Dubai Diamond Exchange (DDE) chairperson Peter Meeus led a panel discussion at the just ended Investing in African Mining Indaba in Cape Town on how the diamond industry will adapt to millennials and synthetics.
Synthetic diamond manufacturers had embarked on an aggressive marketing strategy, which was helping them increase their global market share.
Experts believe that about 3 percent of global consumption of diamonds was man-made with facilities in the Far East, Russia and China said to be producing “enormous” amounts of smaller size CVD and HPHT diamonds.
Meeus, citing the Diamond Intelligence Briefs, said the total annual production of synthetics was between 8 million and 10 million carats, with gem qualities of about 4.5 million carats.
This was compared with the total annual production of natural diamonds set at 124 million carats, with gem qualities of between 85 million and 90 million carats.
The Diamond Producers Association jolted into action last year as it launched the “Real is Rare” marketing campaign to fend off the threat of lab-grown diamonds as there was an emphasis on the rarity and enduring value of natural diamonds.
Namib Desert Diamonds chief executive Kennedy Hamutenya said they take the threat from synthetic diamonds “very seriously”.
He said players throughout the pipeline should come converge and come up with a solution to this challenge together, the same way they fought against the so-called blood diamonds.
However, it emerged during the discussion that production of very small synthetic diamonds was prevalent with supply “seemingly unlimited”, according to Paul Zimnisky, an independent diamond analyst.
Another panelist Des Kilalea, an analyst at Cannacord Genuity said that synthetics “deserve” to take up the market share for smaller and lower quality stones.
“There’s a fantastic silver lining in synthetics in that diamond miners should look at why they’re mining the smaller, less pure diamonds,” he said.
“Synthetics deserve to take away that market share because they are of lower quality. The miners need to return the value to diamonds by only recovering higher-quality stones.”
Deception
The conference also heard that millennials were helping push the demand for synthetic diamonds as they were buying into the image created by the producers of the lab-grown stones that their diamonds are free of labour and environmental exploitation.
The synthetics were also cheaper compared with natural diamonds that are not cheaper to produce.
“They deceive the consumer, because a synthetic diamond is not worth much at retail value. Millennials are being fed lies, because the gap between reality and marketing is huge. Synthetic retailers are winning the marketing battle,” said Arslanian Group managing director Sahag Arslanian.
The mining conference was told that the millennials were also being told that synthetic diamonds were “real” diamonds without the human or environmental impact.
A Bloomberg report published last month cited a Singapore-based fund manager at Tribeca Global Natural Resources Fund, Ben Cleary as saying that prices of diamonds may fall as much as 10 percent this year as it loses appeal with younger consumers and faces challenges from synthetic alternatives.
“Diamonds are marketed on the idea that they will forever represent a pinnacle of luxury and materialist desire,” Cleary said.
“Our concern is whether a younger generation of millennials will have the same allegiance to the same products as their parents and grandparents.”
The report also claimed that polished diamonds were the “worst-performing commodities” last year as the image of diamonds was tarnished by fakes and stones mined in conflict zones.
Bain & Co. said it a report that diamond producers should spend more on marketing the stones if they want to attract consumers and avoid a stagnation for a decade.
To avoid the packaging of fakes as real, Meeus said, there was need for the industry to ensure the traceability of mined diamonds.
This, he said, was necessary to protect their market share.
Already diamond giants such as De Beers and Alrosa had employed blockchain technology to track stones back to their first point of extraction.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
