Shakeout in LGD Industry - Natural Price Increases Next?

[Texas Leaguer]

Posting this in Rocky Talky because it has implications for the natural diamond industry and the price of natural diamonds.

https://www.jckonline.com/editorial-article/grown-brilliance-clean-origin/

This is a further indication that falling prices of lab grown diamond are starting to reach an unsustainable level for many businesses, forcing consolidation. The trend is likely to mean that the market share that lab diamonds have been taking from the natural sector for the past few years is on the wane. As demand heads back in the direction of natural, prices may begin to increase.

How fast and how far natural diamond prices will come back is anyone's guess. Lab diamonds will continue to have a place in the industry, that much is certain. What will the new normal look like? And when will we get to a point of equilibrium between the two products?

Inquiring minds want to know!

 

[Karl_K]

Dont count on a recovery in the mined market until supply shrinks further, this is the new normal.
Even at higher prices LGD is going to continue to take over a larger and larger part of the total market.
Its the mined diamond supply chain that has to struggle to remain relevant long term not LGD.

 

[Karl_K]

The thing I am going to be watching the most is if the EU prevents a LGD cartel from forming like controlled the diamond market for decades.
The US almost certainly wont stand in the way but there is hope for the EU to do so.

 

[Texas Leaguer]

Hard for me to see the potential for any kind of monopolistic control of LGD considering the global availability of the technology and the relatively low cost of entry.

Debeers was able to hold sway over the natural diamond market for so long in part because of the inherent rarity of the resource and the high cost of starting and operating a major diamond mine. Geography and cost are not limiting factors for LGD production or competition.

 

[AllAboardTheBlingTrain]

Imo, just going by what I see (I live in India, the market here is very different from the US), while the prices of naturals has dropped significantly, it's just incentivised buyers to buy more naturals lol.

There is still a very pervasive attitude that labs are for those who can't afford naturals, or for "fun" jewellery or travel jewellery. Younger people are more comfortable with labs, but rarely for "significant" pieces like engagement rings; and if they do buy them, they aren't vocal about it being a lab, because of the perception. I know someone who works in the lab diamond biz, and they told me a large percentage of buyers will ask them to remain confidential about the fact that they purchased labs, to the point that at exhibitions and the like they will earmark pieces but will contact the sellers afterwards to buy on the down-low.

So given what I see, I can totally imagine labs taking over smaller diamond jewellery (like tennis bracelets etc) but unlikely to do so with solitaires; at least in my view of the Indian market. If it gets too cheap, I think it actually turns people away from labs for their "staple" pieces, but it attracts them for their travel or fun pieces which they currently buy moissys or CZs for. I think long-term (just given what I see and hear) I'd expect the prices of natural diamonds to rise from current levels.

 

[oncrutchesrightnow]

Lab prices will hit shiny-rock bottom, earth grown will then stabilize, miners will decide whether to continue to mine based on the reduced stabilized cost of earth grown.

If the miners continue to mine, earth grown prices will stay where they land for a long time.

If the miners shut down, prices for high-end diamonds will increase at a future date. If LGD stay as popular as they are now, or more likely continue to rise in popularity, then even if the mines shut down, vendors may find themselves sitting on inventory of lower quality diamonds that are barely selling. In that case, prices for low-quality diamonds will stay at their new low prices for a long time.

I am not betting serious money on this theory!

 

[Tigerlilyrosepetal]

Hi,
I wonder about the fate of labs and was shocked at their plummeting price. I bought a 2.5 ct lab about a year ago or so and don’t really wear it. So recently I was considering selling it but when I looked to see the current price for an equivalent stone, I was shocked that it was half of what I spent!!! It wouldn’t be any where near worth it to sell. So it’s a travel ring for me and even though it is bright white, an F, I’d still rather wear my natural J.
I think there will be a market for labs, but how large the market share will be in the future is so interesting to watch! If prices keep falling for labs, my thinking is that they will be considered like CZ, but who knows???

 

[Indylady]

I don't think so. I think diamonds are like the local print shop industry - fully out.

 

[Indylady]

They're low in color - but 1 carat for under $1k and 2 carat for $3500. Pretty good cuts.

