Editor’s Note
The diamond market is undergoing a significant transformation. As this article highlights, the price of natural rough diamonds has fallen sharply, driven in part by weak demand in key markets and the rapid rise of more affordable lab-grown alternatives. This shift suggests a lasting change in the industry’s landscape.
Diamonds may be forever, but they are also experiencing significant discounts. The price of natural rough diamonds has plummeted by 26% in recent years. Weak demand for diamond jewelry in the US and China hasn’t helped. But most fingers point to the growing popularity of lab-grown diamonds (LGDs), which are cheaper. This fracture in the diamond market will persist.
Following a brief boom in diamond jewelry during the pandemic, miners are struggling to reduce excess stock. De Beers, part of Anglo American, along with Russia’s Alrosa, control two-thirds of the rough diamond supply. This week, De Beers announced that its rough diamond sales fell by 23% in the first quarter.
At over $20 billion (€18.7 billion) at the end of 2023, it reached near five-year highs, with a 33% increase since the end of 2022, according to Bank of America.
And worse, as LGDs have gained market share, their prices have also fallen, to about 15% or less of their natural counterparts. Diamond miners argued for years that romantic buyers would prefer the allure of rare natural stones. Increasingly, it seems they were wrong.
Synthetic diamonds are not new. They appeared about 70 years ago, mostly for industrial purposes. But in the last decade, LGDs have taken off. In 2015, LGD supply barely rivaled natural stones. Last year, it already accounted for more than 10% of the global diamond jewelry market, according to specialist Paul Zimnisky.
This has led to a competitive frenzy among producers. The lower costs of LGDs have allowed them to lower prices. In October, WD Lab Grown Diamonds, the second-largest synthetic stone manufacturer in the US, filed for bankruptcy. Since then, it has had to shift its business from the retail segment to industrial customers.
Russian supply has further depressed the price of natural gems. Last year, the country supplied 27% of the world’s rough diamonds. Asian and Middle Eastern nations did not participate in the G7 trade sanctions on Russian diamonds, according to Peel Hunt. Russian rough diamonds continued to flow to India, the main cutting and polishing center for the stones.
Meanwhile, the price of diamonds is moving near the same level as early 2011. Miners are struggling. Smaller producers, such as Canada’s Lucara and the UK-listed Petra and Gem Diamonds groups, have market values of about $100 million or less, equivalent to three or four of the mega-gems they hope to find.