Editor’s Note
This article examines the diamond industry’s ongoing transition, highlighting a key market shift from novelty to oversupply. It continues our coverage of the evolving dynamics between natural and lab-grown diamonds.
The diamond industry, still divided, remains in flux following the unexpected shift we recently analyzed between natural and lab-grown diamonds, continuing its quest to establish itself as distinct, though both are valid. As we previously indicated, luxury and safe-haven value play a significant role in this market change that precedes what could be the future of this industry.
Last month, demand for lab-grown diamonds continued with a clear upward trend while rough diamonds experienced precisely the opposite. At that time, excess demand clouded reality and generated distrust. We summarized that the market share of these artificial stones has increased from 3.5% in 2018 to a forecast of 16.5% (equivalent to $14.6 billion) in 2023. In comparison, sales of natural diamonds in dollar terms have remained stable since 2015. On the other hand, natural diamond prices have fallen by more than a quarter since their peak in 2022, a drop driven by this new competition despite being in an industry valued at $89 billion.
But the truth is, synthetic diamond prices have also fallen from over $5,000 per polished 1-carat stone in 2016 to $1,425, as stated by Paul Zimnisky, an independent analyst who compiles diamond transaction data from retail market prices, and they are being sold at a greater discount than ever. This decline is due to the avalanche of suppliers into a booming market, even surpassing the desires of jewelry buyers, and due to economies of scale that have reduced costs. Faced with a seemingly unstoppable surge in the supply of synthetic diamonds, Zimnisky says there will be a “reorganization” among lab-grown producers.
Now, the industry has experienced a new market turn again. According to Rapaport, created diamonds could be experiencing new declines. (Synthetic products are traded at only 98% below the Rapaport price list for natural diamonds). A situation that could be temporary or simply the moment preceding equilibrium for both natural stones to stabilize in the market.