 

[Garry H (Cut Nut)]

Years ago people in the industry laughed at me. I told them big LGD will cost less per carat than smaller stones.
Last laugh: 1, 2 & 3 carat cost more than 0.50ct on Nivoda. 3/4ct to 0.99ct cost even more per carat.
There are now 120% more D & E’s than F-Z’s. A huge improvement in just a couple of months. Improved CVD post growth annealing!
425% more Flawless-VS1 than VS2-I3. Nearly half all LGD are VS1 with VVS2 the next most common.
A natural GIA F VS1 round costs 165 times more than an IGI LGD of the same specs (And most of the LGD's are way better cut).

 

[Texas Leaguer]

They're low in color - but 1 carat for under $1k and 2 carat for $3500. Pretty good cuts.

You're right - those are cheap! But I think these are the kind of stones that many in the market today are passing on in favor of lab grown. With a low budget and a desire for a substantial size, the quality compromise in natural is too big compared to lab grown. This quality in natural will probably struggle to come back to former values.

 

[Rockdiamond]

Years ago people in the industry laughed at me.

Not me!!! I always believed you were correct.
At this point 5ct+ labs have price “corrected” quite a bit.
The rap price is no longer relevant.
As you point out, a K /Si2 is 10000x rarer than a D/VS1 in labs. And surely more costly at this point if you can find one.

As the owner of quite a few natural diamonds, I love @Texas Leaguer optimism.
But I don’t share it sadly.
Like a guy who bought a $65k 1ct D/Fl back in 1980 waiting for the price to come back. Ain’t gonna happen.
Of course who knows- what a crazy market

 

[Garry H (Cut Nut)]

Like a guy who bought a $65k 1ct D/Fl back in 1980 waiting for the price to come back. Ain’t gonna happen.
Of course who knows- what a crazy market

Yes David, like millions who paid 100 times too much for labs when they were 30% off and then half price.
PS thx for believing me re the biggies costing less per carat than smaller stones

 

[Indylady]

You're right - those are cheap! But I think these are the kind of stones that many in the market today are passing on in favor of lab grown. With a low budget and a desire for a substantial size, the quality compromise in natural is too big compared to lab grown. This quality in natural will probably struggle to come back to former values.

I think the diamond industry will become like some other special interest luxury goods - there will always be fans, but I don't think it'll ever go back to a 'need to have' status. I think cultured pearls are a decent example of what *could* happen - personally I love natural, oyster plucked pearls and have a precious strand with several GIA certs and individual pearls collected over the years. I'm still dedicated. But I don't know anyone else who is - everyone else is just fine with cultured. Looks just as pretty if not prettier. My strand doesn't look like the small fortune it actually cost me; it looks like something you could pick up for $70, maybe even that's generous. And a lot of people find pearls to be dowdy and frumpy - they're not a need to have at all. The ritual of a beautiful strand of pearls for your high school graduation, or college graduation, or wedding is not even a thing anymore.

 

[Garry H (Cut Nut)]

I think the diamond industry will become like some other special interest luxury goods - there will always be fans, but I don't think it'll ever go back to a 'need to have' status. I think cultured pearls are a decent example of what *could* happen - personally I love natural, oyster plucked pearls and have a precious strand with several GIA certs and individual pearls collected over the years. I'm still dedicated. But I don't know anyone else who is - everyone else is just fine with cultured. Looks just as pretty if not prettier. My strand doesn't look like the small fortune it actually cost me; it looks like something you could pick up for $70, maybe even that's generous. And a lot of people find pearls to be dowdy and frumpy - they're not a need to have at all. The ritual of a beautiful strand of pearls for your high school graduation, or college graduation, or wedding is not even a thing anymore.

From Chat GPT
Why do people buy expensive natural diamonds?

ChatGPT said:​

People buy expensive natural diamonds for a variety of reasons, ranging from emotional and cultural significance to financial investment and social status. Here are some of the key reasons:

1. Symbolism and Tradition​

• Emotional Significance: Diamonds are often associated with love, commitment, and significant life events. Engagement rings, for example, traditionally feature diamonds, symbolizing an eternal bond.
• Cultural Importance: In many cultures, diamonds have become a symbol of wealth, prestige, and social status. The tradition of giving diamonds for engagement or anniversary gifts has been deeply ingrained through marketing and cultural practices.

