Diamonds forever? Rather, diamonds are for everyone

All for Diamonds

Diamonds forever? Rather, diamonds are for everyone

02.07.2023

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Lets face it: lab-grown diamonds are becoming more common on the market every year, and this trend is likely to continue.


Manufacturers of such stones are increasing their volumes, despite some signs of an oversupply, and the consumption of synthetic diamonds does not think to decrease. At the same time, the category of wedding jewelry, which was previously dominated by natural diamonds, is gradually coming under the influence of man-made precious stones.

Iq Diamonds JewelryI myself, being a representative of the millennial generation, was in search of the perfect wedding ring (which turned out to be very useful in the context of covering the topic of this article), and therefore I will try to consider the problem not only from an analytical, but also from a consumer point of view. No wonder Im faced with a dilemma: should I choose a ring with a natural or a grown diamond? This issue is more complicated than it may seem at first glance in the current conditions of the diamond market and the global economy as a whole, and also considering how much the production of synthetic diamonds has developed over the past few years.

In the last couple of months, diamond industry analysts have been warning about an oversupply in the synthetic diamond market. Meanwhile, according to recent reports, demand for them does not show signs of slowing down, but, on the contrary, is growing. This situation is very interesting from the point of view of what consequences it can lead to for the markets of synthetic and natural stones. There is a feeling that diamonds are slowly but surely becoming a more inexpensive and affordable variety of precious stones than they were before.

However, first I propose to take a look at the current state and deep trends of the markets for grown and natural diamonds in order to better assess their prospects.

Historical background

Perhaps we should take a look at the recent events of the diamond market as a whole and assess how market trends have manifested themselves in the segments of natural and synthetic stones.

Grown Diamonds Iq DiamondsThroughout 2019, diamond prices remained mostly stable, but in 2020, against the background of the Covid-19 pandemic, they fell significantly. Consumer concerns have skyrocketed, jewelry stores have closed, and the global economy is facing lightning-fast destabilization. Nevertheless, after the crisis passed, the prices of diamonds not only increased, but also reached a new peak in the first half of 2022. Consumer spending, which had been forced to stand idle for more than a year due to the pandemic, recovered and increased. Alas, this trend turned out to be quite short-term, and in January 2023, the diamond price index fell to the levels of the end of 2021.

Of course, the merit in this fall can be attributed with a high degree of probability to the seasonality of the diamond market, but there are a number of other factors. Among them are economic uncertainty and fears of an impending recession, as well as concerns about inflation and new cases of coronavirus in China, which could slow down economic growth in the country. If we combine these factors with the threat that synthetic diamonds pose to the natural stone market, the picture looks disappointing. These sentiments have already led to massive job cuts in the cutting segment in Indian Surat.

At the same time, mixed trends were observed in the grown diamonds industry, although the overall picture looks very positive. On the one hand, there are clear signs of oversupply in this market, and synthetic stones are traded at least 90%-95% lower than the same price for natural diamonds on RapNet. A vivid example of this is the recent "advertising campaign", which implied the sale of synthetics with a 100% discount at an industry exhibition in Las Vegas. On the other hand, according to the latest data, grown diamonds enjoy both great market recognition and popularity among consumers.

Some diamond industry analysts believe that synthetic diamonds are playing an increasingly important role and in the future may take a significant share of the diamond jewelry market.

There are several reasons for this.

Created cheap

Iq Diamonds JewelryIt is not surprising that laboratory diamonds have become ubiquitous, because the threshold for entering this market is very low. For example, a quick search on the Internet leads to a well-known Chinese wholesale marketplace that offers to buy a "Hot Sale, professional artificial Diamond CVD machine" (the spelling of the automatic translator embedded on the site is preserved) for just $130,000. A similar plant for growing artificial diamonds in Surat, India, will cost even cheaper – only $86,000 (7 million rupees). China is the world leader in the cultivation of synthetic stones with a market share of more than 50%, and India follows on its heels and is rapidly increasing production capacity.

One of the sellers on the Chinese marketplace offers HPHT-grown 1.5-carat diamonds certified by the International Gemological Institute (IGI) of VVS color D purity for $650 apiece. It is noted that this Chinese company can produce up to 500 such stones per month, and this is just one of many companies in Wuzhou Province alone, known for its capacity to create various artificial precious stones.

