Question

What cartel provides most of the world's natural diamonds? What are the four " \(\mathrm{Cs}^{\prime \prime}\) that determine the value of a diamond?

Short answer

De Beers is the cartel historically known for controlling the diamond supply. The four Cs are Carat, Clarity, Color, and Cut.

Step-by-step solution

Understanding the Cartel

When discussing the main supplier of natural diamonds worldwide, the term "cartel" refers to a group of independent businesses, or sometimes countries, that collaborate to regulate supply and price to maximize profits. Historically, De Beers has been the dominant diamond cartel, controlling a significant portion of the diamond supply up until the late 20th century.

Identifying the Four Cs

The value of a diamond is typically assessed based on four primary characteristics, commonly known as the "Four Cs": Carat, Clarity, Color, and Cut. Each of these aspects contributes uniquely to the overall quality and price of the diamond.

Carat

Carat refers to the weight of the diamond. One carat is equivalent to 200 milligrams. Larger diamonds generally cost more per carat because they are rarer.

Clarity

Clarity measures the presence of internal 'inclusions' and surface 'blemishes.' It is graded from Flawless, which has no inclusions and blemishes visible under 10x magnification, to Included, which has obvious inclusions.

Color

Color is graded based on the absence of color. Diamonds are graded from D (colorless) to Z (light color), with colorless stones being the most valuable.

Cut

Cut evaluates how well the diamond's facets interact with light. It affects the diamond's brightness, fire, and sparkle. Cut is not the shape of the diamond but rather the quality of work done to shape the stone.

Key concepts

Four Cs of Diamonds

The "Four Cs" of Diamonds is a fundamental concept in diamond valuation essential to understanding its market value. These Four Cs refer to: Carat, Clarity, Color, and Cut.

• Carat: This measures the diamond's weight. A higher carat weight means a larger diamond, which often increases the diamond's value because larger stones are rarer and more sought after.
• Clarity: This assesses the purity of the diamond. Clarity grades can range from Flawless (no visible inclusions or blemishes under magnification) to Included (where inclusions are clearly visible). The fewer the imperfections, the higher the diamond's value.
• Color: Diamonds are valued based on their colorlessness. The color grading scale ranges from D (perfectly colorless) to Z (noticeable color). The less color a diamond exhibits, the higher its value, as colorless diamonds are rare.
• Cut: The cut of a diamond is about how well it has been shaped and polished. An excellent cut enhances the stone's sparkle by ensuring that light reflects optimally from its facets. Quality of cut significantly impacts the overall look and brilliance of a diamond.

Understanding these factors provides a more comprehensive insight into why two diamonds of the same weight might have very different prices.

De Beers Cartel

De Beers is synonymous with diamond magic but also with the understanding of cartels in the diamond industry. As a longstanding enterprise, De Beers dominated the diamond industry for most of the 20th century through a mechanism called a cartel. A cartel is a group of businesses or countries that collaborate to control and regulate the supply and price of a commodity.

De Beers cleverly controlled the diamond market, managing both production and distribution of diamonds globally, which allowed them to stabilize prices and maintain diamonds as a high-demand luxury. By buying rough diamonds and managing their release into the market, they ensured that their stock always retained exceptional value. This monopoly-like grip started to loosen towards the late 20th century, but De Beers’ legacy remains significant in the history of diamond trading.

Their influence instilled the idea of diamonds as symbols of heritage and love, often coaxing buyers with the timeless promise of "A diamond is forever." Understanding De Beers' impact on the diamond market provides critical context for why diamond pricing might not entirely reflect overpowering natural scarcity but rather orchestrated supply control.

Diamond Characteristics

Beyond the Four Cs, there are other characteristics that also affect a diamond's value and appeal. These relate to the diamond's physical properties and stability over time, making them enduring valuables.

• Brilliance: This refers to the brightness a diamond exhibits. A well-cut diamond exhibits significant brilliance due to the reflection of white light from its interior.
• Fire: The dispersion of light to create a "fire" of colors is another appealing diamond property. A finely cut stone will display a spectacular rainbow effect when it catches the light.
• Scintillation: This denotes the sparkle and flashes of light observed from a diamond when moved in the light. Scintillation is most visible in well-proportioned, symmetrically cut diamonds.
• Durability: While diamonds are the hardest known natural substance, they can have cleavage planes where a sharp blow can lead to a scratch. Care in wearing and maintaining diamonds is essential to preserve their beauty.

Understanding these additional features helps ensure buyers make informed decisions by considering not just the basic Four Cs but also how the diamond will shine and endure through the ages. Thus, the true beauty of a diamond goes beyond its immediate attributes to include how it performs throughout a lifetime of wearing and admiration.