Synthetic Melee and Rapaport’s New Diamond Guarantee

03/08/2016 13:48

Rapaport Auctions and Trading issued a press release today offering clients, "the opportunity to purchase parcels of melee that are 100% natural and untreated," and their timing could not be more appropriate. On July 18, Morgan Stanley released a report on the effect of synthetic diamonds on mined diamonds, which says that the share of synthetics is so far negligible, but not for long. By their estimation, in the worst scenario synthetics will have a 15% share in the world market of melee diamonds by 2020, putting pressure on their prices in the long term (12%). Elena Levina of Rough&Polished, however, writes that according to their estimates, Morgan Stanley's figures are much too conservative: "The situation is even worse than it is described. Synthetic diamonds are already here, affecting the market quite significantly. And if diamond mining companies will not take any measures as soon as possible, we may lose the market much faster."

Rough&Polished's reasoning is that Morgan Stanley, "have interviewed only the players of the 'civilized' market, the IGDA members. They grow large high-quality stones and spend funds on marketing. Their production costs are indeed high, which means that prices for their goods are also high. But there are also companies operating in China (the 'grey' market) that do not claim to be well-known brands. They just open legions of small labs producing and cutting small-size diamonds, which can always be sold unhindered. These guys do not even need to ... lure consumers with stories about environmental and ethical purity of their products. Buyers will come to them because of their low prices."

She writes, "Unsophisticated calculations show that one manufacturer of synthetic diamonds with an average production capacity of 10,000 carats a month will make 120,000 carats in a year. Ten manufacturers - 1.2 million carats. One hundred manufacturers - 12 million ... All these millions of carats ... are in the market right here and right now and they are equally likely to be set in cheap jewelry rings sold at Walmart and in more or less expensive watches." She suggests that GJEPC statistics - unintentionally - grossly underestimate the amount of synthetic diamonds on the market right now, and due to the financial infeasibility of testing small diamonds, "this flow of cheap melee diamonds are likely to reach the market without any disclosure of their artificial origin."

All of which takes us back to Rapaport. "Every single diamond in these parcels is tested using the latest Gemological Institute of America (GIA) equipment and testing technology. In addition, Rapaport will offer parcels that have been statistically sample tested at a 99% significance level to a 1% tolerance level. The first 100% natural and untreated melee diamond parcels and sample tested parcels will be offered for sale at the upcoming Rapaport auction to be held August 9-18." They are also offering auction buyers of non-tested diamonds and non-auction buyers the opportunity to have all parcels tested. Ezriel Rapaport, Director of Rapaport Global Trading, said, "Melee diamond markets are under pressure due to the unethical behavior of dealers who mix synthetic diamonds into parcels of natural diamonds. It is vital that we create legitimate markets for natural diamonds by statistically sample testing melee parcels and, where possible and practical, testing all diamonds in a parcel to ensure that buyers have an opportunity to source 100% guaranteed natural untreated diamonds."