Lab-grown diamonds have shaken up the jewelry industry, raising questions about the value and cost of traditional diamonds. As society’s values shift towards sustainability and ethical practices, the once-unquestioned allure of natural diamonds faces a challenge. In this blog post, we’ll explore how lab-grown diamonds are transforming the industry and how changing attitudes toward ethics and sustainability are challenging the traditional notions of luxury and exclusivity.
The Context
Have you ever heard the saying, “Diamonds are a woman’s best friend“?
It’s a phrase that has been infused in popular culture for decades, often associated with engagement rings and lavish displays of wealth.
But are diamonds worth all the hype?
As it turns out, the diamond industry is currently experiencing a significant shift, with new disruptors like Lab Grown Diamonds (LGDs) entering the market and questioning the long-held beliefs about the value of these precious rocks.
Sorry, ladies!
Diamonds May Not Be Forever
For years, people have been conditioned to believe that diamonds are symbols of love and commitment, a tangible representation of one’s wealth and status. But as technology advances and more sustainable alternatives become available, the diamond industry is beginning to feel the pressure of changing consumer attitudes.
At the heart of the matter is the question of whether diamonds truly hold their value or if they are merely a product of clever marketing. While there is no denying the rarity and physical characteristics of diamonds, some argue that their value is artificially inflated by the diamond industry itself. After all, diamonds are not as rare as we once believed, and their perceived value is largely based on their association with romantic notions of love and commitment.
What’s The Buzz?
As of the pandemic shifts of 2020, estimations for the diamond industry’s global market value were $89.2 billion. However, after that, something changed. Recently, during the live-streamed annual budget speech on February 1st, 2023, India’s Finance Minister, Nirmala Sitharaman, made a significant reference to lab-grown diamonds.
Specifically, she announced the removal of the 5% customs duty on seeds used to manufacture rough Lab-grown Diamonds (LGD). For those not familiar with the industry, it’s worth noting that diamond trades are not new to India.
The city of Surat in Gujarat is responsible for cutting and polishing 90% of the world’s diamonds. However, the import of rough gems had been stable until the recent Russia-Ukraine war, which disrupted the livelihoods of around 800,000 workers in Surat’s 4,000 cutting and polishing units.
With this in mind, it seems that the removal of customs duty on LGD seeds could be a well-thought-out long-term strategy for India to hedge its reliance on raw material imports for a skill-based industry that’s ready to dive into mass production, much like China.
As a result, India is well-positioned to become the largest market for lab-grown diamonds in the future.
What Are Lab-Grown Diamonds?
Lab-grown diamonds (LGDs) are diamonds that are made in a lab using advanced technology. They look and act like natural diamonds and are almost impossible to tell apart by the naked eye. There are two main methods for making LGDs. One way is to use high pressure and high temperature (HPHT) to recreate the conditions that exist deep within the Earth’s mantle.
A small diamond seed is placed in a chamber with carbon-rich material and then subjected to very high pressure and temperature. The carbon material gradually deposits onto the seed, layer by layer, until a full-sized diamond is formed.
The other way is called Chemical Vapor Deposition (CVD). This method involves exposing a substrate material to a mixture of gases in a low-pressure chamber and then energizing the gases to dissociate them into their atoms.
The carbon atoms then deposit onto the substrate, forming a thin layer of carbon that crystallizes into a diamond. This process is repeated many times until a full-sized diamond is formed. Both methods produce high-quality diamonds that are almost identical to natural diamonds and can be used in jewelry and other applications.
The Monopoly Is Anxious
The diamond industry is dominated by a few major players, which include De Beers Group, ALROSA, Rio Tinto, Dominion Diamond Mines, and Petra Diamonds.
≡ De Beers Group is one of the largest diamond mining companies in the world and controls a significant portion of the global diamond supply. It is also one of the largest diamond traders.
≡ ALROSA is a Russian diamond mining company and is the largest producer of diamonds in the world. The company has a major impact on the diamond market as it controls a significant portion of the global diamond supply.
≡ Rio Tinto is a multinational mining company that has a significant presence in the diamond industry. The company operates several diamond mines, including the Argyle mine in Australia, which is one of the largest producers of diamonds in the world.
≡ Dominion Diamond Mines is a Canadian diamond mining company that operates several mines in the country, including the Ekati mine and the Diavik mine. The company is one of the largest producers of diamonds in the world and has a significant impact on the diamond market.
≡ Petra Diamonds is a diamond mining company that operates in several countries, including South Africa, Tanzania, and Botswana. The company is known for producing high-value diamonds, and its operations have a significant impact on the diamond market.
Despite the dominance of these major players, the diamond industry is facing a threat as the demand for lab-grown diamonds has increased due to their lower cost and ethical production methods. Not to mention, lab-grown diamonds are virtually identical to mined diamonds, even at an atomic level.
Some experts suggest that they may even have already been contaminating the supply of natural diamonds for about a decade. Yes, as we stated earlier, it is difficult to tell them apart even with a certificate from the Gemological Institute of America (GIA).
LGDs are not the same as the low-quality diamonds seen in inexpensive jewelry, in case you’re wondering how and why. These are premium goods that are almost flawless in terms of style and sophistication.
LGDs are typically 40-60% cheaper than natural diamonds due to the precision and equipment required for their production. The popularity of lab-grown diamonds has increased among consumers due to technological advances that make them nearly indistinguishable from mined diamonds.
The Debate
The debate over natural versus lab-grown diamonds centers around whether lab-grown diamonds are genuine and possess the same value and attributes as natural diamonds. Supporters of lab-grown diamonds argue that they are identical to natural diamonds, but opponents believe that they lack the unique features and historical significance of natural diamonds. In the end, the decision to choose a natural or lab-grown diamond depends on personal preference and values.
A report by Allied Market Research predicts that the global market for lab-grown diamonds will grow to $49.9 billion by 2030, with a CAGR of 9.4% from 2021 to 2030. The rise in demand for lab-grown diamonds is similar to what happened with lab-grown pearls in the past and what is happening with digital media in the photography industry and EVs in the petroleum industry.
After centuries of dominating the market, the innovation of lab-grown diamonds has finally caught up with the natural diamond monopoly, making it more affordable for ordinary people to own diamonds. This increased accessibility is likely to create a significant demand for lab-grown diamonds in the market, at least for a decade or so, potentially rendering natural diamonds worthless.
Conclusion
The growing popularity of lab-grown diamonds is causing disruptions in the diamond industry, and as investors, it’s worth considering investing in the companies that supply equipment and technology for producing LGDs.
Last year, Titan Co. Ltd for instance picked up a 17.5% stake in Stamford, Connecticut-based lab-grown diamond maker Great Heights Inc. for an estimated $20 million to cash in on the anticipated surge in LGDs demand.
Nevertheless, the lab-grown diamond market is still new and there are challenges to overcome, such as public perception and industry standards. Also, market conditions and consumer preferences can affect profitability. Investing in the lab-grown diamond industry requires thorough research and consultation with financial professionals to assess risks and opportunities.
As the diamond industry faces increasing competition from sustainable alternatives, it remains to be seen how the industry will evolve and whether diamonds will continue to hold their value as a symbol of love and wealth.
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