Editor’s Note
The diamond market is undergoing a significant shift, driven by science and changing consumer economics. As this article highlights, major jewelers like Pandora are now committing to lab-grown stones, making diamonds accessible beyond the luxury sector and reshaping a long-standing industry tradition.
Laboratories Extract Diamonds from the Premium Jewelry Sector
Pandora Advances 13% After Announcing It Will Use Only Synthetic Stones
Nearly 60 years ago, Audrey Hepburn represented many women by dreaming of entering Tiffany’s and trying on some of its diamond jewelry, even though her pocket could not afford such an expense. Prices have not fallen since then, but science has brought this precious stone closer to less premium brands.
Pandora, the world’s largest jewelry manufacturer by volume, though behind Cartier and Tiffany’s in sales and with more affordable prices than these, announced in May the launch of its first collection with synthetic diamonds, to reach all types of customers and to continue demonstrating its commitment to the environment. Furthermore, at the end of last year, it announced that by 2030 all its items will be made from recycled gold and silver.
Investors have approved this decision, and so far this year, the shares of the Danish firm have appreciated by 25%, of which only 13% is since May. The advance is also linked to the rebound in consumption after the 2020 economic crisis resulting from the pandemic. However, this crisis has not been as relevant for jewelry firms, and some fear that the lifting of lockdowns and the return of travel will cause consumers to spend more on services again and less on more material items.
Pandora has not been the only brand to take this step. De Beers, belonging to Anglo American and with an almost absolute monopoly until a few decades ago on the supply and prices of diamonds, has launched a line of these minerals manufactured in laboratories, although it maintains those extracted from mines for engagement rings. Meanwhile, the recovery has led to a 10% increase in the price of its rough diamonds due to increased demand from centers that work these precious stones, in Antwerp (Belgium) or India. Despite this, the stock market performance of the British mining group is not so positive: although it is up 21% for the year, it has lost 16% from the annual highs reached in early May.
Meanwhile, another major diamond mining company, Petra Diamonds, has improved compared to the start of the pandemic, but continues to accumulate declines: it is down 20% for the year, compared to the 80% it lost in 2020.
Despite positive signs, production will take two or three years to reach pre-pandemic levels, according to the Global Diamond Report 2020-2021, prepared by Bain & Company and the Antwerp World Diamond Centre (AWDC). However, even then it was below the peaks achieved in 2017. This situation is compounded by the competition coming from laboratories and the new sustainability demands from consumers.
All of this could lead to two paths, according to the report. Its increasing production is causing the prices of synthetic diamonds to fall, which could make them a substitute for natural ones aimed at a different customer segment than the premium one. However, the study also raises the possibility that if the differentiation trend is reversed, these diamonds would be increasingly present in the luxury segment and would compensate for the decline in the supply of those extracted from mines.
One of the firms benefiting from these changes is the American Diamond Foundry, among whose investors is actor Leonardo DiCaprio, and which last April reached a valuation of $1.8 billion after raising $200 million from Fidelity. The company’s goal is to multiply its production at the Washington plant by five to five million carats per year by the end of 2022, that is, a quarter of De Beers’ production in 2020.
Alternatives for the industry. Diamonds are not only worn in jewelry. Their properties make them substitutes for semiconductors at a time of shortage of these materials due to supply chain disruption from Covid. Furthermore, these chips will be increasingly necessary due to the rise of the electric vehicle.
Diamond Foundry will build in Trujillo (Cáceres) its first European factory for the manufacture of synthetic diamonds for use as semiconductors with a cutting-edge technology pioneering in the world: the plasma reactor technology patented by the company and which requires a lot of energy that they will obtain from a self-consumption solar photovoltaic plant. That is, a sustainable and emission-free project.
