Global Diamond Prices Tumble as Cheaper Lab-grown Gems Soar
The Business Times
Friday September 15, 2023
[LONDON] Diamond prices have tumbled this year as Russian gems continue to flood the global market despite sanctions from the US and the UK, while the rise of lab-grown diamonds has cannibalised demand for the real thing.
Dealers and industry analysts said that the price of mined, natural rough diamonds have fallen by an estimated 20 per cent to 30 per cent this year alone.
After diamonds saw a boom during the Covid-19 pandemic when travel-starved and cash-rich consumers splurged on jewellery and other luxury items, observers say that heyday is well and truly over.
The International Diamond Exchange’s polished diamond price index has dropped 28 per cent from a peak of 158 points in March 2022 to 113 points today, which is below the pre-pandemic levels in 2019.
In a major move, De Beers – the world’s largest diamond producer by value – announced this week that it would end its offering of lab-grown diamonds for engagement rings as synthetics have hit demand for mined diamonds in the US, one of the company’s most important markets.
Despite the vast supply in the market, gem dealers have expressed surprise at the extent of the falling prices. At the start of the year, many had expected a tight market with inadequate supplies to meet growing demand.
Direct Belgian imports from Russian giant Alrosa plunged by about 93 per cent in the first quarter of 2023, compared to levels prior to the start of the Ukraine war in Feb 2022, said Karen Rentmeesters, a senior manager at the Antwerp World Diamond Centre.
On its part, Alrosa has managed to evade the full brunt of sanctions so far, with its rough diamonds leaked to countries like India, the United Arab Emirates, Armenia and Belarus, said Rentmeesters. Once there, diamond processing centres have cut and polished these rough Russian gems and re-exported them as, for example, Indian diamonds.
To counter this, executives at Israeli tech company Sarine said recently that it has developed new technology to determine whether gems originated in Russia or elsewhere.
Illustrating the extent of surplus diamond inventories in the market, De Beers said its first-half profits fell more than 60 per cent to US$347 million, with its average selling price at US$163 per carat (from US$213 previously). The company’s August sales were the lowest of the year.
De Beers holds ten sales, known as “sights”, every year. Based on the seven sights held so far in 2023, the average sale is US$458 million, down from US$567 million in 2022 and US$482 million in 2021.
Sightholders – the diamond dealers who buy directly from De Beers – continued to take a prudent approach to their purchasing because of softer demand for diamond jewellery in key consumer markets”, said the company’s chief executive officer Al Cook in a statement on Aug 30.
“With the prevailing economic environment leading to softer end client demand for diamond jewellery in key consumer markets, and the traditionally lower levels of midstream trading during the summer period, Sightholders continued to take a prudent approach to their purchasing during the seventh sales cycle of the year,” he said.
The share of lab-grown diamond sales versus natural diamonds is rising rapidly, said Edahn Golan, a diamond analyst who provides data for the global jewellery business.
In the US, which accounts for half of the world’s diamond jewellery sales at about S$75 billion, the lab-grown diamond share was just 2 per cent in 2019. This rose to 8 per cent last year, and recent sales this year saw the rate go up to 11 per cent.
Diamond engagement rings account for about a quarter of annual diamond jewellery sales in the US, or around US$10 billion. The lab-grown ring market has jumped 14 per cent year on year to US$1.4 billion,” he said, based on his estimates.
He added that the production and supplies of lab-grown diamonds have surged because the profit margins can be as high as 64 per cent, compared to around 35 per cent for natural diamonds. Follow Roskin Gem News Report for More Updates
This huge profit margin has been achieved despite the wide difference in retail prices. As of August this year, a generic lab-grown diamond cost about US$1,425 a carat, compared to US$5,185 a carat for a generic natural diamond.
“Lab-grown gems are now a serious competitor of natural, mined diamonds,” said Golan.