2. Rarity and Value​

• Natural Beauty: Natural diamonds are formed over billions of years under extreme conditions deep within the Earth. This natural process gives them a unique allure and a sense of rarity that synthetic diamonds cannot replicate.
• Investment Potential: Some people view expensive natural diamonds as a form of investment. High-quality, rare diamonds can appreciate in value over time, making them an attractive option for those looking to diversify their portfolio.

3. Craftsmanship and Quality​

• Exquisite Craftsmanship: Expensive natural diamonds are often meticulously cut and set in high-quality jewelry, reflecting skilled craftsmanship. The combination of natural beauty and expert design enhances their appeal.
• Superior Quality: High-quality natural diamonds, particularly those with exceptional clarity, color, and cut, are highly sought after. Buyers are often willing to pay a premium for diamonds that meet these criteria, knowing they are getting a superior product.

4. Status and Prestige​

• Social Status: Owning an expensive natural diamond can be a status symbol, signifying wealth and success. It can be a way for individuals to showcase their financial achievements and position in society.
• Personal Identity: For some, wearing or owning a diamond reflects personal identity and taste. It can be a statement of elegance, refinement, and exclusivity.

5. Marketing Influence​

• De Beers Campaign: The famous "A Diamond is Forever" campaign by De Beers in the mid-20th century played a significant role in establishing diamonds as the ultimate symbol of love and commitment. This marketing has had a lasting impact on consumer behavior.
• Perceived Value: Extensive marketing and advertising have reinforced the idea that natural diamonds are rare, valuable, and a wise choice for significant life moments. This perception drives demand for expensive diamonds.

6. Emotional Attachment and Heirloom Value​

• Heirloom Potential: Expensive natural diamonds are often purchased with the intent of passing them down through generations. They become treasured family heirlooms, carrying sentimental value that far exceeds their monetary worth.
• Emotional Attachment: Many people develop a deep emotional connection to their diamonds, whether due to the memories associated with them or the significance of the occasion on which they were given.

7. Exclusivity​

• Uniqueness: Every natural diamond is unique, with its own specific characteristics and imperfections. This uniqueness adds to the allure, as buyers know they are purchasing something one-of-a-kind.

In summary, people buy expensive natural diamonds for a combination of emotional, cultural, financial, and social reasons. Whether as a symbol of love, a status symbol, or an investment, natural diamonds continue to hold significant value and appeal in society.

Which of those criteria can be satisfied by man made diamonds?

 

[Garry H (Cut Nut)]

Claude had a similar but briefer response

Why do people buy expensive natural diamonds?
Edit
There are a few key reasons why people buy expensive natural diamonds:

1. Rarity and exclusivity: Natural diamonds are relatively rare, especially the larger and higher quality ones. This rarity and exclusivity factor makes them desirable as luxury items.
2. Tradition and symbolism: Diamonds, especially engagement rings, have become deeply ingrained in social and cultural traditions, particularly in Western countries. They are seen as a symbol of love, commitment, and status.
3. Perceived value: Diamonds are marketed and perceived as valuable and prestigious gemstones. The marketing campaigns by diamond companies like De Beers have been very successful in establishing diamonds as a marker of wealth and success.
4. Durability and beauty: Diamonds are one of the hardest natural materials on Earth, making them extremely durable. Their clear, brilliant appearance is also highly prized.
5. Investment potential: Some people view diamonds as a long-term investment that can hold or even appreciate in value over time, though the actual investment potential of diamonds is debated.

However, it's important to note that the high prices of natural diamonds are significantly influenced by marketing, monopolistic practices, and perceived value rather than just their inherent rarity and quality. Synthetic diamonds and alternative gemstones offer similar physical properties at lower prices.

GH comment:
I have addressed the monopolistic part in my book. It is largely misunderstood and mostly untrue with regard to polished diamonds.
De Beers (and GE) were charged with monopolistic trading of industrial diamonds. Never for polished gem diamonds. The charge was dropped after a fine was paid 20 years ago. GE have been charged with dozens of monopoly activities and had a wrap on the knuckles un-noticed by the media.

De Beers mined and marketed up to 80% of the worlds diamonds. This enabled them to spend heaps on marketing and they did an amazing job, as we all know.

What is less well known, they also helped many companies and nations sell their diamonds making it possible to raise funds to establish mine infrastructure. Australia's Argyle mine would not have been established without De Beers.

 

[Indylady]

I don't think it's a man made vs. natural issue. I think that young people (under 40) no longer see diamonds as a symbol of anything. This forum is an indicator of that too - I've been on it since 2008 and I see far less traffic and posting than I used to.

