De Beers has always been strong at Public Relations and recently journalists are falling for a new narrative that they are pushing.
De Beers' fake news on pricing is antithetical to the interests of consumers and the public. Here's the facts to consider:
1. The "$800 per carat" statement is brilliantly misleading in that
a.) they sell no carats (of either rough or loose diamonds) on the market at all;
b.) they do not even sell jewelry containing such carats to the industry's main channels where industry pricing is set;
c.) on their embryonic direct-to-consumer website with near zero monthly unique visitors, they only offer carats smaller than 1ct in size, embedded in non-bridal jewelry, and none of the larger "certified uniques" that are prized in the diamond industry.
It's as if we were to announce that we hereby start selling apples at "one cent per apple" -- with the footnote being that "per apple" solely means a hundredth of an apple and no one larger than cherry sized ones and coming from a farm we are planning to seed in 2020. This would be pitched to journalists to create headlines "apples are now cheap" and "apple producers now squeezed worldwide".
2. The $800/ct announcement is not even disruptive.
a. $800 per carat for diamonds smaller than 1ct is actually more expensive than mined diamonds on the market.
So journalists should write this:
"De Beers prices lab grown diamonds more expensive than mined ones".
It does not take much research for anyone to find the market pricing of mined diamonds. For example, go to Alibaba and a quick search will show these offers which in the aggregate give a fairly clear sense of where the market pricing is:
Mined diamonds for $180-200 per carat:
Mined diamonds (unpolished) for $12-24 per carat:
Mined diamonds for $490-495 per carat:
Mined diamonds for $360 per carat:
b. De Beers itself sells its mining output at $162 per carat according to their own investor relations:
Now this is rough diamond pricing and one needs to know the relation to polished prices in the industry is generally four times the rough price (due to polishing yield) plus $35 per carat in polishing cost, which comes out at $788 per carat -- again the mined diamond being cheaper than the created one.
c. The announcement intentionally confuses the big difference between two completely different product categories in the industry: "program diamonds" and "certified uniques".
Diamonds sold by the pound for jewelry programs that are not graded, not certified, and have no warranty associated with them are worth a lot less of course than individually certified ones which are backed by a legal guarantee.
We have proceeded to publish our own pricing to make this distinction clear:
Our program diamond pricing was simplified by De Beers to one number only but this simplification just makes the smaller diamonds more expensive than mined product in the wholesale markets. So we have priced with three different prices in the sub-1ct segment: $250, $750, and $1000 per carat -- for program diamonds.
3. Prices for aboveground diamonds are increasing lately despite De Beers attempt at promoting a PR agenda of dropping prices and mobilizing the industry's shady underbelly of paid associates to support this with fake statistics.
In fact, we now believe the industry is in a situation much like at the beginning of many new industries -- where systemic supply shortages stretch out for years. For example, when the wind power industry first started to take off, there was soon a supply shortage of turbines that kept many planned projects from being realizable and this shortage lasted 5-7 years.
Our own production is presently oversubscribed on demand by at least a factor of five as the entire diamond industry is shifting towards diamonds created aboveground, and this does not even include the largest retailers out there. At this point, if a Signet brand wanted to offer consumers the choice of manmade diamonds, it would not be able to find any supply through at least 2019.
Yes, aboveground diamonds are a technological product that plays into the narrative of their getting cheaper. But no, the reality on the ground is that deploying semiconductor grade tools and mobilizing a supply chain at scale is really hard and takes a lot of capital and time.
It's a thousand times harder than ramping output from a mine -- digging out more diamond that earth has already created. Plus creating diamonds aboveground is not inexpensive relative to mining. In its cheapest form, mining just takes handing a shovel to someone who is paid a dollar a day.
4. We are committed to offering the best value in diamonds and will continue to lead the industry towards that.
Where De Beers is creating production of manmade diamonds using coal fired electricity, ours is 100% carbon neutral.
Where they refuse to offer certified diamonds, we individually certify and guarantee each diamond.
Where De Beers seeks to create a difference between two atomically identical crystals, we offer the same benefits to consumers at better value and count on consumers to not be duped and choose the one that is better quality and better for the world.
5. Also this: Any evolving pricing delta between underground mined versus aboveground created diamonds is solely due to this as any economist can verify: the cartel being alive and well for mined diamonds.
PS: On a possibly funnier note, this is how De Beers' supposedly market moving new diamond production factory looks like presently -- not so much production equipment yet installed!