2024-03-10 23:05:06
Once reserved for kings and queens, since the middle of the last century a coveted expression of romance and social status for the middle class as well, after De Beers’ ingenious advertising campaign convinced millions of couples that, being timeless, diamonds were the ultimate symbol of marriage, in the last decade these precious stones have been increasingly “democratized” thanks to the advancement of technology, reports BTA.
Identical in chemical composition, structure and properties to natural, lab-grown stones are capturing an increasing share of the $89 billion global diamond jewelry market.
Sales of lab-made diamonds are projected to grow to more than $12 billion in 2023, up from $1 billion just seven years ago, according to preliminary data. And in response to growing demand, the market volume is expected to double from 9 million carats in 2022 to over 19 million carats in 2030.
Prices and markets
Mechanical diamond production was developed in the early 1950s, but it wasn’t until less than a decade ago that the technological breakthrough needed to create a commercially viable process occurred.
A small “diamond core” – usually a miniature diamond – is placed in a container of carbon (this is the chemical element that natural diamonds are made of, note) and subjected to high temperature and pressure, mimicking natural processes, for 6 to 10 weeks “grows” to the desired size. Without special equipment, the result is indistinguishable from natural stones formed in the bowels of the earth over billions of years, but coming at a much more acceptable value.
The cost of a synthetic diamond can be 60 to 85 percent less than a mined gem of the same size and quality—for a one-carat stone, depending on the quality, that translates to about $1,200 versus nearly $4,200 for a natural stone.
Along with price, synthetic diamonds have other advantages that make them popular, especially with millennials (those born from the early 1980s to the mid-1990s – ed.) and Gen Z (those born after the millennials to the beginning of the second decade of this century – note ed.): they are perceived as “sustainable” and “ethical” – their creation does not harm nature, and by acquiring them, the buyer does not risk inadvertently financing dictatorial regimes and terrorist groups or to become sympathetic to the exploitation of miners in poor countries. Many manufacturers go even further and try to reduce their carbon footprint by investing in renewable sources to generate the energy needed for the manufacturing process.
The rapid development of synthetic diamonds is putting severe pressure on the natural stone sector, already suffering from geopolitical turmoil and declining demand.
Natural diamond sales surged during the COVID-19 pandemic as affluent shoppers sought to make their stay at home more pleasant with luxury purchases, but demand fell as economies reopened. Factors such as the slowdown in economic growth in the leading markets USA and China, oversupply and sanctions against Russian rough diamonds are also putting pressure on the market.
The global market share, by value, of lab-grown gemstones grew from 3.5 percent in 2018 to 18.5 percent in 2023 and is likely to exceed 20 percent this year, the New York-based analyst at Paul Zimnisky sector.
In February 2023, 17 percent of diamond engagement rings sold in the U.S., the world’s largest consumer of natural stones, were encrusted with lab-grown gems. A share that already stands at 36 percent, according to industry analyst Edan Golan.
Unreliable shine
However, as Marilyn Monroe taught us in “Gentlemen Prefer Blondes”, diamonds are a girl’s best friend, not only as jewels that highlight the beauty of the lady who wears them with their shine, but also because they are an excellent investment that does not lose over time its value. However, this is not the case for synthetic diamonds, whose prices have been steadily declining since 2015, the first year they became a mainstream product.
In the 12 months to November 2023, synthetic diamonds fell about 20 percent, according to analyst firm Tenoris. Cormac Kinney, chief executive of commodities trading firm Diamond Standard, predicted the near-term decline could be even sharper as the excitement surrounding lab-grown gems dies down. According to his estimate, their prices could ultimately fall by another 50-80 percent.
To some extent, this is the result of the natural process of development and improvement of a technology – if at the beginning the price of an artificially created diamond was about 10 percent lower than that of a natural diamond, today the difference can reach 90 percent.
On the other hand, unlike natural stones, there are no monopolies in the production of laboratory-grown diamonds, which also leads to lower and lower prices – in India and China alone there are hundreds of companies engaged in such production. The very abundance of synthetic diamonds deprives them of one of the most valuable qualities of natural stones – their uniqueness and subjective value.
And if that trend sounds good to buyers, it’s bad news for producers — WD Lab Grown Diamonds, the second-largest producer of artificial stones in the U.S., filed for bankruptcy in October. The development is also not favorable for those who have already bought a synthetic diamond, as it is practically impossible to sell it at the same or higher price. Some pawn shops even refuse to give a lab-created stone more than 10 percent of its purchase price.
In some cultures, such as India and China, buying a diamond engagement ring is seen as a long-term investment, Zimniski notes, and the prospect of shelling out thousands of dollars for something that will depreciate significantly in a few years is not particularly appealing.
Against this backdrop, the synthetic diamond market, despite its huge potential for sales growth, is increasingly emerging not as a replacement for natural diamonds, but as a complementary segment for buyers looking for more budget-friendly deals or viewing gems as more a fashion accessory rather than an heirloom for generations.
And yet, as much as the stones themselves are getting cheaper, there are still many factors that go into the price of a piece of jewelry. Among them is grinding – the process is the same for synthetic and natural stones, labor intensive, carried out by hand by people who have specialized in this activity for decades. India, in addition to being a leading producer of lab-created diamonds, is also the world’s largest processing and polishing center, and its ateliers are already running out of steam. With the increase in the flow of carats to the market, it is possible to reach a shortage of skilled labor, which will lead to an increase in the prices of processed stones, experts warn.
Gold is also commonly used to set diamonds, the price of which has recently set historical records. Intellectual work and commercial rights are also behind the design of each bracelet or necklace to match the contemporary and timeless look of the “King of Gemstones”. So we can hardly expect diamonds and jewelry with them to become “fast fashion” soon.