It’s no secret that lab-grown diamonds are disrupting the mined diamond industry, but recent results from international diamond miners suggest the shift may be happening faster than analysts anticipated.
Underlying EBITDA for DeBeers, the world’s second-largest diamond miner, fell by 95 per cent year on year in 2023.
At Vale, an international miner, the underlying EBITDA of diamonds fell by 56 per cent year on year.
Demand for mined diamonds has “collapsed”, according to Max Spicer, sales consultant at London Diamonds, largely due to the emergence of lab-grown diamonds as an alternative.
“We built our business on mined diamonds and we were quite sceptical about lab grown”.
“But once you get your head round that they’re identical… it’s pretty hard to tell someone to spend five to 10 times more money on a mined diamond, right?”
Around 90 per cent of people choosing an engagement ring at London Diamonds in the last two years have chosen lab grown, he said.
“It’s not guesswork… People are choosing lab,” he said.
Finding a diamond in the rough
DeBeers, which accounted for around 29 per cent of the global diamond production market share in 2023, saw more than $1.6bn of impairments related to its diamond mines in 2023.
In late October 2023, Canada’s Stornoway Diamonds filed for bankruptcy for a second time.
“There is no doubt that while the immediate macro picture presents some challenges for [mined diamonds], the demand trends for metals and minerals have rarely looked better,” according to Anglo America, majority owner of DeBeers.
Anglo American’s insistence that the mined diamond industry will pick back up in the next few years is wishful thinking, according to Spicer. It’s “simply not going to happen”, he said.
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The price of mined diamonds hit an all-time high in the first quarter of 2022 on tight supply, but have since collapsed by around 25 per cent.
“Mined diamonds will [continue to] come down in price an awful lot, but the gap will still be too much for people to choose mined,” Spicer said.
In 2023, lab-grown diamonds represented 17 per cent of the global diamond market, with sales increasing by 38 per cent from 2021 to 2022. The size of the market is set to double to £44bn by 2031.
At Queensmith’s, a jeweller, lab-grown diamonds equated to 81 per cent of their sales in 2023, booming from 1 per cent in 2012.
Customers cited value for money, sustainability and environmental impact as their main reasons for choosing Queensmith’s synthetic diamonds.
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Lab-grown diamonds — which are chemically and physically identical to real diamonds — could eventually get as cheap as hundreds or even tens of dollars a carat, according to Rapaport.
Ethics
Unfortunately, lab-grown diamonds are not the environmentally-friendly alternative to mined jewels that they are often seen as.
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Lab diamonds don’t require extraction, but they do require “a tremendous amount of electricity,” Martin Rapaport, diamond industry expert and chairman of Rapaport Group, told Axios.
Synthetic diamonds are mostly produced in factories by machines that require constant electricity to run.
The ethics of lab-grown jewels are “probably overstated”, Spicer said, so “let’s not get ahead of ourselves… but they don’t do as much damage as mining.”
People choose lab-grown diamonds for the price point more than anything else, he added.
“There are better things to spend your money on, and diamonds just aren’t an investment.”
By City AM
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