Editor’s Note
This article examines the sharp decline in natural diamond prices, driven by an oversupply of Russian gems and growing competition from lab-grown alternatives.
Diamonds are displayed at the De Beers Global Sightholder Sales in Botswana. Dealers say the price of mined, natural rough diamonds have fallen by an estimated 20 per cent to 30 per cent this year alone. PHOTO: REUTERS
Neil Behrmann
Published
Fri, Sep 15, 2023 · 10:00 AM
[LONDON] Diamond prices have tumbled this year as Russian gems continue to flood the global market despite sanctions from the US and the UK, while the rise of lab-grown diamonds has cannibalised demand for the real thing.
Dealers and industry analysts said that the price of mined, natural rough diamonds have fallen by an estimated 20 per cent to 30 per cent this year alone.
After diamonds saw a boom during the Covid-19 pandemic when travel-starved and cash-rich consumers splurged on jewellery and other luxury items, observers say that heyday is well and truly over.
The International Diamond Exchange’s polished diamond price index has dropped 28 per cent from a peak of 158 points in March 2022 to 113 points today, which is below the pre-pandemic levels in 2019.
In a major move, De Beers – the world’s largest diamond producer by value – announced this week that it would end its offering of lab-grown diamonds for engagement rings as synthetics have hit demand for mined diamonds in the US, one of the company’s most important markets.
Despite the vast supply in the market, gem dealers have expressed surprise at the extent of the falling prices. At the start of the year, many had expected a tight market with inadequate supplies to meet growing demand.
Direct Belgian imports from Russian giant Alrosa plunged by about 93 per cent in the first quarter of 2023, compared to levels prior to the start of the Ukraine war in Feb 2022, said Karen Rentmeesters, a senior manager at the Antwerp World Diamond Centre.
To counter this, executives at Israeli tech company Sarine said recently that it has developed new technology to determine whether gems originated in Russia or elsewhere.
Illustrating the extent of surplus diamond inventories in the market, De Beers said its first-half profits fell more than 60 per cent to US$347 million, with its average selling price at US$163 per carat (from US$213 previously). The company’s August sales were the lowest of the year.
De Beers holds ten sales, known as “sights”, every year. Based on the seven sights held so far in 2023, the average sale is US$458 million, down from US$567 million in 2022 and US$482 million in 2021.
The share of lab-grown diamond sales versus natural diamonds is rising rapidly, said Edahn Golan, a diamond analyst who provides data for the global jewellery business.
In the US, which accounts for half of the world’s diamond jewellery sales at about S$75 billion, the lab-grown diamond share was just 2 per cent in 2019. This rose to 8 per cent last year, and recent sales this year saw the rate go up to 11 per cent.
He added that the production and supplies of lab-grown diamonds have surged because the profit margins can be as high as 64 per cent, compared to around 35 per cent for natural diamonds.
This huge profit margin has been achieved despite the wide difference in retail prices. As of August this year, a generic lab-grown diamond cost about US$1,425 a carat, compared to US$5,185 a carat for a generic natural diamond.