The million dollar question: are diamonds losing their sparkle?

Times

18 hours ago

It takes three billion years, volcano-like pressure and 1000C-plus temperatures to form 'natural' diamonds that are mined and polished before being lovingly placed on the third finger of the left hand of millions of women across the world.
Technological advances mean, however, that engagement ring sized-diamonds are increasingly being made in vast laboratories, predominantly in China, in as little as a week. These lab-grown diamonds, chemically and visually identical to mined diamonds, are much cheaper to produce than the cost of extracting real diamonds from deep below the earth's surface in Russia, Canada and southern Africa.
Boyfriends and fiancés can now pick up lab-grown diamonds for less than a tenth of the price of similarly sized natural diamonds and their prices are falling sharply as the technology improves further and lab production increases.
• Diamonds in the rough: struggling industry's fight against the lab-grown fake
'Man-made diamonds have captured about a 25 per cent share of global diamond demand by value spent,' Paul Zimnisky, founder of Diamond Analytics, said. 'This is up from nil ten years ago.'
He said that although some consumers were drawn to the lower prices of lab-grown diamonds he did not expect them to replace the allure of natural diamonds.
'Lab diamonds are a manufactured product that can be produced at will so they are not rare, and this is reflected in the price,' he said. 'Natural diamonds are still one of the most valuable things you can own on a value to size and weight ratio. Humans have valued rare and precious metals and gems since the beginning of time. I don't think this will change anytime soon.'
The spectacular growth of lab-grown diamonds has, however, helped to send the price of natural diamonds reeling and plunged the traditional diamond mining industry into crisis.
The price of a one carat natural diamond, roughly the size of an average engagement ring, has fallen about a third from a peak of $6,819 (£5,030) in May 2022, according to the jewellery analyst firm Tenoris.
The wider Bloomberg polished diamond index, which takes in prices across the '4Cs' of diamonds — cut, colour, clarity and carat weight — has fallen 53 per cent from a peak of 6,270 in March 2022.
Prices had spiked after the pandemic as weddings put on hold by Covid finally took place and consumers had lockdown savings to burn.
Olya Linde, a partner at Bain & Company, who specialises in natural resources, said: 'The million dollar question everyone in the diamond industry is asking is: is this bottom?'
She thinks it might be, as the price of both polished and rough diamonds showed slight signs of growth in the first two quarters of this year. 'It gives a lot of hope for the industry that the worst might be over and the market will stabilise,' she said. 'But there is a lot of inventory for people to work through.'
The traditional diamond industry has hugely cut back production in order to try to reduce that stockpile and recreate some of diamonds' original allure: scarcity. De Beers, the diamond miner founded by Cecil Rhodes in 1888, which coined the slogan 'a diamond is forever', has cut its 2025 production expectation from 30 to 33 million carats to 20 to 23 million. Its owner, Anglo American, has put De Beers up for sale with a price tag of about $4 billion, about half its 2023 valuation.
London-listed Gem Diamonds announced plans this week to cut a fifth of its workforce and temporarily cut executives' salaries to try to 'protect shareholder value'. The company's market value has collapsed to £7.9 million from £550 million when it floated in 2007.
Linde is confident that natural diamond prices will not fall much lower but she warned that they were unlikely to return to anywhere near their peak. In order to achieve some price growth she said natural diamonds needed to be 'returned to their position as a luxury product' and consumers needed to have faith in a growing world economy.
Ben Davis, head of European mining research at RBC Capital Markets, said it was entirely possible that natural diamond prices could return to recent highs but it 'would require significant curtailment of both mining and synthetic supply and heavy and length investment in marketing'.
The tariff trade war is also distorting the market, he said, by 'incentivising destocking further' and damaging consumer confidence to buy such expensive luxury items.
Davis and Linde agreed that a huge advertising campaign was needed to remind people of the luxury and scarcity of natural diamonds.
'We know it has been done before and it can be done again,' Linde said. 'There needs to be buy-in not just from the miners but throughout the value chain.'
Yoram Dvash, president of the World Federation of Diamond Bourses, called for the industry to unite to protect the natural diamond industry's value from the threat of lab-grown diamonds. 'The diamond industry is currently at a critical juncture,' he said. 'The meteoric rise in the penetration of synthetic diamonds into the market, which began as a marginal phenomenon, has become an unprecedented flood that threatens the value, image and future of the natural diamond.'
He warned that consumers were 'already having difficulty distinguishing between a natural diamond and a lab-grown imitation' and said a considerable marketing campaign was needed to protect natural diamonds' integrity.
'This trend is not just about sales, it demonstrates changes in values and culture,' he said. 'It is about the loss of the sense of intrinsic worth, wonder and uniqueness that have underpinned the natural diamond for generations.'
Robert Wake-Walker, co-founder of WWW International Diamond Consultants, said it was not just the growth of synthetic diamonds that had hit the prices of natural diamonds.
'The primary reason for the growth of synthetic diamonds over the last three years is that people have fundamentally been hit on all sides by macroeconomic pressures: mortgages are higher, childcare costs are higher, everyone's essential outgoings have increased,' he said. 'In that context, spending £2,000 to 5,000 on a purely discretionary product becomes a huge challenge to most. There needs to be a situation where people can aspire to buy these luxury products for each other again.'
Another industry analyst said lab-grown diamonds were 'an alternative that allows people to purchase something that does the same thing, but they can afford to buy. You'll have people saying to their girlfriend, 'We have this pot of money: we could buy a natural diamond or if we go for a lab-grown diamond we will have a bit left to go into the kids' college fund.' '
• Gemfields' Bruce Cleaver: 'We're like De Beers was 30 years ago'
Wake-Walker added that many lab-grown diamonds were being sold to people who would not have bought natural diamonds. 'It is bringing more people into the broader jewellery market, people who would never have considered diamonds before but when you can get a pair of diamond earrings at Accessorize for £50 for a night out, why not?'
He said the two industries could co-exist and warned that hostile attacks on each other damaged the public's perceptions of the whole industry.
Not all agree with this approach. At the International Gold and Diamond Conference in New York last week Stuart Samuels, president of the diamond jewellery manufacturer Premier Gem Corp, described the lab-grown diamond industry as 'parasites' when asked if the two industries could work together. 'The parasite always likes to co-exist with the host,' he said. 'It's the host that doesn't want the parasite. So it's very nice to say let's co-exist but you're looking to replace me, to kill me off.'