India can use its potential as a diamond cutting center to benefit from the production of synthetic diamonds. Indian exports of such products more than doubled (+105.63%) to $1.3 billion in the fiscal year from April 2021 to March 2022, compared with $636.25 million a year earlier. Despite the fact that the results next year may be disappointing due to a decrease in the operating load of cutting workshops, the trend is very clear: more and more grown diamonds will appear on the market. According to recent estimates, the number of diamond growing plants in India has reached 4,500, compared to 3,000 just six months earlier.

Indeed, the profit in the segment of synthetic diamonds continues to decline, and competition continues to grow, but at the same time, what difference does it make if the plants for growing stones are cheap, operating costs will continue to decline over time against the background of technology development and staff competencies, and the extraction of natural diamonds will gradually fall, freeing up market share? Those synthetic producers who will be able to stay afloat in the current conditions will receive a good profit in the future. And apparently, it is the sellers of diamond jewelry who will help to provide it.

The answer of jewelry retail

Recently, retail jewelry sellers have not just recognized, but have begun to actively offer laboratory-grown diamonds to customers. According to a recent study conducted by the research and consulting company TheMVEye commissioned by the International Grown Diamond Association (IGDA), 72% of jewelry retailers in North America, Europe and Australia sell jewelry with synthetic stones, while 87% of them expressed some level of "satisfaction" with this strategy.

Iq Diamonds JewelryAlthough from the point of view of statistics it is impossible to trace what exactly caused a feeling of deep "satisfaction" among respondents, I believe the answer still lies in profit. A number of sources in the jewelry and diamond industry give different estimates of the profitability of products with synthetic diamonds compared to products with similar natural stones: they usually bring retailers from 16% to 40% more profit. And, while retailers of jewelry products receive higher profits, buyers are not left out and can afford either a cheaper diamond or a larger stone – to the mutual benefit of both sides. And don forget about marketing.

Many retailers in the field of grown diamonds advertise their products as "non-conflict", "ethical" or "sustainable", which in the context of these messages should contrast with natural diamonds, to which exactly the opposite characteristics are implicitly attributed. When the average millennial buyer comes to a jewelry store and is faced with a choice: buy a cheaper "sustainably created" diamond of good quality and color, or a more expensive stone that looks exactly the same, but in his mind is associated with the movie "Blood Diamond", which one will he choose?

Unsurprisingly, synthetic diamonds are increasing their market share. Even in the category of wedding jewelry, which was previously dominated by natural diamonds, there is a sharp increase in the proportion of synthetics, and there is a reason for this. Producers of grown diamonds at the current level of technology development find it easier (and more profitable) to create large quality stones than chalk. Since engagement rings traditionally have to contain a large central diamond, the situation is ideal for manufacturers of laboratory stones. According to the latest data, by October 2022, 10% of all wedding rings sold in the United States were with a synthetic diamond, compared to 6% a year earlier.

The USA is undoubtedly the largest market for jewelry with synthetics, but it is not the only one. When I was personally looking for an engagement ring while in one of the Balkan countries, I was surprised to find a jewelry retailer with grown diamonds nearby, which, as it turned out, is a subsidiary of a local jewelry company dealing with natural diamonds. Grown diamonds are sold there at a price about 40% lower than comparable natural stones in the region, and the website proudly reports that "diamonds grown in the laboratory are not associated with unethical practices characteristic of stones extracted from mines."

Grown diamonds go on the offensive

Iq Diamonds JewelryManufacturers of synthetic diamonds, and, to some extent, retailers are making every effort to tell consumers about the unspeakable horrors of diamond mining. A striking example is the company Clean Origin, one of the five largest producers of grown stones. On her website there are, for example, such passages: "...most of the diamonds on the market are mined at an incredible cost to the communities and the environment in which they live," and "although all types of mining can have negative consequences, diamond mining has proven to be particularly brutal." The following is a list of atrocities, victims and conflicts, as well as detailed descriptions of the "ecological devastation", which, according to the narrative of this company, are caused by the extraction of "so-called natural" diamonds.

