Editor’s Note
The rapid rise of lab-grown diamonds has disrupted the traditional gemstone market, but recent data suggests a dramatic price correction is underway. This article examines the shifting dynamics and the profound impact on industry players worldwide.
In the past few years, synthetic diamonds, also known as lab-grown diamonds (LGDs), have been a flash in the pan. They have threatened natural diamonds, hit the production and bottom lines of mining giants such as De Beers and Argyle, and almost completely destroyed India’s old diamond cutting and polishing industry.
Now, things are changing again. In recent months, lab-grown diamonds (LGDs) are losing demand rapidly due to oversupply, with consumers preferring to shift back to the appeal of natural stones. This was confirmed recently by World Diamond Council President Feriel Zerouki in an interview with Reuters in Luanda.
He added that a collapse in lab-grown diamond prices, driven by increased production in China and India, has started to undermine confidence in the synthetic gems.
Industry analysts told Reuters the synthetic diamond bubble seems to have burst, with some claiming that prices of one-carat and two-carat lab-growns had fallen as much as 96% since 2018. This was corroborated by Paul Zimnisky, a diamond trade analyst, who said lab-growns were currently selling at a 90% discount to similar natural diamonds—compared to being just 10% cheaper in 2015.
Experts have been warning that the price of LGDs could drop so low that they become fashion accessories that no longer compete with diamonds, especially in the key bridal market.
In India, it is both good and bad news. The bad news first. Surat and many other rough polishing and cutting hubs saw small and medium units diversifying to produce synthetic diamonds as international markets changed gear post-2022.
But the synthetic diamond market has not kept pace. In 2024, exports of polished LGDs shot up 50% in volume to 6.45 million carats, compared with 4.28 million carats in 2022. However, in value terms, earnings dropped 45%. This year, both volume growth and value realization have plummeted.
Anecdotal reports from Surat point to heavy investments being made to set up 6,000 synthetic diamond reactors, employing 40% of the original cutting and polishing workforce. Workers’ unions since June are pointing out that nearly 4 lakh (400,000) employees in the ‘synthetic’ units in Surat are facing delays in wage payments or layoffs.
However, those who expect the natural diamond industry will proportionately benefit from the decline of ‘lab-growns’ may be in for a disappointment. Global synthetic diamond production reached 17.1 billion carats in 2024.
While synthetic diamonds will continue in industrial and electronic use, their share in the gems and jewelry lifestyle market, once projected at nearly $26 billion, is plummeting. On the other hand, natural diamonds are facing social headwinds. A November 2024 study on the diamond market by McKinsey & Co pointed to increasing ethical considerations against mined diamonds, often associated with exploitation and child labor. Environment, Social and Governance (ESG) factors have become more important to millennial and Gen Z markets, who prefer buying branded jewelry that guarantees ESG compliance.
Natural diamond production worldwide, which touched 129 million carats in 2024, is expected to dip to 125 million carats in calendar 2025. The slowing market has seen several major mines, including Australia’s Argyle and key sites in Canada, depleted or nearing the end of their operational lifespans. Sanctions since the Ukraine war against Russia’s Alrosa, the world’s largest diamond producer by volume, have also severely disrupted the supply chain of roughs, impacting India.
Reacting to the slowing market, mining companies have lowered investments in shoring up ageing mines and developing new ones. This means supply will be restricted in the long term, as it takes 10 years for a new mine to reach commercial production.
However now, with synthetic diamonds receding, miners see a sliver of opportunity. At the recent Luanda conclave, De Beers said it wants to boost production but pointed out that a rebound in demand calls for initiatives such as the Luanda Accord. This is an agreement by diamond-producing countries and companies to create a collective marketing fund. So far, most African producers have committed to allocating 1% of their annual diamond sales revenue to promote natural diamonds.
India is not a miner of roughs. It imports them and then polishes over 90% of the world’s diamonds by volume and is the largest exporter of cut and polished diamonds. In 2023-24, India exported approximately $18.2 billion worth of diamonds. Theoretically, we should be the biggest gainers from the international slide in synthetic diamonds.
But there is a fly in the ointment. The Trump administration has imposed an over-50% tariff on most Indian goods. Since 45% of our polished diamonds and jewelry is destined for the US, the tariffs have been back-breaking. One analysis has projected a revenue drop of 28–30% in FY2006.