The article "Sparkling from the lab: Is the era of mined diamonds over?" in the business magazine Capital from September 10, 2023 outlines the current situation in the diamond industry. The article addresses the ongoing decline in diamond prices, both for mined and lab diamonds. The strong growth of the lab diamond industry is explained by the increasing price and environmental awareness, especially among younger buyers. In addition, the serious environmental impacts of mining are addressed, as well as the greenwashing problem in the lab diamond industry.
Lab diamonds as an alternative? Yes, but please with renewable energies
Capital explains that laboratory diamonds and mine diamonds do not differ in their basic properties, only their origin is different. While mine diamonds are created underground over many millions of years, these natural formation conditions are artificially imitated in the laboratory. There are two popular methods for this, the HPHT method and the CVD method. You can read more about the production of laboratory diamonds here on our blog. Capital also correctly states that, on the one hand, it is simply not possible to trace mine diamonds with absolute reliability and, on the other hand, that mining and sustainability are mutually exclusive. Even if many mine operators are working on various projects to protect the environment and try to compensate for the damage they cause, every diamond mine is an intervention in nature that leaves serious consequences. Therefore, manufacturers of laboratory diamonds are now increasingly presenting themselves as a sustainable alternative, simply due to the fact that they do not mine. However, Capital points out that the extremely high energy consumption in the production of laboratory diamonds must not be ignored. If the production is carried out using fossil fuels, it causes CO2 emissions of 511 kg per carat, more than three times as much as a carat from the mine. In this context, Capital cites the Diamond Foundry as a positive example of the production of lab-damantiums using only renewable energy. Capital then also mentions DIAVON as a dealer in Germany and explains that in addition to the sustainability aspect, we also pay attention to compliance with high social standards.
Capital also raises the question of what will happen with the lab-grown vs. mine categories. However, the question remains open for now, as the prices for lab diamonds are also currently in free fall. It is therefore not yet clear how the value of jewelry with lab diamonds will develop and whether they are even suitable as heirlooms. The article concludes that lab diamonds are definitely not automatically environmentally friendly and that they do not represent a reliable investment. According to Capital, however, a fifth, namely CO2 emissions, should definitely be added to the 4 Cs, and possibly also the criterion of ethical correctness.
The article from Capital addresses some important points that we would like to briefly address again here. It is nice to see that sales of laboratory diamonds are continuing to rise, as sustainability plays an increasing role in purchasing decisions. We are convinced that this trend will continue and are of course pleased that DIAVON was mentioned in the article as a positive example of sustainability on the one hand and social standards on the other. We source our laboratory diamonds from the Diamond Foundry, which produces them using only hydropower from the Columbia River. We also ensure that everyone involved in the production of MANUFACTURED DIAMONDS along the value chain has good working conditions and we are committed to social projects in collaboration with our Indian cutting shop.
We at DIAVON are extremely critical of the aforementioned drop in the price of laboratory diamonds, because in our opinion it damages the value of the diamond and the work of the people within the value chain. DIAVON therefore decided from the outset not to take part in the price wars of its competitors. In addition, the production of our MANUFACTURED DIAMONDS is also associated with higher costs than that of conventional laboratory diamonds. Production with renewable energies is more expensive than production with coal-fired power. Compliance with social standards in our Indian partner polishing plant, such as paying above-average wages, providing a canteen and a company doctor, are additional cost factors that are reflected in the price of the MANUFACTURED DIAMONDS.
We agree 100% with Capital when it says that CO2 emissions should be introduced as the fifth C and that ethical aspects should also play a role in (laboratory) diamonds. We ourselves have committed ourselves to two other Cs with which we already meet this requirement, namely "climate neutral" and "conflict free". A more consistent commitment by companies to these two criteria would also automatically put a stop to price dumping to a certain extent. Because if other suppliers also produced more sustainably and paid attention to social justice at every step of the value chain, they would be forced to raise the prices for their laboratory diamonds.
It remains to be hoped that laboratory diamond producers will respond to the younger generations' desire for greater sustainability and that the necessary change towards an ecologically and socially just future can soon be initiated in the industry.
The current situation in the diamond industry explained in more detail
As already mentioned, the article also explains the current situation in the industry, with regard to the rapid drop in prices for both mined and lab diamonds. At the moment, the prices for mined diamonds are on a strong downward trend. One of the reasons for this is the increasing purchases of lab diamonds as an alternative. In the USA, two primary factors can be seen that influence the decision to buy lab diamonds: on the one hand, increasing price awareness, and on the other hand, the increasing desire for sustainable alternatives. In this context, Capital now raises the question of whether this development is just a phase, or whether a long-term trend can already be seen here.
A closer look at DeBeers' sales development reveals the significance of the situation: from 2022 to 2023, the company's net sales fell by more than 60%. The company's CFO attributes the reasons for the decline to "economic headwinds" on the one hand and "large remaining stocks" on the other, as well as the fact that 2021 and 2022 went particularly well, making it difficult to build on these successes. However, the price drop does not affect all carat sizes.
The De Beers subsidiary Lightbox, which sells jewelry with lab diamonds, has, however, recorded an increase in sales. Given the falling prices of lab diamonds, the sales volume of Lightbox jewelry is likely to have increased even more. The significantly improved technology in particular makes the use of lab diamonds in the fine jewelry segment interesting. With today's manufacturing processes, flawless diamonds of up to 30 carats can be produced.
The environmental impact of jewelry plays a major role in purchasing, particularly among younger generations. But ongoing inflation and the resulting frugality of people are also having a positive effect on the sales of lab diamonds. According to optimistic forecasts, the lab diamond industry could overtake the classic mined diamond industry as early as 2030. Current developments in the USA are particularly important to observe, as the USA, the world's largest buyer of diamonds, is particularly sensitive to changes in buyers' tastes. There is also greater sales potential there for jewelry for occasions such as weddings or Valentine's Day. The one or two carat diamonds mainly used for such jewelry are the ones affected by the sharp drop in price. Mind you, these are the rough diamonds, whereas the finished cut diamonds are still no bargain.
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Source: Article "Sparkle from the laboratory: Is the era of mined diamonds over?" in Capital from September 10, 2023
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