A Pivotal Year For Lab-Grown Diamonds As Industry Uncertainty RemainsFebruary 01, 19
Discussions this week with a range of people with deep knowledge of industry trends and changes threw up some interesting comments on the issue of lab-grown diamonds, synthetic diamonds or factory-made diamonds: even what to call them was contentious.
Above all, the discussions illustrated well the lack of unity in the diamond trade regarding the stones.
None of this is new, of course, but it was interesting to see the deep irritation among some of the figures, who shall all remain nameless but who have significant exposure to what is happening in the market. Some said the diamond industry was creating a problem for itself by being obsessed with the synthetics issue.
"The synthetics sector is receiving significant airtime because we keep on talking about it," said one. "We are giving them far too much free publicity." But is the answer really to simply ignore the issue? Among the favorite claims of the factory-made stone firms is that the diamond sector is causing huge environmental damage and using child labor. Should those claims not be countered robustly?
"Can you really imagine that someone would propose to his fiancée with such a stone? A stone that sees a huge fall in price the moment you walk out of the store. A stone that has little if any resale value. A stone that cannot be possibly considered as an heirloom."
I personally find it difficult to believe, and I am sure most other members of the diamond trade think likewise. But I am not sure that younger buyers are thinking along the same lines as us. Unfortunately, the trade has come late to the party in explaining the romantic story of diamonds.
And then there are cases of established diamond companies trading in synthetics as a parallel business. I am not sure how many are doing so, and one company that I heard about might be just a one-off, but one can't know for sure since such firms necessarily keep their operations under close wraps. The company trades in factory-made stones because, for now, the margins are huge – especially when production costs are on a continuous decline and demand for the polished apparently strong. With razor-thin margins in the diamond trade, this side business brings in much-needed revenue for the firm in question. But it also shows a high level of cynicism and undermines the diamond sector's arguments regarding synthetics.
Meanwhile, other conversations pointed to the need for the diamond and lab-grown sectors to engage in talks in a bid to reduce the heated exchanges between them. The issue of De Beers' Lightbox jewelry line also arose, with one diamond exchange president confident that the new enterprise would serve to undermine synthetics manufacturers' production costs. I must admit that I don't share his certainty, particularly when one of the larger synthetics makers – Diamond Foundry – announced just a couple of weeks ago that it had raised its diamond prices across the board.
I was reminded of these conversations when I received an email later in the week from the International Grown Diamond Association (IGDA) with a report on a study conducted by MVI Marketing LLC, an industry research firm, which it claims highlights "growth in lab-grown diamond awareness and attitudes as well as purchase interest, with an emphasis on the bridal sector."
The report, A Diamond Choice 2019, Lab-Grown Diamonds & The Future of The Diamond Industry, was published by the IGDA, and claims the following key findings:
- 66% of millennials actively shopping for an engagement ring say they will consider a lab-grown diamond, and 23% say they will definitely buy a ring with lab-grown diamonds
- The main purchase driver is the fact that a consumer can get a larger, better quality lab-grown diamond for the same price as a smaller mined diamond
- Consumer attitudes are consistent with updated FTC guidelines in terms of defining language
- Consumers expect lab-grown diamonds to be certified just like mined diamonds
- 51% of consumers are aware of lab-grown diamonds, compared to 9% in 2010
The media statement said that "despite conflicting reports in the trade about which direction lab-grown diamond prices are moving, the report acknowledges that some prices have gone down, mostly in the smaller size goods, but states that for higher quality, larger lab-grown diamonds suitable for bridal, demand exceeds supply and prices are stable and increasing".
Richard Garard, Secretary General, IGDA, said: “Over the last two years, the anecdotal feedback from IGDA members has been that the bridal category is where they’ve had most success. The extensive survey conducted by MVI confirms this as well as corresponding consumer attitudes toward lab-grown diamonds, indicating the significance of the opportunity in bridal."
One should bear in mind that the report was partially underwritten by IGDA member Seki Diamond Systems (CORNES Technologies, LTD), which it says is the leading provider of CVD reactors to the industry.
Clearly, the results fit in with what the grown-diamond manufacturers want to hear. On the other hand, there can be little doubt that the public's interest in such stones – especially among younger buyers – is growing. The Diamond Producers Association is working hard to counter this and though its budget has grown significantly since its establishment four years ago, the size of the challenge means much more is needed. To put it in perspective, its current budget is about a third of the amount that De Beers used to devote to generic marketing. As I write in this month's magazine, 2019 is likely to be a pivotal year for the lab-grown diamond industry, and the conversations this week have confirmed that the trade is unsure how to confront the challenge.