One of the more interesting aspects of gem grade diamonds is how they are mined, traded and sold. For the most part, the entire process of mining, trading, cutting and polishing diamonds and then selling them to wholesale and retail outlets are tightly controlled. The main player in the Diamond industry is De Beers. The De Beers company has set up a strong diamond cartel to sell gem grade diamonds. A cartel is a small group of members that controls a large share of a specific market. In essence, they use their control of a market to raise the prices and control its output.
At one point in history, it is stated that De Beers had control over 80% of the diamond market, today’s estimates are far lower at 40% to 50%, however it is still enough to have strict control over prices and supply. De Beers has control of the mines and sells their gem grade diamonds to its subsidiary the DTC (Diamond Trading Company) for cutting and polishing. Sightholders are a small group of companies that purchase diamonds from DTC for cutting and polishing. The trade center for diamonds only occurs at a few specific locations including Antwerp, London, Amsterdam, Tel Aviv, New York, and Surat.
Once the gem grade diamonds are cut and polished, they are then put up for sale at bourses, a bourse refers to a diamond exchange. There are only 24 bourses in the world. At this point, the bourses then sell diamonds directly to wholesalers and retail outlets. The fact that there are such tight controls on supply and sale of diamonds makes diamonds much more valuable then their true mined value. For instance in 2002, the value of rough gem grade diamonds mined was only 9 billion dollars; however it rose more than 600% to 57 billion dollars at the retail point of sale.
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