It’s been the diamond and jewelry industry’s worst-kept secret for at least the past five years: lab-grown diamonds (LGDs) have almost no inherent value and become ever more worthless with time. The natural diamond trade has been warning that the value of lab grown diamonds (LGDs), from the moment they are produced, would fall dramatically.
To the frustration of many natural diamond industry players, such as the World Federation of Diamond Bourses, the message appeared not to be getting through as consumers – particularly younger buyers – flocked to LGDs. Several recent events, however, may indicate that the tide is turning.
Those younger consumers were not raised on De Beers’ classic diamond marketing and find current natural diamond marketing irrelevant. They became enamored of the cheaper option and continue to be. For now, at least. It’s still not clear whether that will change.
In the meantime, however, there is clear evidence that the industry itself is seeing things differently. Are natural diamonds back and can they give a killer blow to LGDs?
De Beers changes course on Lightbox
Despite the decline in its share of global rough production, De Beers remains a major influence on the market. So, when it announced that it plans to stop manufacturing its LGDs for its Lightbox consumer brand in a strategic change of direction that also sees it manufacture and sell natural polished stones, then the industry knows that a major change is happening.
When De Beers makes a decision, it inevitably has an impact on the rest of the trade.
“We believe the value of lab-grown diamonds lies in technology rather than in jewelry,” De Beers CEO Al Cook said at the company’s JCK Las Vegas breakfast event.
The miner’s Element Six business will merge its three chemical vapor deposition (CVD) plants, into its $94 million facility in Portland, Oregon.
Essentially, the announcement brings to an end De Beers’ six-year trial producing LGDs for its Lightbox jewelry which it launched in 2018.
Prices of lab-grown diamonds over this period collapsed, and that inevitably has led to slim pickings for all players involved – from manufacturers all the way through to the retail jewelry sector. In particular, items set with LGDs, especially engagement and bridal rings, are now significantly less appealing to jewelry store owners and operators.
The final straw for De Beers apparently was in May when it slashed its retail prices for the Lightbox jewelry line by as much as 40%. It has realized that further production is a waste of its resources and is now pivoting towards creating such stones for research and industrial uses.
De Beers has, for a number of years, been giving the appearance of only looking out for its own interests despite it being the historic custodian of the natural diamond industry. The Lightbox LGD decision will do nothing to boost its image in the natural diamond sector, and indeed will probably only further burnish its image of being concerned only with its specific business interests.
Strong evidence at JCK Show of lower interest in LGDs
Evidence of the possible decline of LGDs and a move back towards natural stones came at the hugely influential JCK show in Las Vegas at the end of May and start of June. Many of the conversations in the halls and social events centered around the collapsing price of LGD's and consumer dissatisfaction with this development.
Retailers and their representatives did not seek to hide their disappointment with the impact that lab-growns are having on customers who bought engagement and bridal rings just a few years ago. Those consumers are coming back to stores only to discover that no upgrades are possible because the synthetic diamonds in the rings that they bought 3-5 years ago have practically no value.
Although many jewelers may have pointed this out at the time to buyers, the retailers are still suffering from the hit to consumer confidence. “Buyers tend to forget these things and see us as responsible,” according to one retailer who now regrets his foray into LGDs. “We jumped into it because it was such a hot new area at a time when sales of natural diamonds were declining. We warned about this at the time, but consumers were looking to their pocketbooks.”
Evidence of the decline of the LGD sector at the JCK Show was seen in the noticeably lower presence of booths of LGD manufacturers and wholesalers. As compared with recent years, the whole lab-grown attendance was significantly quieter.
Israel Diamond Exchange President makes position clear on LGDs
Recently elected Israel Diamond Exchange (IDE) President Nissim Zuaretz made clear his lack of surprise regarding the dramatic decline in LGD prices. He says that this is what he predicted about five years ago.
He is not the only one, of course, WFDB President Ernie Blom was vociferous five years and more ago about LGDs’ lack of inherent value and their likely further decline in price as time passes.
As Blom wrote in 2019: When consumers are faced with the choice – diamonds on the one hand, and the lab-grown alternative on the other – what ultimately matters is the money. The industry, he says, must “unite around a campaign to stress as much as possible the rarity of diamonds and the best way to express the rarity argument is related to the issue of the resale price”. In other words, lab-grown diamonds can be produced in abundance, and their price will never be sustained. Synthetic diamonds, he says, will not hold value. Natural diamonds will.
Final words…
Unfortunately, consumers will not be racing to the archives to check what was said half a decade or more ago. Their concern revolves around the diamonds they bought at the time - the value, or lack of it now.
As usual, the diamond industry faces another challenge in how to explain this away and bring customers back to buying natural diamonds.
Abraham Dayan for Rough&Polished
