When De Beers Sold Its Diamond Stockpile

De Beers ran the closest thing the modern world has had to a permanent monopoly. From the 1930s onward, the company's Central Selling Organisation in London bought up rough diamonds from almost every producing mine — its own, its competitors', whoever — and metered them out at prices it controlled. The lever was a stockpile. Whenever supply spiked or demand softened, De Beers added to the vault. Whenever it wanted to push prices, it released a little. Market share stayed above 80% into the late 1990s.

Then Canada and Australia started selling outside the channel. Mines in the Northwest Territories and at Argyle began routing rough diamonds directly to cutters and traders, and the cartel discovered that policing supply only works when there is supply to police. Around the same time, antitrust pressure in the United States — De Beers had been under indictment since the 1940s for price-fixing and was effectively barred from operating there — made the buy-everything model legally untenable for a company that wanted to sell into America.

So De Beers did the opposite of the thing the company had been built to do. From 2000 to 2004 it liquidated its strategic stockpile, dumping inventory into a market it had spent 70 years carefully starving. Prices wobbled but did not collapse, because Asian demand was rising fast enough to absorb most of it. By 2005 the cushion was gone, and for the first time in a century rough-diamond prices moved on supply and demand alone.

The Oppenheimer family — controlling shareholders since 1927 — read the signal and exited. In November 2011 they sold their 40% stake to Anglo American for £3.2 billion in cash, ending an 80-year run. The market De Beers had invented kept going. The company that invented it became one diamond producer among several.