It’s one of the world’s most exclusive clubs, known over the years as the Syndicate, the Central Selling Organization and the Diamond Trading Company.

For more than a century, De Beers has sold most of its rough diamonds to a select number of customers, a list that reads like a who’s who of the opaque gem-trading world. Tiffany & Co., Graff Diamonds and Signet Jewelers Ltd. all own subsidiaries in this group, guaranteeing a steady supply of gems with the pedigree of being vetted by De Beers.

In the diamond trading world, becoming one of De Beers’s elite buyers is viewed as essential to achieving success and making money. Now, it’s no longer so easy.

De Beers sells its gems through 10 sales each year in Botswana’s capital of Gaborone, and the buyers—known as “sightholders”—have to accept the price and the quantities they’re offered. It’s a system that originated in the 1890s and designed to benefit both miner and customer, who receives the diamonds at a discounted rate.

But the discount has been shrinking. In some cases the prices have been higher than the going trading rate, forcing customers to sell at a loss, according to people familiar with the matter. Some sightholders now struggle to make money from a business that was once highly lucrative.

The problems in the diamond industry are twofold. High-end jewelry sales are stagnating as other luxury offerings, like shoes, handbags and resort vacations, crowd the field. It’s also harder for diamond trading companies to find financing because banks are abandoning the sector after being hit by frauds and bad loans.

“It’s not an easy time right now, I’m not going to pretend it is and I’m not to pretend to my clients that it is,” said Chief Executive Officer Bruce Cleaver. He argues that demand remains robust, and millennials will covet diamonds the same way their parents and grandparents did.

De Beers says it’s also spending more on marketing and improving tracing in the supply chain as part of efforts to show the diamonds aren’t fueling conflict or broader human-rights abuses.

Even so, the relationship between De Beers and its sightholders is becoming strained, as the company keeps prices high even if it means selling fewer stones.

It’s a change for an industry, where being one of the chosen buyers was long considered the highest achievement. So desirable was becoming a sightholder that some of De Beers’s art collection, which lines its office hallways at its headquarters near London’s Trafalgar’s Square and includes works by David Hockney and Damien Hirst, were gifts from customers hoping to curry favor with the miner.

First « 1 2 3 » Next