In his New Year message, diamond industry tzar, Martin Rapaport, or as I like to call him, “he who must be obeyed” delivered an unfettered rant about lab grown diamonds.
This is certainly not the first time, nor will it be the last time the issue of lab grown vs natural diamonds has been raised. In fact, animosity has been brewing within the diamond industry for some time now.
When lab grown diamonds first arrived on the scene, many in the industry, including myself didn’t see them as a threat to natural diamonds, mostly due to the fact they weren’t really price competitive with natural diamonds. In fact, a quick search of Martin Rapaport’s news site, reveals only 10 articles mentioning lab grown diamonds up till December 31 2017. However, with the price of some lab grown diamonds coming down 80% in the last four years, their popularity has exploded, and thus consumer demand has made them hard to ignore.
The “Emotional and Financial Security” of Engagement Rings
In his message, Martin Rapaport states:
“The basis of diamond and jewelry demand is the need for emotional and financial security. The need for security and commitment is fundamental to human nature and directly related to procreation. No matter who you are, where you are, or when you are, if you want to have children, you need financial and emotional security. It’s Darwinian.”
Now I think most people would agree with the last part of that statement, that is you need some sort of financial and emotional security to have children. However, whether or not this is represented through the purchase of jewellery is another issue. Many people will argue that jewellery is inherently sentimental, thus the price shouldn’t play a part in its sentimental value. Others may argue that spending 5,000 dollars or more on an engagement ring is financially reckless and could be spent on much more useful things such as housing or education. Heck, if you’re politically progressive, then you may even argue that engagement rings are inherently misogynistic.
It is also important to note that the modern diamond industry, and the popularisation of diamonds for use in engagement rings was created by DeBeers after World War 2. Therefore, there certainly isn’t anything “Darwinian” about a diamond engagement ring.
It is also important to note that the modern diamond industry, and the popularisation of diamonds for use in engagement rings was created by DeBeers after World War 2. Therefore, there certainly isn’t anything “Darwinian” about a diamond engagement ring.
Are Lab Grown Diamonds The Bitcoin of Diamonds?
Martin goes on to say:
“Synthetic, man-made, laboratory-grown diamonds (LGD) are the Bitcoin of the diamond trade. In fact, they are worse than Bitcoin because they lack any element of scarcity. The value of these diamonds is consistently falling. Despite their lack of natural scarcity, they are sold as comparable to natural diamonds without full disclosure as to their inability to retain value.”
This statement is completely false. The fact is, that most jewellers have been selling natural diamonds for many years and are fully aware of the value of a natural diamond. These jewellers have gone through the ups and downs of diamond pricing over the years – taking huge losses when prices fall, and reaping windfalls when prices go up. Therefore, a reputable jeweller will explain to their clients that the biggest difference between lab grown and natural diamonds is the price, and that lab grown diamonds will only go down, whereas prices for natural diamonds will fluctuate from year to year.
Also, the Bitcoin reference is quite bizarre. Whether or not you’re a “crypto bro” or think cryptocurrency is essentially a Ponzi scheme, the fact is that Bitcoin has gone up more than 20 fold from early 2017 to early 2023.
Diamond Elitism
In the end, the lab grown vs natural diamond debate boils down to elitism. Those that buy and sell lab grown diamonds are seen as “lower caste”. As Martin concludes:
“They are also a threat to the fundamental message of diamonds. Let me make it clear: Engagement rings are not costume jewelry.”
Such elitism can also be seen in the December issue of Jeweller Magazine:
“Lab-created diamonds don’t align with our product offering or values as a company.”
Now I’m not sure how people who have purchased engagement rings with lab grown diamonds feel about a supposed expert calling their engagement ring a piece of costume jewellery, nor do I know what “values”, apart from elitism, that selling only natural diamonds espouse.
Lab Grown Pricing
As stated earlier, some lab grown diamonds have gone down 80% in the past four years. Industry analyst Edahn Golan has an written an excellent article on lab grown diamond prices, stating:
“Lab-grown rough diamond prices have been falling as well. The primary driver is not a lack of demand or a decrease in the cost of production. It is the result of the action of one large grower.”
Obviously lab grown diamonds will continue to go down in price, however, it is fair to say that no one really knows how low they will go. What I think will happen is that lab grown diamonds will adopt more of a fixed price per carat model, meaning a 2ct lab grown diamond will cost double what a 1ct lab grown diamond will, which is different from natural diamond pricing which is typically exponential. If you think about the growing, cutting and retail overhead costs, it is fair to say that, as of January 2023, we’re not far from a bottom, with a 1ct D/VVS2 excellent cut round brilliant selling for just over A$1,000 including GST.
Scary Times for The Diamond Industry
Whilst some retailers and others in the industry show their elitism by only selling natural diamonds, perhaps they are just scared of what lab-grown diamonds will bring?
If lab grown diamonds gain any sort of traction and capture 20 percent, 30 percent, or even 50 percent of the diamond market, many in the diamond industry will be in trouble. Gone will be the days of making thousands of dollars of markup on a single diamond ring, hence jewellers will have to go back to, heaven forbid, making and designing jewellery! Also, with the capital requirements of natural diamonds eliminated, the business model of diamond wholesalers whose main purpose is to provide credit to retailers will be ripped to shreds.
The Future of Lab Grown Diamonds
Lab grown diamonds will continue grow in popularity, and decrease in price. My prediction is that in the coming years, they will continue to chip away at the market share of natural diamonds. Whilst some in the industry will flat out refuse to deal with lab grown diamonds, I have a feeling that, much like the use of the internet to sell diamonds and jewellery, most will eventually come around, especially when the market forces them to.
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