When, 10 long years ago, the diamond industry began the second decade of the 21st Century, indicators of some of the changes that were to impact it during the 2010s already were apparent. Others were not. What is a definite, however, is that the industry that now enters the 2020s is greatly changed from the one that existed at the start of 2010, and many of these changes will decide its future over the coming 10 years.
How did the industry evolve? The following is the first of a three-part series, and looks at the impact of the changing of the diamond-buying generations, and how the newcomers’ values affected and will continue to affect the ways in which diamond jewelry is sold.
DE BEERS DELIVERS A WATERSHED MOMENT
A watershed moment for the diamond industry occurred on May 29, 2018, the day before the start of the JCK Show in Las Vegas. In a move that few expected, the world’s most well know rough diamond mining company announced that it was launching a fashion jewelry brand with laboratory-grown diamonds called Lightbox Jewelry. They would begin selling online that September at a fixed price of $800 per carat, which at the time was about 75 percent lower than those being charged by existing lab-grown diamond producers.
Addressing the media, the company’s CEO Bruce Cleaver that they were consumers a lab-grown product that consumers told them they want, but are not able to get – affordable fashion jewelry. It “may not be forever, but is perfect for right now,” he stated.
“Our extensive research tells us this is how consumers regard lab-grown diamonds – as a fun, pretty product that shouldn’t cost that much – so we see an opportunity here that’s been missed by lab-grown diamond producers,” Cleaver added.
To support Lightbox, De Beers revealed it was investing a total of $94 million over four years in a new production facility near Portland, Oregon. Once fully operational, the plant will be capable of producing upwards of 500,000 rough carats of high-quality lab-grown diamonds each year.
A 3.99-carat Asscher-cut diamond, manufactured by ALTR Created Diamonds, which in 2018 was unveiled as the largest pink synthetic diamond ever created.
PRICE DIFFERENTIAL BETWEEN SYNTHETIC AND NATURAL GROWS
The fixed pricing structure did not come as good news to the other synthetic producers, who believed that the market value of natural diamonds would always be the benchmark for the price at which they can sell their own products.
Indeed, a good number of the laboratory-grown diamond companies that had set up booths at the 2018 JCK Show Las Vegas most likely wished they had done otherwise, as the public largely kept away, unsure where prices of the new product category would go.
It took several months before that became obvious, and the answer was downward. The price divide between laboratory-gown and natural diamonds grew ever wider.
According to Bain & Co., during the fourth quarter of 2016, the price of laboratory-grown diamonds at retail was about 80 percent of the price being paid for natural goods of equivalent size and quality. By the fourth quarter of 2017, the figure was down to 65 percent, and a year later it stood at about the 50 percent mark. It fell about 5 percentage point over the next 12 months.
From a wholesale perspective, the growing price differential between rough and polished diamonds was even more stark. According to the Bain, during the fourth quarter of 2016 the price of laboratory-grown diamonds was about 70 percent of the equivalent prices for polished, falling to 55 percent over the next 12 months and plummeting to about 20 percent of the value by the fourth quarter of 2018, which was in the months after JCK Show at which Lightbox Jewelry was introduced. Today it is closer 15 percent of the value of an equivalent natural stone.
PRICE DIFFERENTIAL BETWEEN SYNTHETIC AND NATURAL GROWS
But while prices are falling, so is the popularity laboratory-grown diamonds in the marketplace. According to Bain & Co., in 2018 and 2019, production of these goods increased 15 percent to 20 percent, with majority of the growth coming from China.
What clearly is happening is that they are coming into their own as a separate product category, raising the importance of the industry and regulators to easily differentiate between them and natural stones.
In June 2019, World Customs Organization ratified a new international six-digit code into its HS system, 7104.21, which it qualifies as “synthetic diamond, unworked or simply sawn or roughly shaped.” Until then, rough laboratory-grown diamonds were grouped with all other synthetic goods.
Furthermore, a number of leading gem labs are now issuing reports for laboratory-grown diamonds, including the Gemological Institute of America. Their appearance and sometimes the terms used within the report can help distinguish between these reports from those issued for natural diamonds.
In November 2019, at the 2019 congress of CIBJO, the World Jewelry Confederation, it was decided to create a committee dedicated to establishing operating practices that are specific to the laboratory-grown diamond trade.
“There are clear ground rules,” said Wesley Hunt, a De Beers official who heads the new committee: “The primary goal is to protect consumer confidence. Secondly, it is to ensure consumer confidence that the consumer must receive complete and unambiguous information about what they are buying – namely a natural diamond or a laboratory-grown diamond, so that they can make a consciously informed purchasing decision. And, thirdly, such principles should be carried out with mutual consideration by all sides, so as not to harm the natural or laboratory-grown diamond sectors in marketing their respective products.”