Diamond Market Shows Serious Cracks from Man-Made Stones
Financial Times – SUBSCRIPTION
Diamond market shows serious cracks from man-made stones
Miners are battling to whittle down the oversupply of gems
Diamonds may be forever but they are also seriously on sale. Natural rough diamond prices have collapsed 26 per cent in the past couple of years. Tepid US and Chinese demand for diamond jewellery hasn’t helped. But most ring fingers point at the increasing popularity of cheaper laboratory grown diamonds (LGD). This fracturing of the diamond market is set to last. After a brief pandemic-era boom in diamond jewellery, miners are battling to whittle down oversupply of gems. Anglo-American’s De Beers, along with Russia’s Alrosa, control two-thirds of the rough diamond supply. DeBeers this week said its rough sales dropped 23 per cent in the first quarter. It is not enough. While rough stone inventory has stabilised of late, polished diamond stocks remain high. At more than $20bn at the end of 2023, these were near five-year highs, up a third since the end of 2022, according to Bank of America. Worse, as LGDs have taken market share, their prices have declined too, to about 15 per cent or less of their natural counterparts.
Diamond miners spent years maintaining that romantic buyers would prefer the allure of rare, natural stones. It increasingly appears they were wrong.
Synthetic diamonds are nothing new, having appeared about 70 years ago mostly for industrial purposes. But in the past decade LGDs have taken off. In 2015, LGD supply barely featured as a rival to natural stones. By last year it was more than 10 per cent of the global diamond jewellery market, according to specialist Paul Zimnisky. This has created a competitive frenzy among producers. LGDs’ lower costs have enabled them to slash prices. In October, WD Lab Grown Diamonds, America’s second-largest maker of synthetics, filed for bankruptcy. It has since had to shift its business away from retail towards industrial customers. Russian supply has depressed natural gem prices further. Last year the country provided 27 per cent of the world’s rough diamonds. Asian and Middle Eastern countries did not participate in G7 trade sanctions against Russian diamonds, points out Peel Hunt. Russian rough diamonds continued to flow to India, the leading centre for cutting and polishing of stones. Meanwhile, diamond prices flounder near the same level as in early 2011. Miners are struggling. Smaller producers such as Canada’s Lucara and UK-listed Petra and Gem Diamonds have market values at about $100mn or less — worth three or four of the mega-gems they aim to find. Perhaps the mines themselves could become trophy assets for billionaires? Either way, the mass market for stones looks less than rock solid.
Tap here to read the original post in the Financial Times, written by Alan Livsey!
