In his August review of the US diamond market, Edahn Golan reported that “Of all the loose diamonds sold in July, 49.9% were lab grown. Natural diamonds accounted for 50.1%.” These figures are by volume (units). The share of lab-grown diamonds (LGDs) in the US market by value is 25.2%. In our opinion, these figures indicate a significant cannibalization of the natural polished diamond market by lab-grown polished diamonds. This process is gaining momentum and Edahn Golan suggests that the share of LGDs in the US market can reach 60% in 2024.
The cannibalization is accompanied by tough confrontation between true natural diamond enthusiasts and LGD proponents in media. This is quite a spontaneous process in development because the policy of the organizations uniting the leaders of competing industries - the Natural Diamond Council (NDC, diamond producers) and the IGDA (International Grown Diamond Association, LGD producers) in generic marketing (anti-marketing) is extremely sluggish and ill-defined. It is obvious that the information struggle has moved to the level of private companies. For them, the problem of generic marketing is vital, and this makes the battle (advancing towards its culmination) tough and radical.
RAPAPORT, one of the most significant research and publication companies in the natural rough and polished diamond industry, published a detailed instruction on “How to debate lab-grown vs. natural diamonds”. It is quite obvious that this instruction is focused on the promotion of natural diamonds and bringing the LGDs down to the fashion jewelry; according to Martin Rapaport, this diamond market bifurcation model is objective and fair, which he has repeatedly stated during the past decade. Rapaport’s instruction is in the “questions-and-answers” format and the answers are given from the standpoint of a natural diamonds advocate. We believe, it is interesting to add the answers given from the standpoint of an LGD advocate and let the readers judge whose point of view is more convincing. Let’s begin:
1. I want to buy an engagement ring, but I’m worried about blood diamonds. Aren’t all diamonds unethical?
RAPAPORT: I can understand your concerns, but there are many ways of ensuring you can buy a natural diamond that has benefited its local mining community. More than 80 countries are signed up to the Kimberly Process that ensures diamonds are conflict free. It’s true that in the 1990s, as much as 15% of recorded rough diamonds were from conflict zones; now it is less than 1%. Technology has moved on so much that we can trace diamonds from the mines to our store using blockchain, so we know their origin. We choose to work with reputable suppliers that can prove provenance and ethical working conditions, as well as communicating the many ways they give back through providing career opportunities, or funding schools and hospitals, for example. There are many communities that would not survive without diamond mining. In Botswana, where the government has a stake in all mining activities, diamond mining contributed 33% of the country’s GDP in 2021.
LGD: Your concerns about unethical mining of natural diamonds are completely justified. There is no evidence-based study showing exactly how many “blood diamonds” are circulating in the market. The Kimberley Process is a bureaucratic phantom and its fake certificates are a common practice in corrupt diamond mining countries. Every third natural rough diamond in the world is mined by a company included in the SDN (Specially Designated Nationals) list by the U.S. government because it has some relation to an armed conflict. Therefore, the likelihood that you can buy a natural “conflict” diamond is extremely high and well over 30%. Why do you need a stone with a negative legacy and vibe? LGDs have nothing to do with these problems!
2. Okay, but what about the environment? Surely, it can’t be a good idea to be digging up the earth?
RAPAPORT: You’re right, mining is destructive. There is no getting around it, but good miners invest in funding projects that protect our wildlife and strengthen our ecosystem. De Beers, for example, has an environmental policy that states that it “will have no net loss of significant biodiversity through responsible planning and management of biodiversity, from exploration to closing operations and contributing to the conservation of biodiversity in the regions in which we operate.” For every acre of land it mines, De Beers pledges to dedicate six acres to nature conservancy, which has resulted in a 200,000 hectare stretch of reserve in southern Africa called the Diamond Route.
LGD: Over 100 years of mining diamonds from primary deposits, large areas are damaged on the five continents and are not reclaimable. Chemical explosives are constantly used in large quantities at diamond mines, and in the 1970s, even nuclear explosions were carried out in the USSR in the interests of the diamond industry, some of which were accidental. Reclamation of primary diamond deposits is impossible, that is why exhausted kimberlite pipes will forever remain the Earth’s “gaping wounds” and rock waste dumps have no productive layer. There have been repeated disasters at diamond mines with casualties. Biodiversity in diamond mining areas has been destroyed. And all this is for the sake of luxury jewelry. Only a barbarian or an idiot can destroy a planet for the sake of luxury items.
