Synthetic Diamonds Enter ‘Growth Phase’
As 2018 wrapped with the emergence of synthetics, a report by ABN AMRO has predicted that in 2019 and the years ahead lab-grown diamonds for jewellery will witness more growth and acceptance from the end consumers. Read on to know what will lead synthetics to the mainsteam and how it will impact the diamond industry.
Last year, the global diamond industry witnessed a number of major developments. From wraming up to the blockchain technology to the introduction of lab-grown diamond jewellery and the controversial FTC diamond ruling, 2018 was an eventful year for the diamond trade. Going forward in 2019, ABN AMRO in its report ‘Diamond Sector Outlook for 2019’ concluded that the impact of lab-grown diamonds on the industry will significantly increase in the next two years.
According to the report, the diamond industry has moved from a ‘relatively stable environment to a highly dynamic environment’ and the large mining companies have adopted control strategies (for example buyer’s acceptance standards, selling of lab-grown diamond detection machines) and they are positioned for a larger role for lab-grown diamonds.
ABM AMRO has attributed this upheaval in the diamond industry largely due to the launch of laboratory-grown diamond jewellery brand, Lightbox Jewellery by De Beers. While admitting that for a long time the diamond industry resisted the entry of lab-grown diamonds into the overall diamond supply chain as there was no transparent use of lab-grown diamonds, the bank said that the launch of Lightbox has shocked the industry and now all the bets are off. ‘For us 2018 was the year that lab-grown diamonds got a place in the jewellery industry. We think that this was the first phase (introduction) in the product life cycle,’ the bank stated.
The report further said that although lab-grown diamonds are already there for some years (also for jewellery purpose) but because of De Beers’ Lightbox announcement it has become more legitimate. ‘Recently, more producers have been able to produce lab-grown diamonds. As a result, competition in the technology for lab-grown diamonds has taken off. In addition, the technology has progressed rapidly. Not only are lab-grown diamond producers able to produce bigger stones than before (more carats) but also better quality stones (for example better clarity and colour). Moreover, there seems to be a higher acceptance among consumers. This is probably driven by the perception that lab-grown diamonds are more sustainable and the price/quality could be more attractive,’ the report said.
ABN AMRO’s Coordinator for Foreign Exchange & Precious Metals Strategy and also the author the report, Georgette Boele, commented: “We think that 2019 and 2020 will be the years that lab-grown diamonds take off and move from an introduction phase (2018) to a growth phase. Lab-grown diamond producers have been able to produce larger and better-quality lab-grown diamonds. Moreover, more companies and persons in the diamond industry are willing to jump on the lab-grown diamond experience.”
“In future there will most likely be a wider variety of colours. Lightbox and some other lab-grown diamond (jewellery) providers have decided to leave wedding jewellery or engagement rings out of the offering (for now). We think sooner rather than later lab-grown diamond wedding jewellery will be part of the offering,” she added.
Shift in strategy for miners
The report also highlighted the strategies that the diamond miners could adopt to brace the growth of lab-grown dimaonds. ‘They can speed up mining activity to cash in on the diamonds that are still under the ground before prices and demand fall. They can also stop searching for new mines, as high exploration costs are unlikely to be offset by any income from future sales of natural diamonds. Finally, miners can move into the lab-grown industry themselves, either on their own, or by teaming up with lab-grown diamond producers,’ the report said.
Diamond prices will decline
ABN AMRO expects lower rough and polished prices ahead. The bank feels that it is likely that some of the natural diamond buyers including retail houses will want to offer a wider range of diamonds, including natural and lab-grown diamonds. This will eat into the budget of buying natural diamonds.
Moreover, the popularity of lab-grown diamonds for jewellery will result in lower demand for certain groups of natural diamonds. ‘If lab-grown diamonds are able to compete with the higher quality and larger stones of natural diamonds, this will likely also add pressure on polished and rough natural diamond prices. It is likely that the wider acceptance of lab-grown diamonds will result in rough and polished diamond prices moving more in sync because the power of the supplies/miners is moving towards the buyers and competition is increasing.’
The bank also expects lower prices for lab-grown diamonds used in jewellery. ‘Higher lab-grown diamond production and focus on better technology to become less energy dependent will drive lab-grown prices lower.’
Synthetics to lure manufacturers/consumers
In the report, ABN AMRO assumed that diamond manufacturers will polish both natural and lab-grown diamonds, but the polishing of lab-grown diamonds could be somewhat different as the growth-structure differs.
Moreover, the report said that the consumers will profit from the wider variety of diamonds at more attractive prices. ‘We are of the view that the consumers are the clear winners. Consumers will be able to buy a diamond at more attractive prices. But they also have to realise that lab-grown diamonds do not hold investment value. In addition, lab-grown diamonds will give consumers larger, better quality stones for more affordable prices. Moreover, a range of colours will be more accessible for consumers,’ the report concluded.