The diamond industry faces a turbulent phase after experiencing a surge in demand for diamond jewelry during the pandemic, leading to an oversupply that is now compelling miners to manage excess inventory.
Prices of natural diamonds have plummeted by nearly 20% compared to a year ago, following a surge in 2022 but remaining higher than ten years ago.
Anglo American’s De Beers, the leading diamond producer by value, has trimmed its output due to sluggish demand. Sanctions-ridden Russian miner Alrosa, the world’s largest producer of rough diamonds by volume, ceased publishing sales data in early 2022 and reduced its output by 2.8% to 34.6 million carats last year.
The burgeoning popularity and affordability of laboratory-grown diamonds (LGDs) are identified as the primary factors contributing to the ongoing challenges faced by the diamond market.
In contrast to miners, companies associated with lab-made stones have reported favorable outcomes. For instance, Pandora, the world’s largest jewelry maker by production volume, raised its full-year revenue guidance after surpassing first-quarter sales and profit forecasts earlier this month. The Danish company, renowned for its charm bracelets, opted out of mined diamonds in 2021 and nearly doubled its sales of lab-grown diamonds in the first quarter, bolstering revenue by 87%.
Pandora attributes the increase in sales in its largest market, the United States, to the use of lab-made diamonds and 100% recycled silver and gold.
The shift towards lab-grown diamonds is primarily driven by consumers seeking more affordable and ethical alternatives. However, industry insiders caution that this trend may not endure.
“People are discovering that a diamond is a diamond. It’s a different value proposition, and people are voting with their wallets,” remarked chief executive Alexander Lacik. “Older customers are more wedded to mined diamonds. Younger ones are more open to lab-grown.”
Despite the hype, man-made diamonds constitute only 20% of global diamond jewelry sales, with the majority still dominated by mined stones, according to diamond industry analyst Paul Zimnisky.
Zimnisky predicts a similar decline in prices for lab diamonds this year, noting a consistent decrease in their value since 2015 when they gained popularity. Initially priced about 10% lower than mined diamonds, synthetic diamonds now command discounts of up to 90%.
Jewelry maker Nightingale, which incorporates both mined and lab diamonds in its offerings, anticipates that man-made gemstones will prompt miners to adopt more transparent and ethical practices.
“History has proven the diamond mining industry isn’t capable or interested in increasing ethical standards or becoming more sustainable without outside pressure,” the company stated. As with blood diamonds, change only came about because public outcry demanded it, and standards quickly began to slip as soon as the spotlight was turned off.
Demand for more ethical products from consumers disrupts this status quo, Nightingale noted, suggesting a gradual transition towards a combination of ethically mined and lab-grown diamonds.
