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Is it impossible for a new player to discover a mine and start selling them for cheaper? Why doesn't this happen if they are so overpriced? They don't all go th

by imh 10y ago

Is it impossible for a new player to discover a mine and start selling them for cheaper? Why doesn't this happen if they are so overpriced? They don't all go through the same company, so I would expect someone to try to undercut their competitors.

Hondor 10y ago
The idea of the cartel is that nobody would want to sell their diamonds cheaper when they can sell them for more through deBeers. They don't want to get into a price war with each other since then every player will lose.
- imh 10y ago
  Doesn't everyone in every industry lose if they go into a price war? But they do it anyways. I'm not trying to be argumentative, I just sincerely don't understand what makes diamonds different from other products.
  - fosk 10y ago
    Small number of players, and high barriers to entry the diamond market that prevents that number from growing and disrupt the cartel.
ridgeguy 10y ago
What Hondor said, and it's extremely capital-intensive to develop a mine to production. Even after all the geoexploration to find a deposit, it's on the order of $1B - $2B to get into production. You have to move and inspect hundreds of tons of rock to find a carat of diamond in most mines [1]. Mined diamonds can't ever compete with CVD diamond synthesis costs. As more CVD producers come online, I think we'll see prices for synthetics drop drastically. There's a lot of margin available for market-grabbing. [1] http://www.bloomberg.com/news/articles/2016-07-05/first-find-the-world-s-biggest-diamonds-then-don-t-break-them http://www.bloomberg.com/news/articles/2016-07-05/first-find... edited for typos
- imh 10y ago
  Why don't the same cartel dynamics for natural diamonds apply to synthetics? If they can sell them for more, why won't they?
  - ridgeguy 10y ago
    They kind of do. Prices for synthetics are typically ~ 75% of the natural equivalent. For CVD synthetics, there's significant margin in that pricing, margin that could be used to initiate price wars. For now, the synthetic vendors are riding on diamond's traditional high pricing as sustained by artificial scarcity. They're cheaper than the naturals, but not all that much. I think it's their way of maintaining high margins during early business & market development. I expect pricing to change when there are more suppliers and sales channels. Probably a couple of years to a definite downward inflection point.

by imh 10y ago

Hondor 10y ago

The idea of the cartel is that nobody would want to sell their diamonds cheaper when they can sell them for more through deBeers. They don't want to get into a price war with each other since then every player will lose.

imh 10y ago
Doesn't everyone in every industry lose if they go into a price war? But they do it anyways. I'm not trying to be argumentative, I just sincerely don't understand what makes diamonds different from other products.
- fosk 10y ago
  Small number of players, and high barriers to entry the diamond market that prevents that number from growing and disrupt the cartel.

ridgeguy 10y ago

What Hondor said, and it's extremely capital-intensive to develop a mine to production. Even after all the geoexploration to find a deposit, it's on the order of $1B - $2B to get into production. You have to move and inspect hundreds of tons of rock to find a carat of diamond in most mines [1]. Mined diamonds can't ever compete with CVD diamond synthesis costs. As more CVD producers come online, I think we'll see prices for synthetics drop drastically. There's a lot of margin available for market-grabbing. [1] http://www.bloomberg.com/news/articles/2016-07-05/first-find-the-world-s-biggest-diamonds-then-don-t-break-them http://www.bloomberg.com/news/articles/2016-07-05/first-find... edited for typos

imh 10y ago
Why don't the same cartel dynamics for natural diamonds apply to synthetics? If they can sell them for more, why won't they?
- ridgeguy 10y ago
  They kind of do. Prices for synthetics are typically ~ 75% of the natural equivalent. For CVD synthetics, there's significant margin in that pricing, margin that could be used to initiate price wars. For now, the synthetic vendors are riding on diamond's traditional high pricing as sustained by artificial scarcity. They're cheaper than the naturals, but not all that much. I think it's their way of maintaining high margins during early business & market development. I expect pricing to change when there are more suppliers and sales channels. Probably a couple of years to a definite downward inflection point.