Merchants purchase and sell diamonds in various amounts and qualities to make a profit.
Mining businesses, producers, and enterprises that distribute diamonds all employ a lot of traders. Many of those questions have some relationship to the notion of how the diamond business functions.
Our main query today is: How Does Diamond Business Work?
The straightforward response is that this industry is well-organized, with a four-tiered structure. The Gem and Jewelry Export Promotion Council (GJEPC) claims the place at the head of the system.
This Council is a conduit between business and government and promotes India’s jewelry sector internationally.
Despite how simple the question first seems, there are many factors to consider and calculations to be done while discussing this topic. Thus we strongly encourage you to keep reading.
Without further ado, let’s find out how the diamond industry works!
What Are Diamonds And Their Value
Let’s start with what diamonds are!
Carbon makes up the uncommon, naturally occurring mineral known as diamond. The most vital chemical link, covalent, connects each carbon atom in a diamond to the four carbon atoms surrounding it.
One of the most resilient and adaptable materials ever created results from this straightforward, homogenous, tightly-bonded configuration. So, the hardest known natural material is diamond.
It also boasts the best thermal conductivity of any natural material and is chemically resistant. Due to these qualities, it may be used as a cutting tool and for other durability tasks.
Additional unique visual characteristics of diamond include an adamantine brilliance, a high index of refraction, and high dispersion.
These characteristics make diamond the most popular gemstone in the world and make it suitable for use in specialized lenses where performance and durability are required.
What about the diamond market, you may wonder? Let’s take a look!
What Is The Diamond Market?
Let’s learn about the diamond market, its size, and many more!
One of the world’s most critical natural resources, particularly in Africa, are diamonds.
Rough diamond production is projected to be worth US$13 billion annually, with US$8.5 billion coming from Africa (approximately 65 percent).
Around ten million people are employed by the diamond business globally, directly and indirectly, in various positions ranging from mining to retail.
Global sales of diamond jewelry have grown steadily over the past 25 years, tripling in value, and now exceed US$72 billion annually.
So, you may wonder: What are the uses of diamonds?
Due to their rarity and exquisite look, diamonds are primarily used in jewelry and industry due to their unique molecular characteristics.
About 30% of all diamonds, in terms of number, are gem-quality and sent to professionals for cutting, polishing, and jewelry production.
The remaining 70% of diamonds are marketed for use in cutting, drilling, grinding, and polishing equipment in industrial settings.
How Does The Diamond Sector Encourage Ethical Business Practices?
Governments, NGOs, and the international diamond industry have joined forces to put into place a “certificate of origin” system known as the Kimberley Process to encourage the trading of diamonds from legal sources and to guarantee that consumers can be confident in their purchases of diamond jewelry:
The Kimberley Process is a method of certification that stops conflict-related diamonds from entering the supply chain for legal diamonds.
Only raw diamonds accompanied by a government-issued certificate can be imported and exported thanks to the Kimberley Process, which guarantees that the diamonds come from conflict-free sources.
Only nations part of the Kimberley Process can import or export raw diamonds under this UN-mandated method.
Today, 74 nations currently participate in the Kimberley Process, which guarantees that over 99 percent of diamonds come from conflict-free sources. It is against the law to import or export raw diamonds between these nations without a Kimberley Process certificate.
The World Diamond Council (WDC) created the System of Warranties in addition to the Kimberley Process to extend the Kimberley Process’s conflict-free guarantee to polished diamonds and provide customers a way to be sure their diamonds come from conflict-free sources.
Its main component is a statement on the invoice that goes along with every polished diamond transaction (apart from those made directly to consumers), stating that the diamonds are “not involved in fueling conflict and are following United Nations resolutions.”
Diamonds are guaranteed to come from conflict-free sources up to the diamond jewelry store, thanks to the System of Warranties.
Also, here is another global association called CIBJO.
The World Jewelry Confederation, or CIBJO, is a global association of national jewelry trade organizations from 40 countries. There are 33 associate members from the commercial organizations and the national members.
CIBJO was established in 1926 to promote international cooperation in the jewelry industry, foster harmonization, and consider concerns that affect global commerce.
Protecting customer faith in the sector is foremost among these.
In May 2005, the diamond and gold jewelry supply chain, from mine to retail, came together to form the Council for Responsible Jewelry Practices (CRJP, “the Council”).
The 81 members of the present Council are dedicated to advancing ethical corporate conduct in a clear-cut and responsible way across the whole sector, from mining to retail.
Their dedication seeks to uphold customer faith in gold and diamond jewelry items and the confidence of all interested parties in their business.
Now that we learn about the diamond market, let’s take a look at how diamond traders work!
The Work of Diamond Traders
To benefit from the trade, diamond merchants purchase and sell many diamonds. Mining operations and enterprises that distribute diamonds employ plenty of merchants.
