Lab-grown diamond industry is seeing a slump owing to a significant decline in prices, decrease in trust and over supply
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The laboratory-grown diamond industry is at a pivotal moment, facing challenges like falling prices, oversupply, and declining trust in certain areas. At the same time, it seeks to capitalise on emerging opportunities within and beyond the jewellery market.
Natural diamonds down 30 per cent
The diamond industry is facing dramatic shifts, with the price of natural diamonds seeing a significant decline over the past decade.
“Over the past 10 years, the price of a slightly-better-than-medium-quality 1-carat, round, polished natural diamond is down about 25-30 per cent at retail,” a report by Financial Times quoted industry analyst Paul Zimnisky as saying.
This price drop reflects changing market dynamics, where the competition from lab-grown diamonds has impacted the traditional diamond market.
Lab-grown diamonds down 90 per cent
Lab-grown diamonds, which were once seen as a niche market, have experienced an even more dramatic price decline.
Zimnisky explains, “An equivalent lab-grown diamond is down about 90-95 per cent. Today, a generic lab-grown diamond can be bought for as little as one-20th the price of an equivalent natural diamond.”
While falling prices have led to significant growth in consumer sales, with lab-grown diamonds now accounting for about 20 per cent of global diamond jewellery sales, the market still struggles with issues of oversupply and consumer trust.
Demand-supply mismatch
The lab-grown diamond industry is also dealing with a mismatch between production and demand. As production volumes increase, prices continue to fall, with some companies struggling to maintain profitability.
China and India have emerged as the largest producers of lab-grown diamonds, but the US remains the biggest retail market.
Despite this growth, there are still challenges, including consumer confusion over diamond classifications and concerns about fraud.
The Gem and Jewellery Export Promotion Council (GJEPC) of India has sought to address these issues by calling on the Indian government to adopt updated diamond terminology and guidelines, modeled after the US Federal Trade Commission’s (FTC) standards.
Several companies have gone bankrupt
Amid the rising competition, several lab-grown diamond companies have failed. One of the most high-profile casualties was WD Lab Grown Diamonds, which filed for bankruptcy in October last year. It was once a leading US producer.
Zimnisky noted that it has become “very difficult for anyone to compete with Chinese and Indian producers.”
The challenges of oversupply and falling prices have taken their toll on companies, with the growing presence of cheap synthetic diamonds raising concerns about fraud and even money laundering activities. Examples include cases of fraudulent swapping of natural diamonds for lab-grown stones, and the discovery of lab-grown diamonds being mis-declared as natural ones for money laundering purposes.
As the market continues to evolve, industry experts suggest that product innovation will be key to surviving in the competitive lab-grown diamond sector.
With inputs from Financial Times.