Gem Focus – August 2023 – Featuring Lab-Grown Diamonds: The topic that consumes us

Posted on August 16, 2023 by Richard Drucker, GIA GG, Honorary FGA

In a very short time, lab-grown diamonds (LGD) went from a small blip in the industry to a major jewelry category. Like many in the industry, I predicted correctly that prices would continue to fall sharply as technology advanced. What I did not predict correctly is that LGD would gain in popularity so much that the category is now estimated to be as much as 50% of retail sales in the U.S.

The product is not without controversy and has consumed the industry. At every conference and trade show I have attended this year, LGD as a topic was featured in lectures, panels, and hands-on workshops. The relevance to our industry has grown so much in the past few years that recently, on July 10, the inaugural Lab-Grown Diamond Symposium was held in Dubai.

A Rapaport podcast featured an interview with Amish Shah, founder of Altr Created Diamonds, who summarized much of the discussion at the symposium. Since the Dubai Diamond Conference in 2017, production of LGD has grown five times. The LGD category grew from about 1% to 2% of market share in 2016 to near 50% today. Early on, every diamond bourse rejected the product, but today some sightholders are now trading LGD.

Shah said De Beers Group’s introduction of Lightbox was an acknowledgment that LGD are diamonds and a valid category. However, at the time of the company’s entry into this market, it was also calling them an inexpensive fashion product. There was much speculation at the time as to what their motive was, and since they undercut most sellers at the time by a lot at only $800 per carat retail, some thought they were purposely doing so to boost the value of natural diamonds. We really don’t know their ultimate plan back then or today, but they seemingly have embraced the LGD category. De Beers’ Lightbox website continues to grow with more offerings, now including engagement rings, for which the marketing line is: “Because great chemistry deserves great chemistry.” They are also now selling up to 2 carats.

Lightbox loose lab-grown diamonds and jewelry.
(Image courtesy of Lightbox)

Discussions about grading also continue as most of the LGD sold on the market are accompanied by a lab report, with the IGI lab leading the market by volume. By grading these with the same scale they use for natural diamonds, there’s a perception that the same rarity rules apply, hence a price difference between grades. However, there is talk of eventually sorting into just a few quality categories, much like how Lightbox sells now. Initially, Lightbox had one category and all diamonds were $800 per carat retail regardless of size (selling up to 1 carat). Now it has its standard quality, still at $800 per carat retail, and their Finest collection at $1,500 per carat retail.

As prices continue to slide, the price differential from grade to grade is not as significant. Prices are morphing together, and overlapping data is found when we research. GemGuide recently expanded its charts to show individual grades as with natural diamonds, however, many quality categories are close in price. For example, the difference in price on a 1-carat LGD from an F/VVS1 to an H/VS1 is $900 per carat to $700 per carat—only a $200-per-carat spread. In a natural with the same grades, the price difference is from $9,580 per carat to $6,570 per carat—a $3,010 spread.

Shah also discussed profit margins in the podcast. A large manufacturer recently went bankrupt in India, but he said he doesn’t think this will be a trend as most companies still maintain a good margin. The cost of start-up for a growing system is now about 1/3 of what it was a few years back, and the production output for one system has doubled, so it’s easy to see what’s behind the large price slide. Shah said the ROI on production is down, but with current pricing, growers still have healthy margins. As expected, as prices fall, some growers will be weeded out, and stronger ones will remain. Retailers also like selling LGD as their margins are generally more than those of natural diamonds.

Shah also talked about the opportunities with LGD like designing new cuts. The cost of natural diamond rough makes this much more costly and difficult, so LGD allow for creativity.

The lab-grown diamond historical price chart that appeared in
the GemGuide July/August 2023 issue.

The biggest topic of controversy remains the way some have been selling lab-grown diamonds, using claims of ethical, sustainable, or environmentally friendly. Shah said conversations are getting much better, and noted the two sides were not throwing dirt at each other at the symposium. But claims need to be backed up with better information.

Yet Another Panel

At the NAJ Summit, a jewelry valuers conference held in Birmingham, U.K. in June, there was a spirited closing panel discussion on LGD. Panelists included Howard Levine, managing director of Diamnet, a U.K. company selling both natural and lab-grown diamonds; Lisa Levinson, head of the U.K. branch of the Natural Diamond Council; Joanna Park-Tonks, president of the International Grown Diamond Association; and Gaetano Cavallieri, president of CIBJO.

After each panelist gave a brief overview of their position, the discussion began, with some debate but a polite exchange considering some of the polar opposite views, and then finally, a few questions from the audience. Joanna Park-Tonks presented her view, trying to convince the audience that LGD are a luxury product, a position that did not go over well with the audience. I asked her a pointed question: If the natural diamond price differential is based on rarity, why are lab-growns also priced that way when there is no difference in rarity for LGD of differing grades? She tried to relate LGD pricing to the cost of paint supplies and artists, but the argument fell short to the audience. There really is no justification I have heard for the differences. Surely, lower quality will be priced different than higher quality, but De Beers has priced with two quality grades lumped together and it works fine for them.

Another audience member challenged the luxury notion. Jonathan Solomons, partner at Solomons & Rose LTD, quoted from a research paper he had written titled “The Great Diamond Debate: Natural vs. Synthetic, Consumer Perception, and Value.” In this extensive, well-researched 40-page paper, he covers a wide range of topics and several surveys of consumers and trade.

Helzberg Diamonds launched a lab-grown diamond collection called Rêve in March.
(Image courtesy of Helzberg Diamonds)

One topic he brought up was the lack of resale value. Luxury items have resale value. LGD do not. He surveyed three groups of diamond buyers, including online buyers, independent diamond dealers, high street pawnbrokers, and high street jewelers. In total, 24 companies were contacted, asking for offers on a 1.01-carat F/VS1 mined diamond with a GIA report and a 1.01-carat F/VVS2 LGD with an IGI report. While the offers varied on the natural diamond, all companies made an offer. With the LGD diamond, 100% of the companies declined to make an offer of any amount. While there might be some companies that manufacture or sell LGD that might make an offer, it would have to be well below their cost, which is already low. Therefore, his argument was that LGD are not luxury items since they hold no value.

I do not mean any disrespect to Ms. Park-Tonks, as her job is to be the spokesperson for the product. She was passionate about her position and statements. I just disagreed. I have stated before that I am not opposed to LGD and I do think they have a place in the industry. I only hope the industry gets better at disclosure, honesty of product, and a recognition of what it is and is not.


Photo in header:
Loose lab-grown diamonds from Lightbox.
(Image courtesy of Lightbox)

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