Will Natural Diamonds Cease to be Sold in the Near future?
The price of natural diamonds has fallen by 26 percent in the past couple of years, with decreasing US and Chinese demand for diamond jewelry being one culprit, and another being the growing popularity of more affordable, lab-grown diamonds (LGD).
Following a short-lived pandemic-era boom in diamond jewelry, miners are fighting to stop the oversupply of the precious gems. Anglo-American’s De Beers, along with Russia’s Alrosa, control two-thirds of the natural diamond supply, and De Beers this week said its sales had dropped 23 percent in the first quarter, as reported by the Financial Times.
It’s true that rough stone inventory has stabilized slightly, but polished stone stocks remain very high. At more than $23bn at the close of 2023, these were near five-year highs, up a third since the end of 2022, according to Bank of America. What’s worse, as lab-grown diamonds have increased their market share, their prices have come down too, to around 15 percent or less of their natural counterparts.
Synthetic gems are not a new creation, having first appeared around 70 years ago primarily for industrial purposes. However, in the past decade, lab-grown gems have really taken off. In 2015, LGD supply was no way near being a rival to natural gems, but by last year it was more than 10 percent of the global diamond jewelry market, according to specialist Paul Zimnisky – as per the Financial Times.
This situation has brought about a competitive frenzy among producers, with LGDs’ lower costs meaning they are able to reduce prices. In October last year, WD Lab Grown Diamonds, America’s second-largest maker of synthetics, filed for bankruptcy. Since then it has had to move its business away from retail towards industrial customers.
Russian supply has pushed natural diamond prices down even further. Last year the country provided 27 percent of the world’s rough diamonds, with Asian and Middle Eastern countries not taking part in G7 trade sanctions against Russian gems. Russian stones continued to flow to India, the hub for cutting and polishing gems.
Diamond prices are now nearing the same level as in early 2011, and miners are reportedly struggling. Smaller producers such as Canada’s Lucara and UK-listed Petra and Gem Diamonds have market values at around $100m or less, worth three or four of the mega-stones they aim to discover.
How are Diamonds Formed?
The gems are made up of billions of carbon atoms and most were formed between one to three billion years ago, deep below the Earth’s surface under intense heat and high pressure.
Older than humankind itself, diamonds are one of nature’s most incredible and unique gifts. Much like a snowflake, every gem has a natural pattern telling a different story, each one is unique and no two are alike.
