Editor’s Note
This article explores the significant decline in global polished diamond prices, citing expert analysis that attributes the trend to a confluence of market pressures. It presents a perspective from within the industry on the current valuation of natural stones.
Recent global prices of polished mined diamonds have tumbled to the lowest in the past decade, as reported by the International Diamond Exchange. Over the past few years, this decline is attributed to various complex factors resulting in what Tay terms “a perfect storm”.
During the Covid lockdown, explains Tay, mining halted, factories shut, and workers moved to other sectors — resulting in a labour and product shortage. However, consumer demand was buoyed by pent-up spending desire.
The opportunity was ripe for lab-grown diamond jewellery companies, which have been around for decades, to capitalise on the situation. When fine jewellers and traders were restricted from doing in-person business, as is the norm for such precious goods, lab diamond firms and retailers launched aggressive marketing campaigns and sold online, especially the smaller stones destined for solitaire rings.
Immediately post-pandemic, consumers continued to splurge on luxury goods but began to prioritise travel and experiences. This trend, along with the increasing popularity of cheaper lab-growns and Russian natural diamonds flooding the market, started to shake things up — the impact of which hit in early 2023. A precipitous price drop for mined diamonds ensued with the onset of the Russia-Ukraine war, economic uncertainty and sudden interest rate hikes.
The natural diamond industry is currently rallying for recovery. It expects prices to self-correct within the next one to two years, as forecasted by the Diamond Exchange of Singapore (DES). After all, while prices of these mined stones have fluctuated over the last 35 years, they have risen by 3 per cent per annum on average.
However, one of its biggest long-term challenges would be the exponential growth of lab diamonds and its cannibalisation of market share.
As a comparison, a one-carat round lab diamond, VS in clarity, was 16.6 per cent cheaper than a mined one in 2016, as Paul Zimnisky Diamond Analytics reported. By January 2023, lab stone had become 74.6 per cent cheaper at US$1,430 compared to US$5,635 for a natural stone.
Towards the end of last year, the per-carat price of the lab diamond had dipped to US$800, says the DES, which expects this figure to fall to US$300 this year.
Meanwhile, Allied Market Research forecasts lab-growns’ market size to reach US$55.6 billion by 2031, up from US$22.3 billion in 2021, with a compound annual growth rate of 9.8 per cent from 2022 to 2031. Statistica projects the lab-growns pie of the global diamond market to hit 10 per cent in 2030. Asia-Pacific, boasting rising disposable incomes and interest in luxury, is said to be a significant growth driver.
Still, whether they are described as man-made, cultured, brand-created or synthetic, lab diamonds are not fake. They are chemically, physically and optically identical to natural ones. In a landmark announcement in 2018, the US Federal Trade Commission (FTC) declared that they could be marketed as diamonds — the basis for which is that lab diamonds are grown by combining carbon atoms in a crystal lattice, just as in nature.
However, FTC cautioned that publicity statements must qualify their lab origins.
Today, what took the earth one to over three billion years to form under extreme pressure and heat now takes a few days to several weeks. The two main methods are High Pressure, High Temperature (HPHT), which is a costlier technology that uses sizeable industrial pressure chambers to crystalise carbon around a diamond seed, and Chemical Vapor Deposition (CVD), a more widespread process that uses more compact, lower-pressure reactors in which microwaves strip carbon atoms from a hydrocarbon gas, and layer them onto a seed diamond plate.
Lower price points aside, proponents have touted various advantages of such stones, which won over many consumers, especially the younger ones.
Lab diamonds are said to be free from ethical and human rights complications historically associated with natural diamonds, which could originate from conflict zones that mined “blood diamonds”. And while the African civil wars in question happened in the late 90s and have mainly been resolved, the sale of Russian diamonds, believed by some to be funding the war against Ukraine, has recently become a matter of contention.
Lab diamonds are also purported to have a low environmental and carbon footprint. However, a recent global greenwashing crackdown has caught up with some of these marketing claims, which can only be substantiated by firms operating at the highest standards.
Still, the stats put out by the “for” and “against” camps can be contradictory. Not all lab diamond producers are green or socially responsible, and most of such diamonds are manufactured in China and India and mainly use electricity generated by fossil fuels. European producers, especially those that use renewable energy like wind power, fare much better in their carbon footprint.