The Secret of Diamond Prices, the History of De Beers Monopoly, and the Lab-Grown Revolution

Diamonds, often considered symbols of eternal love, are actually composed of carbon, the same element found in pencil lead and charcoal. Behind how this ordinary lump of carbon became a gemstone worth thousands of dollars lies the strict supply control and meticulous marketing strategy of the De Beers cartel, which once controlled 90% of the global supply. Today, we uncover the history of monopoly and the secrets of price formation that have dominated the diamond market, and provides  the lab-grown diamond revolution that is currently shaking up the natural diamond market.

1. The History of De Beers Supply Control Beginning in the South African Wilderness

The Discovery of the Eureka Diamond and Lawless Mining Competition

Diamonds became a popular gemstone after a farmer’s son discovered a shiny pebble near the Orange River in South Africa in 1866. This stone turned out to be a massive diamond of over 21 carats, later named the Eureka Diamond. As news spread, tens of thousands of miners rushed to South Africa from all over the world. Initially, anyone could buy land, dig holes haphazardly, and extract diamonds. Consequently, a massive flood of diamond supply hit the market, causing prices to crash catastrophically.

The Emergence of Cecil Rhodes and Building a Cartel Controlling 90% of Global Supply

At this juncture, a young British businessman named Cecil Rhodes entered the scene. He began buying up small-scale mining operations that were facing financial ruin due to the price crash at dirt-cheap prices. Having acquired mining rights one by one, he founded a massive mining company called De Beers in 1888. De Beers was not just a company that mined stones; it was a cartel that completely dominated the market supply. At one point, De Beers single-handedly controlled 90% of the world’s diamond supply. They manipulated prices at will by creating artificial scarcity in the market.

2. The Copy of the Century and the Secret of Defensive Resale Market Controls

The Hollywood Marketing Strategy that Overcame the Great Depression Crisis

The Great Depression that hit the globe in the 1930s was a massive crisis for De Beers. With people struggling to make a living and their pockets emptying, few were willing to purchase expensive luxury goods.

As rough diamond stocks piled up endlessly in warehouses, De Beers commissioned NW Ayer, a major American advertising agency, for marketing. The ad team devised a meticulous strategy to shift public perception so that young American men and women would feel compelled to buy a diamond when getting married. They staged romantic scenes in Hollywood movies where protagonists handed over diamond rings when proposing, and flooded magazines with photos of famous actors wearing diamonds at parties. As a result, people began to view diamonds as an essential requirement for success and love.

Clever Liquidity Controls Making Diamonds Difficult to Resell

In 1947, De Beers’ representative slogan—the most famous phrase in advertising history—was born. This phrase instilled an idea in people that because a diamond is a token of love that never changes, it must be kept for a lifetime and should never be resold as a used item. The real reason De Beers promoted this perception was that if consumers began selling secondhand diamonds back into the market, the price control system they had maintained would collapse in an instant. In fact, even today, attempting to resell a diamond to a jewelry store or gold merchant rarely yields even half of the purchase price. Unlike gold, whose value remains stable or rises monthly, diamonds are not an asset that can be liquidated at any time, but rather a consumer good with extremely low liquidity.

3. Cracks in the Iron Fortress and the Collapse of the Monopoly System

Independent Paths Declared by the Soviet Union, Canada, and Australia’s Argyle Mine

The De Beers monopoly structure, which seemed perfect for several decades, began to fracture in the 1980s. A massive diamond deposit was discovered in a large mine in the Siberian region of Russia. Since it was during the Cold War, the Soviet Union exported diamonds independently without being subject to De Beers’ control to earn foreign currency. Subsequently, in the 1990s, large-scale mines were discovered one after another in northern Canada, and Australia’s Argyle Mine, famous for its pink diamonds, also broke away from the De Beers cartel to establish an independent distribution network. As supply controls collapsed on all sides, De Beers’ market share plummeted from its historical 90% to its current level of around 30%.

The Ethical Consumption Trend and the Blood Diamond Crisis

Entering the 2000s, the diamond industry suffered a fatal moral blow. The reality of so-called Blood Diamonds—where rebel groups in African conflict zones forced local residents into labor to mine diamonds to fund weapons purchases—was exposed globally by the media. As consumer boycotts spread, global governments and the industry introduced an international certification system called the Kimberley Process in 2003 to block the distribution of diamonds used for war funds. However, this system also possesses structural limitations, failing to completely prevent smuggling or origin laundering, and remains under market criticism.

4. A Revolution Born in the Lab: Lab-Grown Diamonds and the Future of the Market

The Price Disruption Phenomenon of Real Diamonds 100% Identical to Natural Stones

The force shaking up the diamond market most powerfully today is technological advancement. This is due to the emergence of lab-grown diamonds, which are grown artificially in laboratories. These are not cubic zirconia or cheap imitations. They are real diamonds with physical, chemical, and optical properties that are 100% identical to natural diamonds. Even professional gemologists cannot distinguish them without specialized analytical machinery. While natural stones are formed under pressure deep underground over hundreds of millions of years, lab-grown diamonds are created in laboratories within a few weeks using High-Pressure High-Temperature (HPHT) or Chemical Vapor Deposition (CVD) methods. As mass production became viable, prices dropped to 20% to 30% of the cost of natural diamonds. A ring of a size that once required a thousand dollars can now be purchased for just a few hundred dollars.

De Beers’ Shift in Business Direction and a Cold Assessment of Asset Value

When lab-grown diamonds first entered the market, De Beers vehemently criticized them, claiming that lab-grown items were fake and not genuine gemstones. However, as the market rapidly reorganized around a younger generation that values reasonable consumption and eco-friendly values, De Beers completely reversed its stance in 2018 by launching its own lab-grown brand, Lightbox. They simply could not resist the massive tide of the market. Use the table below to intuitively compare the characteristics of natural and lab-grown diamonds.

Currently, one must be highly cautious about purchasing diamonds for asset accumulation or investment purposes. As mass production technologies become more sophisticated, rarity is disappearing, and supply is becoming infinite, putting downward pressure on the prices of standard-grade diamonds. While the emotional value embedded in a diamond may be deeply moving, the monopoly and the illusion of value that sustained its price are vanishing at a rapid pace.