This is the crystallized and most extreme form of the attitude towards natural diamonds that synthetic manufacturers are trying to instill in the consumer in the struggle for his wallet. At the same time, they usually modestly keep silent about the fact that over the past two decades, the diamond pipeline has undergone major changes, conflict diamonds are practically excluded from the supply chain, and the diamond industry itself provides a livelihood for tens of millions of people from local communities in developing countries where precious stones are mined. However, the negative impact of mining on the environment cannot be discounted. According to the estimates of the same Clean Origin (probably quite high, although the data vary greatly), the extraction of one carat of diamonds leads to the emission of 57 kg of CO2 into the atmosphere. For comparison: the carbon footprint of your smartphone is also estimated at 57 kg of CO2! However, unlike a smartphone, you probably won throw away your diamond after 2-3 years of use.

Of course, the producers of grown diamonds at the beginning of the formation of this industry had to withstand the flow of negativity from diamond mining companies and influential people who tried to describe the new product on the market as "synthetic" and generally expose these stones as "fake". And naturally, in response, the producers of laboratory stones chose the simplest strategy of retaliation aimed at the most vulnerable point of the natural diamond market – its closeness and inaccessibility to outsiders. It is precisely because of this opacity that synthetic manufacturers found it so easy to use any negative media products, such as popular films and common misconceptions, against natural stones. And while this strategy is working, it will be used, despite the suggestions of some experts to look for their own history for synthetic diamonds. From the consumers point of view, a lab–grown diamond is the same diamond. Therefore, synthetic stones will continue to take away market share from natural ones as long as they are allowed to do so.

"This study confirms the fact that the destabilization of the diamond market associated with laboratory-grown stones has gone far beyond the United States, and now consumer demand [for synthetic stones] is growing in markets around the world," said Liz Chatelain, president and founder of TheMVEye in a recent report of the organization. "There are also clear signs that natural diamonds are losing market share [in favor of synthetics]."

There is a tense struggle ahead

Iq Diamonds JewelryDiamond mining companies have no other choice but to try to defend themselves against this young and strong enemy. The Natural Diamond Council (WDC) was created specifically for this purpose, as well as to inform consumers about efforts to ensure sustainable development in the diamond industry. The organization is fairly well funded, and its initiatives deserve praise, although the recent withdrawal of ALROSA from it may negatively affect its efforts. But these efforts alone are not enough.

You see, as a consumer, I want to know what Im paying for. If I am offered a choice of two identical gems and one of them is 40% cheaper, then why should I choose the more expensive one? In a typical jewelry store setting, the consultant will probably tell me about the weight of the diamond, name the price, 4C and, if lucky, the country of origin of the stone. This is simply not enough to justify a 40% higher price. Modern consumers looking for an engagement ring need to know about the specific community in Botswana or Nunavut that they helped by buying this particular diamond, and even better if they find out how well these funds have been used to help these people. And each individual diamond seller should be ready to provide this information to the consumer in the best possible way. If millennials are not aware of these things, they will buy a synthetic diamond cheaper and either keep the difference for themselves or spend it on charity programs that openly talk about their ultimate goals.

Rising interest rates in the US and the looming recession are also putting pressure on both jewelers and consumers. As recent Mastercard SpendingPulse data show, as money becomes more expensive, it makes more and more sense to save on luxury items. Jewelry sales fell 5.4% in the 2022 holiday season, while spending on experiences (such as restaurants) increased. The holiday season was marked by big discounts, as concerns about inflation forced consumers to look for great deals. This means that consumers will prefer cheaper products offered by companies producing grown diamonds.

As an analyst, I don see anything surprising in the fact that the synthetic market is gaining momentum. The natural diamond market did a poor job of introducing grown stones as its tool and instead created a strong and uncompromising opponent. Lower prices for artificial diamonds, combined with a better image in the consumers mind, make them a serious competitor for natural stones, and the more time passes, the harder it will be for the natural diamond industry to resist taking away its market share. The only way to coexist with synthetics in a highly competitive market is to make even more efforts to disclose information, openness to the consumer and a detailed story about each individual diamond in order to truly reflect its uniqueness and exclusivity. This is something that lab-grown diamonds don have. Until then, "A diamond is forever" is slowly but surely turning into "A Diamond for everyone." If you want to know, I still bought a ring with a grown diamond. It is cheaper, and a synthetic diamond is still the same diamond. Fedor Lisovoy for Rough&Polished.

Источник https://www.rough-polished.com/ru/analytics/129101.html



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