DeBeers S.A., a Kimberley, South Africa based holding company, is historically and currently the main driver of the diamond industry. With its hand in many aspects of the global value chain, DeBeers has proven itself in the market with revenues of $7,958 million in 2005, an increase of 13% over 2004.1 Yet, DeBeers is seeing a gradual decrease in its market share. In the 1980s, DeBeers had 80% of the market share, in 2000 it had 65%, and in 2005 it had a mere 43%. Much of this loss can be attributed to production surges in locales where De Beers does not have a stronghold, including Australia, Canada, and Russia.2 DeBeers has the largest share of exploration expenditure of all companies, investing $90 million in 2003, with 40% invested in Canada and 32% in Africa.3 The company has 20 mines distributed among South Africa, Namibia, Botswana, and Tanzania, and engages in production joint ventures with local governments and other companies, such as Louis Vuitton. DeBeers also oversees both DeBeers Consolidated Mines, Ltd. (mining in South Africa) and The Diamond Trading Company, which markets rough diamonds for DeBeers and other companies. DTC revenues increased 7% from 2002 to 2003 to $5.518 billion in revenue.4
There is some concern about DeBeers in terms of monopolizing the industry. However, there has been little action taken against DeBeers because they represent the backbone of the industry. The fear among competitors is that if DeBeers falls out of the competition, prices would fall and the value of the industry would decrease. This would have detrimental effects on worldwide economies and the global value chain of diamonds.5 De Beers competitive advantage lies in its historical dominance and its well-distributed exploration and mining operations. However, Beers is relying too much on its historical dominance and needs to adapt to changes in the industry. This includes investing in ming in Australia and Canada, which should help regain some of its lost market share.
Alrosa, a Russian state-owned diamond company, partakes in exploration, mining, manufacture, and sale of diamonds. Alrosa produces nearly 100% of Russia’s rough diamonds and more than 20% of the world’s rough diamonds, making it the second largest producer, second only to DeBeers. In 2005 Alrosa earned $2,510.3 million in sales, a 10.6% growth from a year earlier.6 Alrosa has a 12% market share of exploration spending.7 Although Alrose mines mostly in Russia, it also mines in Angola at the Catoca Kimberlite, the 4th largest mine in the world and the biggest producer of diamonds in Angola.8 Although Alrosa supplies DeBeer's Diamond Trading Co. with rough diamonds, the company is working on marketing its own diamonds, in attempts to support a Russian diamond-cutting industry.9 By pursuing its own diamond marketing company, Alrosa will be able to cut the middle man and market its diamonds directly. This bodes extremely well for Alrosa's future ability to maintain competitiveness in global markets
Rio Tinto is a major Australian player in diamond mining. Its sales in 2005 were $19,033 million, with a net income of $4,969 million, including sales of all products. Rio Tinto’s portfolio is not restricted to diamonds, as coal accounts for about 20% of sales revenue. It also mines iron, copper, uranium, aluminum and gold.10 The company accounts for 9% of world production of diamonds and 12% of exploration spending.11Rio Tinto mines in Australia, which produces the highest mass of diamonds, but not the highest value. Its two major mines in Australia, Argyle Mine and Merline Mine, produced 30.91 million carats and 62,000 carats in 2005, respectively .12 Recently, Rio Tinto has started to mine in Canada. Diavik Mine, in which Rio Tinto owns 60%, produced 3.8 million carats in its first year and is proving to be very profitable for the company, with 9,829,000 carats.13 Rio Tinto has an operation in Murawa, Zimbabwe, as well, in which it has a 77.8% share and produces 240,000 carats as of December 2006.14 Rio Tinto sells its rough diamonds in Antwerp and also sells polished pink diamonds from Argyle Mine to wholesalers, manufacturers, and retailers. Unlike most companies, it appears best for Rio Tinto to scale back, rather than expand. It is gaining strongholds in places like Canda and Australia, and should seek to strengthen them over the next few years. If Rio Tinto continues to expand, it runs the risk of being overly distributed and failing to be a market leader anywhere.
BHP Billiton is another Australian diamond mining firm, and is the largest world resources company. Like Rio Tinto, it is also involved in mining other products such as iron ore, coal, petroleum products, aluminum, base metals, manganese and stainless steel.15 It does, however, play a fairly large role in the diamond industry, with 6% of world production.16 Its major breadwinner for the diamond industry is the Ekati Pipe in Canada, in which it owns 80%. Ekati produces about 4 million carats of rough diamonds per year, which is about 3% of the world market share of rough diamond production by weight and 6% by value.17 Most of BHP Billiton’s sales are through Antwerp. BHP Billiton sells both rough and polished diamonds to various manufacturers. The company sells about 10% of rough diamonds to Canadian manufacturers and sells polished diamonds, made via contract polishing arrangements through its CanadaMark™ and AURIAS ™ brands.18 BHP Billiton is in a good position because it has it subsidiaries doing most of the work for it. However, unless BHP expands into direct retailing, it is doubtful that will again any substantial market share.