3. But all lab-grown diamonds are carbon-neutral, so they don’t need to make up for any damage.
RAPAPORT: Now that one, I would have to disagree with. Not all lab-grown diamond producers operate in the same way. Some are carbon-neutral businesses and are verified by external bodies, such as the SCS-007 diamond certification, but others produce a lot of carbon when making man-made stones. As the lab-grown diamond industry grows, so too does the number of producers, and it can be hard to tell which come from carbon-neutral sources and which do not. It takes a lot of energy to achieve the high pressure and temperatures required to make lab-grown diamonds, which can be as much as 870,000 pounds per square inch and 1,600 degrees Celsius. Another thing to think about is that, according to the Natural Diamond Council, 60% of lab-grown diamonds are produced in China and India, where 63% and 74% of grid electricity is generated from coal. In the same way, some natural diamond producers are more sustainable than others. Dimexon, for example, has announced an environmental plan that will see it eradicate single-use plastic this year, stop sending waste to landfill by 2025, and be fully carbon-neutral by 2030.
LGD: When someone tells you that diamond mining companies’ efforts are aimed at carbon neutrality and the companies are about to achieve it, advise that person to stand next to the exhaust pipe of a mining truck or excavator for 15 minutes. If the person can continue the discussion after this experiment, advise them to read the instructions for using the ANFO chemical explosives, without which no diamond mining is carried out today. Draw your opponent’s attention to the fact that for every kilogram of the ANFO exploded, approximately 1,000 liters of gas (consisting mainly of CO2, nitrogen and water vapor) are emitted into the planet’s atmosphere. Please note that thousands of tons of the ANFO are exploded at the diamond mines every year, but there is no mentioning about this fact in the diamond miners’ sustainability reports. Inform your opponent that neither diesel fuel nor chemical explosives are used in the production of LGDs.
4. Why do we bother digging up diamonds if we can make them and they are exactly the same?
RAPAPORT: It is true that lab-grown diamonds and natural diamonds are chemically identical, but while one was grown in a lab in a few weeks, the other is a natural phenomenon that has been part of the earth’s story for between 90 million and 3 billion years. There is a romance to that.
LGD: The age of the carbon atoms that make up both natural and lab-grown rough diamonds is exactly the same. The work by the human genius is completely identical to the work by the creator of the universe. Indeed, it’s very romantic!
5. There is also a cost to that.
RAPAPORT: True, natural diamonds are more expensive, but when you look at the trends, lab-grown diamonds are a quick fix when it comes to investment. While you will pay less for them now, they are likely to be worth even less in the future. There is a big gap at the moment between wholesale and retail prices. Production is increasing as the technology becomes cheaper; Bain & Co estimates the cost of producing a 1-carat lab-grown stone dropped 90% between 2008 and 2018. This has an impact on prices as the market floods with product; analyst Paul Zimnisky has found that a 1-carat round lab-grown diamond is now worth 80% less than its natural counterpart. Yet not all stores are passing on this discount. Meanwhile, natural diamonds have increased in value by 3% per annum on average over the past 35 years. This trend will only continue as lab-grown diamonds increase in availability, and natural diamonds remain as rare as ever. Lab-grown diamonds might be OK for a piece of fashion jewelry you want to wear for fun, if you can get a true price on them, but for something like an engagement ring that you might want to hold value for when you pass it on to loved ones, natural is best.
LGD: The value of a diamond is really determined only by the desire of the consumer to buy it. And this desire depends on the information provided by marketers to consumers. The product is not a polished diamond, but its information shell. Linking (justifiably and convincingly) the image of a natural polished diamond with bloody conflicts, damaged environment and shady business made by those who created the polished diamond market, one can give a negative consumer value to natural polished diamonds, and the consumer will feel not desire to have them, but disgust to these gemstones. Thus, if there are LGDs as a strong generic competitor (and this happens for the first time in the history of the diamond market), the issue of preserving the value of natural polished diamonds is just removed from the agenda, which, in particular, is proven by the rapid penetration of LGDs into the sector of engagement and wedding jewelry.
The writer of this article is not an advocate of either natural diamonds or LGDs. He analyzes the marketing efforts made by both parties and those mentioned in the media, on social networks and on the on-line trading platforms aimed directly at consumers. The author has to admit that the marketing struggle is getting tougher, and the main idea generators are not industry organizations like the NDC and the IGDA, but the companies whose sales and profits directly depend on their success in these battles. And judging by the surge in sales of LGDs in the US market, the positions of marketers promoting grown diamonds seem to be more advantageous so far.
Sergey Goryainov for Rough&Polished
