of Diamond Bourses (WFDB) is an organization that deals with diamond exchange on wholesale. It is a global body that deals with both rough and polished diamonds. The organization has branches in vital cities like Johannesburg, Antwerp, and various cities in the US.
The organization also seeks to prevent the trade in blood diamonds, which are minerals that are used in the financial support of wars. The WFDB has established the International Diamond Council (IDC), which is involved in the grading of diamonds.
Producers and suppliers have close relations. Specifically, De Beers is a mining company that has established subsidiaries as traders of the commodity. In this case, De Beers has established the Diamond Trading Company (DTC), which markets diamonds mined from the facilities run by De Beers. DeBeers and its subsidiaries control over 39% of the diamond industry.
Working conditions
The mineral is extracted through a variety of means. In South Africa, diamond deposits are mined from kimberlite volcanic pipe mines. There is a single large pit where miners access the mineral. Initially, diamond mining was characterized by the underpayment of labor. Many laborers traveled for long distances to look for work in diamond mines.
This changed after the South African government placed tighter controls on the mining industry. The change has led to an increase in wages as the rights of minors are protected by the state. Initially, miners lived in informal settlements next to the mines. The intention of the mine owners was to keep costs low while ensuring that workers were paid well. The situation changed with the increase in improved living conditions.
Diamond mining has extensive environmental risks. For instance, the mining pits create a risk to the surrounding living things. The damage to the environment is extensive. The pits produce waste in the form of rocks and dust, leading to pollution of the environment. Workers face health hazards like asbestos that comes from mines. The asbestos can lead to the development of asbestosis among miners.
Price determination
The diamond industry is divided into two. One sector of the industry deals with industrial-grade diamonds while the other deals with gem-grade diamonds. Essentially, the two sectors value diamonds differently. The price of the commodity is determined by bourses or diamond exchanges. Currently, there are about 28 bourses worldwide. Other suppliers can then purchase the diamonds from the bourses for supply to the final consumers. Additionally, diamonds are sold as either unset or set in jewelry.
The international corporations that dominate the trade include De Beers Corporation. The diamond market is characterized as an oligopoly. De Beers is the dominant diamond miner in the world and has a sizeable portion of rough diamond mines. It also controls distribution channels for the mineral. Despite this, the company’s control has been decreasing over the years, which is attributed to tighter controls by the South African government in the mining industry.
Distribution channels
The mineral is first transported to several locations that cut and trade-in diamond. For instance, over 90% of the diamond is transported to India for cutting and polishing. Other locations that deal with cutting diamond include Amsterdam, London, Belgium, and New York.
Specifically, the distribution of 80% of the world’s diamonds occurs in Antwerp. Essentially, a large amount of the minerals that arrive in the U.S. will have to go through this location. Antwerp deals with about half of all the rough diamonds, cut diamonds, and unstained diamonds. On the other hand, over half of the world’s diamonds are sold in New York.
The diamond, after mining, goes through the cutting process in India and other locations. It is graded by the IDC and finally transported to the consumer markets by traders. The IDC deals with determining diamond prices, depending on the grade of the diamonds. The diamonds are then cut and polished as per the final usage.
Diamonds with smaller karats are mainly handled in India. They are in larger quantities. Smaller quantities of diamonds with a higher karat are handled in North America. After that, the diamond is distributed to traders. Diamonds are often bought at jewelry shops. Additionally, there is a market for diamonds that have been polished. The market is comprised of sales from the bourses, pawnshops, and second-hand jewelry stores.
Usage
Diamond is a luxurious commodity; it is an expensive product and a preserve of a few. A large proportion of the population uses it on special occasions, such as jewelry for wedding rings and necklaces. Diamonds have a cultural significance, as they are a sign of love for couples who want to marry.
Diamond is incorporated into the daily lives, as the individual with a diamond ring will wear it at all times as a symbolic representation of love and having a companion. Moreover, diamond jewelry is worn for parties and other special occasions like dinners.
The producer’s compensation for diamonds is, on average, about $221 per carat. On the other hand, store owners make about 6% profit for every karat of diamonds sold. Essentially, a diamond as a luxury commodity is a profitable venture. De Beers is listed on the stock exchange as De Beers Centenary and De Beers Consolidated Mines Limited (DBR: SJ). The earning per share is about $28.88.
To conclude, diamond is a luxurious commodity. It is mainly mined in South Africa, and De Beers is one of the largest producers and traders of the diamond through its subsidiaries. Diamond follows a complex distribution channel that has a few players only. It also enjoys extensive use, such as jewelry for wedding rings and the industrial application for drilling machinery.
Bibliography
“De Beers Consolidated Mines Ltd.” Bloomberg.com. Web.
Falls, Susan. Clarity, Cut and Culture: The Many Meanings of Diamonds. New York: NYU Press, 2014.
Williams, Gardner. The Diamond Mines of South Africa: Some Account of their Rise and Development. New York: New York Macmillan, 2011.