The price of Natural diamonds at small carat weight has fallen sharply, and the competition between Lab Grown diamonds and natural diamonds has entered a critical moment.
A few days ago,It's reported that as more and more American consumers choose engagement rings made of lab-grown diamond, the world’s most popular diamond type and the diamond industry’s most popular The price of small-carat products, one of the important products, rough diamonds, has fallen sharply.
Currently, the price of diamonds used in the popular, less expensive one- or two-carat solitaire engagement rings in the United States has fallen far more than other gemstones on the market. According to industry insiders, this reason is due to the surge in consumer demand for laboratory-grown gemstones. The lab-grown diamond industry is paying particular attention to this category because these consumers are particularly price-sensitive, and the lab-grown diamond industry’s efforts are paying off.
However, this shift does not mean that the price of engagement rings will plummet. This impact is limited to the rough diamond industry, which is an opaque world of miners and diamond traders.
De Beers head of diamond business: The real problem is macroeconomics
The scale and speed of the collapse in rough diamond pricing has alarmed the market. The big question facing the industry now is whether the sharp decline in demand for rough diamonds is a permanent change. At the same time, whether the trend of lab-grown gems will eventually affect sales of more expensive diamond products, which are usually paid for by Asian consumers.
Diamond industry leader De Beers insists the current weakness is a natural drop in demand, with "stuck-at-home shoppers" causing prices to soar while prices are lower during the pandemic. Engagement rings are particularly susceptible. De Beers acknowledges that cultured gemstones have now penetrated the engagement ring category, but this is not a tectonic shift.
“It’s an undeniable fact that (grown diamonds) cannibalize parts of the market, (but) we think the real problem is macroeconomic,” said Paul Rowley, head of diamond trading at De Beers.
Lab-grown diamonds, which are physically identical to natural rough diamonds but take weeks to grow in a lab, have long been seen as an existential threat to the natural mining industry. But proponents of lab-grown diamonds argue that lab-grown diamonds offer a cheaper alternative that doesn't have as much of an environmental or social impact, while native diamonds can sometimes have drawbacks (in areas such as color).
Prices of De Beers small-carat rough diamonds plunged more than 40% last year
For much of the past decade, the industry didn't clearly appreciate the magnitude of the impact lab-grown diamonds were having. While lab-grown diamonds encroached on the lower-priced gifting segment early on, the “threat” elsewhere remains limited. Now, that is changing, with lab-grown diamonds starting to take a larger share of the important US wedding ring market.
Each year, De Beers conducts ten sales of diamonds, and buyers (called sightholders) usually have to accept the price and quantity on offer.
In response to weak demand, De Beers has significantly reduced prices in the “select makeables” category, or rough diamonds between 2 and 4 carats. These rough diamonds are polished and cut to approximately half their original size to make the center diamond of a wedding ring. De Beers has cut prices in the category by more than 40 percent over the past year, including more than 15 percent in July alone, according to people familiar with the matter.
In June 2022, De Beers priced “select makeables” diamonds at approximately $1,400 per carat. By July of this year, prices had fallen to around $850 per carat, and could have more to fall: they are currently still 10% more expensive than the "secondary" market, which refers to traders and diamonds sold between manufacturers).
De Beers typically slashes prices as a last resort, and the recent drop in benchmark prices has been unprecedented outside of a speculative bubble burst, people familiar with the matter said. De Beers declined to comment on the pricing of its diamonds.
One of the clearest signs of the popularity of lab-grown diamonds is their share of India's diamond exports, about 90 percent of which are cut and polished. Lab-grown diamonds accounted for about 9% of India's diamond exports in June, compared with about 1% five years ago. According to data from Liberum Capital Markets, currently, about 25 to 35% of diamond products on the market use cultivated diamonds.
The impact of sales in the first half of the year on De Beers is obvious. Profits in the first half of the year fell by more than 60% to only US$347 million, and the average selling price fell from US$213 per carat to US$163 per carat. Among them, the sales volume in August was the lowest since the beginning of this year.
De Beers responded by giving buyers additional flexibility. This allows buyers to defer contract purchases for up to 50% of diamonds larger than 1 carat for the rest of the year, according to people familiar with the matter.
The price of synthetic diamonds has fallen more than that of rough diamonds, and the price difference may continue to widen
While China Lab grown diamonds are currently taking a toll on demand for natural diamonds, prices are also falling in the lab-grown diamond industry: lab-grown diamond prices are falling more than rough natural diamond prices, and more so than ever before.
About five years ago, lab-grown diamonds sold for about 20 percent less than natural diamonds, but as retailers push these diamonds for ever lower prices and manufacturing costs continue to fall, the price difference between the two is now increasing. has soared to about 80%. Wholesale prices for polished lab-grown diamonds have more than halved this year alone.
Beginning in 2018, De Beers began to sell its own lab-grown diamonds at a steep discount to the prevailing price, trying to differentiate natural diamonds from lab-grown diamonds. Paul Rowley said De Beers expects lab-grown diamond prices to continue falling as more "supply tsunamis" hit the market. As a result, a greater price differential will result between natural and lab-grown diamonds, helping to differentiate the two diamond commodities.
Paul Rowley noted: "As supply increases, we will see the price (of lab-grown diamonds) come down to a point where it stays at a level where it doesn't compete with (natural rough diamonds) in the long run. , because it’s so cheap. Ultimately, natural diamonds will naturally become two different categories from lab-grown diamonds due to their finiteness and rarity.”
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