Aber is a successful Canadian firm in the diamond global value chain. Like DeBeers, Aber is involved in multiple parts of the value chain, with production, polishing and jewelry retail activities. In 2006, Aber earned $505.2 million in sales, netting $89.7 million in profits, with 31.1% growth from 2005.19 Aber’s market share of world production is 2% and its major source of profit is the Diavik Diamond Mine, in which it has 40% ownership.20 Diavik has produced 8 million carats annually since 2004.21 Its subsidiary, Aber International, deals its rough diamonds in Antwerp; however, Aber directly supplies Tiffany Co. with diamonds for its jewelry. Aber mostly supplies its diamonds to cutting and manufacturing companies located in Israel, the United States, Belgium, and India. Aber also owns 100% of Harry Winston Inc., a diamond jewelry and watch retailer that designs and manufactures diamonds in Switzerland, which accounts for 40% of the companies revenues.22 Aber is up and coming and has a backbone of sustained profit through its exclusive partnership with Tiffany's. We predict Aber will become an even bigger player in coming years as it continues to expand.
Leviev, a Russian company, is the largest cutter and polisher of diamonds in the world. It also owns mines and even designs jewelry in-house. In fact, Leviev is the first and only vertically integrated diamond producer in the world, earning between $570 million and $1 billion in polishing and about $1 billion in marketing, with a total turnover between $2 and 2.5 billion a year.23 Leviev used to be a direct buyer of DeBeers rough diamonds. Now the company provides stones for itself as well to other cutters, polishers, and manufacturers worldwide. Leviev competes with DeBeers, and has taken business away from DeBeers in Angola and Russia. Alrosa is one of Leviev’s many suppliers, making Leviev the first company to finish production in the country of the diamond’s origin. Leviev currently owns 100% of Ruis, a previous joint venture with Alrosa, which cuts $140 million worth of diamonds a year.24 The company has factories in Ukraine, Israel, Namibia, China, Armenia, and South Africa.25 Leviev epitomizes the process of industrial upgrading, as they terminated their relationship with both De Beers as a provider and almost all of its retailers. Since it mines, designs, and markets its own diamonds, Leviev has an extremely integrated supply system and has a lot of potential for increased market share.
Bibliography
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Introduction
1) Picture Sources (in order of appearance): BBC News Online, Kwa-Mmapula Mining, http://www.buttebooks.com/, People’s Daily Online, Canada Diamonds Company, and Victoria Secret.
2) “Global Precious Metals & Minerals.” Datamonitor, March 2007: 8.
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Global Value Chains
1) “Value Chain,” Commodity Focus – Diamonds, The Mining Journal, Ltd, October 27, 2006.
2) Picture Source: “Diamond Industry Fact Sheet” DiamondFacts
3) “Diamond Industry Review,” Mining Review Africa. Issue 4, 2004.
4) “Value Chain”
5) "Value Chain"
6) "Value Chain"
7) So-Young Chang, et. al “The Global Diamond Industry,” Chazen Web Journal of International Business, Fall 2002, Columbia Business School.
8) "Value Chain"
9) Picture Source: Conflict-Free Diamond Council,
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Major Countries
1) “Diamond Industry Review,” Mining Review Africa. Issue 4, 2004.
2) Mining Review Africa.
3) Chart Source: Mining Review Africa.
4) Mining Review Africa.
5) Mining Review Africa.
6) So-Young Chang, et. al “The Global Diamond Industry,” Chazen Web Journal of International Business, Fall 2002, Columbia Business School.
7) “Value Chain,” Commodity Focus – Diamonds, The Mining Journal, Ltd, October 27, 2006.
8) Mining Review Africa.
9) Mining Review Africa and “Value Chain.”
10) “Diamond Industry: Annual Review.” Republic of Angola. 2004: 2.
11) “Value Chain.”
12) Mining Review Africa.
13) “Value Chain.”
14) Mining Review Africa.
15) Mining Review Africa.
16) “Value Chain”
17) “Diamond Industry Fact Sheet” DiamondFacts
18) “Value Chain.”
19) “Polishing a Rough Diamond,” SouthAfrica.info 8 Nov. 2004 and Phyllis Berman and Lea Goldman “Cracked DeBeers” Forbes 15 Sept. 2003.
