After a brief surge in diamond jewellery demand during the pandemic, diamond miners find themselves grappling with an oversupply, compelling them to tackle excess inventory. Natural diamond prices have witnessed a significant drop of almost 20% compared to a year ago, following a surge in 2022, although they were higher a decade ago. Anglo American’s De Beers, the largest diamond producer by value, has responded by reducing its output due to sluggish demand. Additionally, sanctions-affected Russian miner Alrosa, the world’s largest producer of rough diamonds by volume, ceased publishing sales data in early 2022 and cut its output by 2.8% to 34.6 million carats last year.
The growing popularity and affordability of laboratory-grown diamonds (LGDs) are perceived as the primary drivers behind the current challenges faced by the diamond market. Unlike traditional miners, companies associated with LGDs are reporting positive results. A notable example is Pandora, the world’s largest jewellery maker by production volume, which recently raised its full-year revenue guidance after surpassing first-quarter sales and profit forecasts. The Danish company, renowned for its charm bracelets, transitioned away from mined diamonds in 2021. In the first three months of the year, Pandora nearly doubled its sales of lab-grown diamonds, resulting in an 87% revenue increase. Pandora attributes this sales surge, particularly in its largest market, the United States, to the use of lab-made diamonds, along with 100% recycled silver and gold.
The shift towards lab-grown diamonds is primarily driven by consumers seeking more affordable and ethical alternatives. However, industry insiders suggest that this trend may not be permanent. According to Alexander Lacik, Pandora's chief executive, while younger consumers are more receptive to lab-grown diamonds, older generations still favour mined stones. Despite the momentum behind LGDs, traditional mined diamonds still dominate the market.
Diamond industry analyst Paul Zimnisky underscores the rapid growth of lab-grown diamonds, with global sales reaching nearly $12 billion in 2022, marking a 38% year-over-year increase. However, Zimnisky predicts a price decline for man-made diamonds similar to that of mined stones. Last year alone, prices for lab diamonds dropped by about 20%, and this trend is expected to persist. Initially priced approximately 10% lower than mined diamonds, synthetic diamonds now boast discounts of up to 90%.
Jewellery maker Nightingale, which offers both mined and lab diamonds, suggests that the rise of man-made gemstones may pressure miners to adopt more transparent and ethical practices. Nightingale emphasizes the historical necessity of consumer demand for ethical products to drive industry change, citing past instances such as the outcry against blood diamonds. While acknowledging that demand for mined diamonds won't vanish overnight, Nightingale predicts a gradual transition towards a blend of ethically sourced mined and lab-grown diamonds.