 

[Garry H (Cut Nut)]

I don't think it's a man made vs. natural issue. I think that young people (under 40) no longer see diamonds as a symbol of anything. This forum is an indicator of that too - I've been on it since 2008 and I see far less traffic and posting than I used to.

Since Andrey, our much loved CEO passed away two years ago, the site has suffered.
We are working out how to turn it around.
It is interesting. As a grandfather and an employer, the approaches of younger folk is always changing based on searching out differences to the generation before.
14 year old Granddaughter: "OhH! Millennials!" rolling eyes - in reference to her Mother.
"If You Are Not a Liberal When You Are Young, You Have No Heart, and If You Are Not a Conservative When Old, You Have No Brain"
The fact is, some of us change as we age.
Will some of those who buy or receive a LGD engagement ring one day buy a diamond to pop into the setting?
I believe enough will.

 

[Rockdiamond]

David, like millions who paid 100 times too much for labs when they were 30% off and then

If you look at the progression- say starting at 2020. Labs were about 500% the current price. But the market share was also probably 1/5 what it is now. If that. This means few buyers were affected.
Secondly - let’s take a guy who spent $20k on a 5 ct lab that’s now $3500…..
At the time the 5ct natural was $250k and now it’s $175k (if that). So if it was the “investment “ aspect, lab wins by 10 miles.
And in both cases, the they buyer was smart and bought a well made piece - they’re still identical.
That’s really the key here. Lab diamonds perform exactly as naturals in real life. Both are not investment instruments- and by that token , natural is far worse.
Now, I don’t have this chat GPT. But how about posing the question like this:
“Why are people choosing man made diamonds over mined diamonds?”
Let’s see what ChatGPT says on that.

 

[nala]

I don't think it's a man made vs. natural issue. I think that young people (under 40) no longer see diamonds as a symbol of anything. This forum is an indicator of that too - I've been on it since 2008 and I see far less traffic and posting than I used to.

As long as rappers and the Kardashians are flaunting diamonds, young people will want them. Even young men are wearing tennis bracelets.

 

[JPie]

You don’t need Chat GPT to break down such an obvious answer. The cost of living has skyrocketed since the pandemic. Wages have been stagnant compared to housing and grocery costs regardless of where you live. It makes sense that a young couple would opt to spend $2K and under on a lab diamond rather than more money on a smaller mined diamond. Younger people are also more concerned about the environmental impact and exploitive history of mined diamonds.

Antique and vintage diamonds could technically satisfy their requirements for social and environmental responsibility, but they’re nowhere near as cheap as lab, and some people still care about their origin as blood diamonds regardless of however long ago it was.

 

[Texas Leaguer]

I think the diamond industry will become like some other special interest luxury goods - there will always be fans, but I don't think it'll ever go back to a 'need to have' status. I think cultured pearls are a decent example of what *could* happen - personally I love natural, oyster plucked pearls and have a precious strand with several GIA certs and individual pearls collected over the years. I'm still dedicated. But I don't know anyone else who is - everyone else is just fine with cultured. Looks just as pretty if not prettier. My strand doesn't look like the small fortune it actually cost me; it looks like something you could pick up for $70, maybe even that's generous. And a lot of people find pearls to be dowdy and frumpy - they're not a need to have at all. The ritual of a beautiful strand of pearls for your high school graduation, or college graduation, or wedding is not even a thing anymore.

Congrats on your natural pearl necklace. That is something of extreme rarity!

In fact, that is where the analogy between the pearl industry and the diamond industry diverges. Natural pearls were always very rare, but became essentially unavaible over time through over-harvesting, and environmental degradation. There could be no competing industry to the cultured pearl industry once it emerged, because there was no supply of natural pearls!

With natural diamonds, that will not be a factor. It will be interesting to see how buying patterns change over time though. Clearly lab grown diamonds gaining widespread appeal at a time that young people have unprecedented financial challenges will be a cultural factor in what the future holds for natural diamonds.

 

[Rockdiamond]

You don’t need Chat GPT to break down such an obvious answer.

Agreed 100%.
Just that the GPT stuff that Garry posted is so much like what Rappaort is saying and so full of....well you know. Bull$hit.
I'd love to hear what GPT will answer when asked about lab diamonds.

