Editor’s Note
The diamond industry is facing a significant challenge as consumer preferences shift toward more affordable lab-grown alternatives. This article explores the economic pressures and changing perceptions that are reshaping the market for these traditional symbols of luxury.
The diamond industry is in trouble because people prefer the synthetic alternative, which can be up to 85% cheaper.
Ankur Daga, founder and CEO of fine jewelry e-commerce company Angara, told CNBC on Tuesday. Daga estimates that this year in the United States, the largest consumer of diamonds, half of the stones in engagement rings will be lab-grown, compared to just 2% in 2018.
For the expert, the blame lies primarily with the “rapid growth of lab-grown diamonds,” which can be up to 85% cheaper than natural ones. Sales of lab-grown diamonds increased from just 2% of the global diamond jewelry market in 2017 to 18.4% in 2023, according to data provided by price analyst Zimnisky.
A lab-grown diamond is identical in composition and appearance to a mined diamond but is ready in a matter of hours. Natural diamonds, on the other hand, were forged about 160 kilometers underground between 1 and 3 billion years ago, when our planet was hotter.
Today, producing a synthetic diamond (or CVD, from “chemical vapor deposition”) costs between $300 and $500 per carat, compared to $4,000 per carat in 2008, according to a report commissioned by the Antwerp World Diamond Centre (AWDC).
Mehul Sompura, CEO of diamond price comparison tool Diamond Hedge, told CBS MoneyWatch.
The cost savings for lab-grown or artificial diamonds, compared to the naturally formed variety, are significant. For example, a 1-carat princess-cut natural diamond would cost approximately $2,500, compared to $500 for an equivalent lab-grown diamond of the same quality, Sompura said. According to Zimnisky, natural diamond prices have fallen 5.9% year-to-date, more than 30% from their all-time high in 2022.
Meanwhile, in China, a trend-setting market for the industry, consumers are showing less and less interest in diamonds, as its population experiences a significant drop in marriage rates. Market research firm Daxue Consulting also pointed to the growing popularity of other precious materials, such as gold and lab-grown gems, among the factors that helped reduce Chinese demand for diamonds.
Adding to this, the end of pandemic restrictions led consumers to prefer spending their money on travel experiences rather than jewelry and other luxury items. Furthermore, people no longer see diamonds as an investment, Daga told CNBC.
he explained. Daga believes natural diamond prices could fall another 20% in the next 12 months.
The Luxembourg-based diamond giant De Beers, which coined the phrase “diamonds are forever” in 1948, had its worst year in two decades: its parent company, Anglo American, announced plans to spin off the subsidiary, of which it owns 85%.
Anglo American CEO Duncan Wanblad told the Financial Times that selling De Beers will be “the hardest part” of the company’s radical restructuring. “Diamonds no longer fit, despite De Beers’ strong legacy under Anglo,” independent diamond industry analyst Paul Zimnisky reflected to CNBC.
De Beers once had a monopoly on the diamond market, but its share has fallen after being forced to cut prices by 10% earlier this year, Bloomberg reported.
said Anish Aggarwal, co-founder of diamond advisory firm Gemdax.
Diamonds are discretionary products and marketing has not been up to par, he noted.
Aggarwal said.