For an easy way to understand this, let’s take a look at one of the biggest diamond mines in the world, the famous Argyle mine in Western Australia. During its 37 years of operation, it was on numerous occasions the world’s biggest diamond producer, producing up to 42 million carats in one year (1994) and an average of 8 million carats annually. Most of the world’s pink diamonds were produced in Argyle, also known as the pink diamond capital of the world. Rio Tinto, however, decided to end production in late 2020. Even though Rio Tinto has plenty of diamonds remaining in the mine, they had to stop because they were losing money. In addition to rising operational costs, the Ale mine was losing money because of a flat diamond market. There had been a flattening of the diamond market due to an oversupply that outweighed demand.
There are so many mined diamonds floating in the market today that even one of the most successful mines in history cannot make a profit. In the following sections, we will examine some of the most significant reasons why there is too much supply and not enough demand to absorb it.
“Diamonds are forever” is one of the most famous contemporary sayings. In a way, this is true, but it’s also a downside to the mining industry, since once a diamond enters the market, it will always be in circulation. Unlike cars and phones, diamonds are not prone to obsolescence like cars or phones, which people generally replace every few years and then end up in a scrapyard. Diamonds are never thrown away because they are "too old". Rather, diamonds life cycle lasts forever. It all begins when a consumer purchases a diamond. After the diamond is no longer wanted, they sell it to a second-hand dealer or something like that. If necessary, the diamond is recut and sent to a Diamond Laboratory for a new certificate to be reissued. After this process, the stone no longer shows any evidence of its original sources and becomes a "new" diamond. It is a never-ending cycle that goes on forever. The recirculation of diamonds combined with the mining of more and more diamonds has flooded the world with more diamonds than it can handle.
Historically, every diamond engagement ring has either returned to the market via the process described above or been handed down as an heirloom to be used by the next generation of children and grandchildren.
The fundamental reason why there are so many diamonds out there but not enough demand is that for the last 140 years there has been mass production of diamonds. So much so, that from 1880 to 1919, diamond prices actually declined by 50% of their value. In fact, it wasn’t until De Beers intervened to drastically reduce supply that diamond and used a strong marketing campaign that the prices stabilized before slowly going going up.
As a result of the massive amount of diamonds that have been dug up, especially in the last 140 years, all of those diamonds are still circulating and will continue to do so for a very long time. In this sense, there is no scarcity, nor is there any rarity. As a matter of fact, there are so many diamonds ready for sale that perfectly operational mines have to shut down because there are not enough buyers to match the supply. Although some would argue that the population keeps growing, it is completely irrelevant compared to the amount of mining that occurs and the continuous supply of diamonds that renters the market. We invite also to learn more about the disruption of lab grown diamonds is having in the industry.