20) Mining Review Africa and "Diamond Industry Fact Sheet"
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Major Firms
1) “DeBeers S.A.” Marketline. 5 Aug 2006.
2) So-Young Chang, et. al “The Global Diamond Industry,” Chazen Web Journal of International Business, Fall 2002, Columbia Business School.
3) “Diamond Industry Review,” Mining Review Africa. Issue 4, 2004.
4) “DeBeers S.A.” Marketline.
5) Mining Review Africa.
6) Peter Partheymuller, “Alrosa Company Limited” Hoovers, 1 Apr 2007.
7) Mining Review Africa.
8) “Diamond Industry: Annual Review.” Republic of Angola. 2004: 4-5.
9) Partheymuller, “Alrosa”
10) Peter Partheymuller, “Rio Tinto Group,” Hoovers, 1 Apr 2007.
11) Mining Review Africa.
12) Partheymuller “ Rio Tinto.”
13) Partheymuller “ Rio Tinto”
14) Partheymuller “ Rio Tinto”
15) Peter Partheymuller,“BHP Billiton Limited,” Hoovers, 1 Apr 2007.
17) “Value Chain.”
18) Partheymuller “BHP Billiton”
19) Partheymuller “BHP Billiton”
20) Peter Partheymuller, “Aber Diamond Corporation,” Hoovers, 1 Apr 2007.
21) Mining Review Africa.
22) Phyllis Berman, “Diamond Mines are Forever” Forbes 179.5 12 April 2007: 80-1.
23) Partheymuller, “Aber”
24) Phyllis Berman and Lea Goldman, “ Cracked De Beers” Forbes 15 Sept. 2003.
25) Berman “Cracked”
26) “Leviev”
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International Trade Patterns
1) "The Australian Diamond Industry." Castellos Diamonds. 2007. 19 Apr. 2007
2) "Canada: a Diamond-Producing Nation." Natural Resources Canada. 27 Mar. 2007. Natural Resources Canada. 19 Apr. 2007
3) "Canada: a Diamond-Producing Nation."
4) "Canada: a Diamond-Producing Nation."
5) World Trade Analyzer
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Global Precious Metals and Minerals Industry Trends
1) "Global precious Metals and Minerals." Datamonitor (2007).
2) "Global precious Metals and Minerals."
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Global Diamond Production
1) Picture Source: "Global Diamond Production,"
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Social & Political Factors
1) Picture Source: www.cincinnati.com
2) Conflict Diamonds, United Nations,
3) Richard Dowden, "Blood, bullets and Ice," New Statesman, 29 Jan 2007.
4) Picture Source: UN
5) "Conflict Diamond Process Enters Key Phase," Canada World View, Issue 21, Winter/Spring 2004.
6) Blood Diamond Action,
7) "Africa Recovery, Targeting 'conflict diamonds' in Africa," UN,
8) Chart Source: "Countries Where al Qaeda Terrorists Are Involved in the Diamond Trade," Conflict Free Diamond Council,
9) Conflict Diamonds, UN, 13 Apr 2007
10) Businessand Human Rights Resource Cafe, 13 Apr 2007
11) "Africa Recovery, Conflict Diamonds evade UN sanctions," UN, 13 Apr 2007
12) Conflict Diamonds, UN,
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Kimberley Process & World Diamond Council
1) Picture Source: "Why I didn't buy a Diamond"
2) "Child Labor," International Labor Organization, 16 June 1998, 16 Apr 2007
3) Picture Source: Geografi
4) "Children working on Sierra Leone mines," BBS News, August 2007
5) Picture Source: Amnesty USA,
6) M. Fleshman, "Targeting Conflict Diamonds in Africa," Africa Recovery,
7) Picture Source: Africa' People's Solidarity Committee
8) Conflict Free Diamond Council, 13 Apr 2007
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Child Labor & Blood Diamond Campaigns
1) Picture Source: The Diamond Jeweller,
2) "Conflict Diamonds evade UN sanctions," Africa Recovery, UN, 13 Apr 2007
3) "Diamonds in Conflict" Global Policy Forum, UN Security Council, 13 Apr 2007
4) George W. Bush, "Executive order implementing the Clean Diamond Trade Act," 9 July 2003
5) "Africa: Life near the mines," MSNBC.com,
6) Picture Source: World Diamond Council,
7) Diamond Facts, 13 Apr 2007
8) World Diamond Coucil,
9) Global Exchange, 16 April 2007
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Blood Diamond - The Film
1) Picture Source: Cine Telecinco,
2) "Conflict Diamonds," UN, 14 Apr 2007
Sean Bani, Stefanie Bohrt, Carson Denny, Courtney Landy
http://www.duke.edu/web/soc142/team7/index.html
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