However, it's important to note that the high prices of natural diamonds are significantly influenced by marketing, monopolistic practices, and perceived value rather than just their inherent rarity and quality. Synthetic diamonds and alternative gemstones offer similar physical properties at lower prices.

This pretty much sums it up- save the word "similar". In virtually all cases, man made diamonds are identical to natural diamonds in terms of physical properties which are apparent to humans without expensive tools.

I say again- based on what's in our safe, I would LOVE LOVE LOVE for natural diamonds to re-gain their lost value. However I'm not holding my breath

 

[JPie]

Agreed 100%.
Just that the GPT stuff that Garry posted is so much like what Rappaort is saying and so full of....well you know. Bull$hit.
I'd love to hear what GPT will answer when asked about lab diamonds.




This pretty much sums it up- save the word "similar". In virtually all cases, man made diamonds are identical to natural diamonds in terms of physical properties which are apparent to humans without expensive tools.

I say again- based on what's in our safe, I would LOVE LOVE LOVE for natural diamonds to re-gain their lost value. However I'm not holding my breath

Ask and Chat GPT shall answer!

People are choosing man-made diamonds over mined diamonds for several reasons:

1. **Ethical Concerns**: Man-made diamonds often avoid the ethical issues associated with traditional diamond mining, such as conflict diamonds and poor labor conditions.

2. **Environmental Impact**: The environmental footprint of producing synthetic diamonds is generally smaller than that of mining, which can be environmentally destructive.

3. **Cost**: Man-made diamonds are typically less expensive than mined diamonds, making them a more affordable option for consumers.

4. **Customization**: Lab-created diamonds offer more flexibility in terms of customization and can be produced in various sizes and qualities on demand.

5. **Transparency**: The production process for synthetic diamonds is more transparent, allowing consumers to understand exactly where and how their diamond was created.

Overall, these factors contribute to the growing popularity of man-made diamonds as a sustainable and ethical choice.

 

[Niel]

I don't think it's a man made vs. natural issue. I think that young people (under 40) no longer see diamonds as a symbol of anything. This forum is an indicator of that too - I've been on it since 2008 and I see far less traffic and posting than I used to.

As one of those youngins you’re describing I think you’re painting too broad a stroke. This forum is more than just diamonds, too. And the drop in traffic - I don’t believe- falls on the shoulders of lgd.

 

[Niel]

I don’t think cultured vs natural pearls is a good comparison. Cultured pearl marketing has done a good job of making cultured pearls still natural.
I think lab grown gemstones is a better comparison.

 

[freddyboston]

I don’t think cultured vs natural pearls is a good comparison. Cultured pearl marketing has done a good job of making cultured pearls still natural.
I think lab grown gemstones is a better comparison.

Actually they call them Synthetics... it's odd to me how they got away with using the "Lab Grown" moniker for factory "Diamonds"..... And the whole Earth Grown tag kinda downplays the 1+ Billion years old, shot up 100 miles during a supercontinent break up ...volcano eruption story..... Stolen Valor if you ask me....

 

[Niel]

Actually they call them Synthetics... it's odd to me how they got away with using the "Lab Grown" moniker for factory "Diamonds"..... And the whole Earth Grown tag kinda downplays the 1+ Billion years old, shot up 100 miles during a supercontinent break up ...volcano eruption story..... Stolen Valor if you ask me....

They call lab sapphires lab sapphires, too. That terms been around before LGD.

 

[Dreamer_D]

The cost of living has skyrocketed since the pandemic. Wages have been stagnant compared to housing and grocery costs regardless of where you live.

This is the answer I keep coming back to. The economic reality for most young people I meet is pretty bleak. Luxury goods are irrelevant to their lives.

 

[Garry H (Cut Nut)]

Actually they call them Synthetics... it's odd to me how they got away with using the "Lab Grown" moniker for factory "Diamonds"..... And the whole Earth Grown tag kinda downplays the 1+ Billion years old, shot up 100 miles during a supercontinent break up ...volcano eruption story..... Stolen Valor if you ask me....

One of my prime beefs.
The Younguns eat up the marketing stories and seem to be rather gullible?
Earth mined, Mined.
Blood diamonds (30 year old story).
Carbon offsets in India at $5 a ton of CO2 from dodgy programs vs 10-20 times that in USA and Europe.
etc etc