The dealers are referred to as brokers in certain countries. Some of them work for investment firms rather than businesses in the diamond sector.
In worldwide mines, major mining firms and independent miners fight to unearth uncut or raw diamonds and other kinds of precious stones.
Diamond merchants seek to broker arrangements to sell these jewels to jewelers, investment companies, or private people by buying raw diamonds directly from minors.
The prices that traders must agree upon with mining companies rely partly on variables like supply and demand, just like the pricing of most commodities.
Additionally, since extra-large gems may sell for a lot of money on the world market, minors frequently charge a premium for them.
After buying raw diamonds, merchants sell the gems to companies that polish diamonds.
Some traders work for companies that cut and polish diamonds, and these people are frequently salaried workers. Other dealers operate independently of diamond businesses and are typically compensated with commissions.
In other cases, diamond wholesalers hire independent dealers to negotiate contracts with mining firms and minors on their behalf.
Along with purchasing raw diamonds, merchants also purchase polished diamonds, which they then offer to jewelers and investment companies.
Large numbers of diamonds that may be used to manufacture earrings, engagement rings, and other jewelry may be purchased by traders.
In other cases, people may hire a trader to find a particular diamond that satisfies the specifications of a specific client, such as a wealthy person who wishes to purchase a massive diamond as a present or status symbol.
Investment firms are more interested in generating money from transactions than acquiring the stones, like those that handle other commodities and buy and sell diamonds.
Contrary to gem enterprises, investment corporations lack diamond storage facilities.
Consequently, if they cannot locate a customer prepared to pay a premium for the stone, investment firm-employed diamond merchants may have to take a loss on diamond deals.
Like other investing business brokers, diamond traders often provide commissions rather than salaries.
Some rules control the operations of diamond merchants in various nations. These regulations are meant to prevent merchants from acquiring and disposing of so-called conflict diamonds with origins in violent conflict.
Diamond sales have historically been used to pay for military costs related to civil wars and other conflicts. As a result, merchants throughout the majority of the globe must maintain comprehensive documents demonstrating that they obtained their diamonds from reliable sources.
Let’s move to the story about where it all started!
What Led To The Growth Of The Indian Diamond Industry?
The Golconda area was home to India’s very first diamond-producing mines.
Diamonds gradually made their way into the royal courts of Europe as India began to establish international economic links. When diamond embellishments first appeared on clothing in the 15th century, they quickly gained popularity.
The diamond industry, however, saw a downturn towards the end of the 18th century as the essential resources became scarce due to the rising demand for Indian diamonds.
Restructuring of the Industry
The Indian diamond polishers decided to bolster and adequately organize the diamond business in the 1960s. A new diamond that would be their ticket out of poverty brought optimism to a group of jewelers and polishers from the Gujarati state.
Most of the diamonds sold in India at this period were tiny stones, measuring 0.20 carats or less in weight. Although this was a modest start, India exported polished diamonds worth $ 17 million in 1966.
This beginning served as a launching pad for developing the modern diamond industry, which currently rules the globe.
India has traditionally carried the torch for diamond production and is now the world’s top producer of diamonds. India is responsible for producing 8 out of every 10 diamonds sold worldwide.
Western towns like Surat, Ahmedabad, and Mumbai are home to the cutting and polishing industry. Approximately 2500 interconnected families control this industry and have built an empire there.
Surat’s diamond industry produces one trillion rupees’ worth of polished diamonds each year. While Surat is where most diamonds are cut and polished, Ahmedabad, Amreli, and Bhavnagar are responsible for other jewels.
Approximately 1 million people are employed in India’s diamond cutting and polishing sector.
This industry has a four-tier structure and is well organized. However, the Gem and Jewelry Export Promotion Council claims the place at the head of the system (GJEPC).
This Council is a conduit between business and government and promotes India’s jewelry sector internationally.
So, the second tier comprises the biggest private export and import businesses. The diamond cutting and polishing business include all of these.
The third tier comprises the industry’s small and medium-sized companies with contracts with significant rough importers.
The small-scale businesses in this industry that are skilled at processing very tiny diamonds make up the fourth tier.
Even though the diamond sector frequently has many ups and downs, its future is positive since it has always been one of the most competitive in the world and has a sizable workforce.
Related Read: When Did People Start Using Diamonds As Jewelry?
For those still unclear, let us explain the diamond industry again! So, the main question was: How Does Diamond Business Work?
The simple explanation is that this business is highly structured, with a four-tiered structure. The Gem and Jewelry Export Promotion Council asserts its position as the system’s top organization (GJEPC).
We tried to provide you with as much information as we can on topics such as what diamonds and their value is, what the diamond market is, how it works, and many more!
We hope you enjoyed reading this article as much as we enjoyed creating it!
Learn More: Diamond Statistics: Diamond By The Numbers