Diamond companies estimate this volume of production at $ 16.7 billion per year

The more we study the facts, the clearer it becomes that the main problem facing the diamond and diamond industry is that the middle part of the diamond pipeline - the diamond manufacturing sector - does not receive its fair share of the pie.

People consider the diamond sector to be very profitable, enticed by the attractiveness and profitability that embodies diamonds. But the middle part of the diamond pipeline is currently suffering from low profitability, constantly bordering on losses, while the upper part of the diamond pipeline and the lower part of the diamond pipeline retain large profits.

The industry pipeline, based on the low-profit sector, sandwiched between two profitable sectors, is not sustainable. The result will be that the cost structure of the middle part of the diamond pipeline will be disrupted. A study of the issue will show why I think that the requirement for the middle part of the diamond pipeline to "add value" is not reasonable and that investments in knowledge, stocks and financing will not pay off under the existing structure.

Economy of the middle part of the diamond pipeline

In general terms, the middle part of the diamond pipeline acquires diamonds for cash. Then she completely finances the process of producing diamonds and buyers of diamonds, selling diamonds on the terms of relatively long terms of payment.

The upper part of the diamond pipeline and the lower part of the diamond pipeline win the most in the diamond pipeline, receiving the bulk of the profits. In addition, the middle part of the diamond pipeline, in fact, operates on the basis of the "costs plus" approach (costs for rough diamonds and labor plus profit). This includes, apart from all the financial obligations of the middle part of the diamond pipeline, market fluctuations and financial risks, as well as the knowledge gained by it about how to turn diamonds into diamonds. In fact, every company in the middle part of the diamond pipeline works like a cutter who earns a salary, earning perhaps less than a cutter.

- Direct costs for diamond mining in 2014, according to Chaim Even Zohar (Chaim Even Zohar), amounted to $ 7 billion per year.

- In 2013, the diamond mining sector produced and sold about 130.5 million carats. In 2014, this volume is believed to have decreased somewhat, but there is still no official data.

- Of the 130.5 million carats of diamonds, about 70 million carats are diamonds of jewelry quality and almost of jewelry quality, cut and polished for use in jewelry.

- Diamond companies estimate this volume of production at $ 16.7 billion per year. This is so much first-hand buyers in the middle part of the diamond pipeline paying for rough diamonds.

- The world's annual sales of diamonds in 2014 amounted to $ 22.3 billion. The difference between diamond sales of $ 22.3 billion and $ 16.7 billion of purchased diamonds is $ 5.6 billion, or 33.5%.

- About 5,000 companies work in the middle of the diamond pipeline. Dividing the annual volume of purchased diamonds, equal to $ 16.7 billion, to 5,000 companies in the middle part of the diamond pipeline, we find that each company in the middle part of the diamond pipeline spends an average of $ 3.34 million for the purchase of diamonds. Dividing the annual sales of diamonds in the amount of $ 22.3 million to 5,000 companies in the middle part of the diamond pipeline, we find that the average income per company is $ 4.46 million, and therefore the annual gross profit per company is $ 1.12 million. This may seem more than enough, but you need to consider a lot.

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