Prices of Laboratory-Grown Diamonds Continue Inevitable Decline

Market Analysis
20/03/2018 10:35

Independent diamond-industry analyst Paul Zimnisky turns his attention to synthetic diamonds, noting that the price gap between diamonds and laboratory-grown gems has widened by an average of approximately 100% in the past year - doubling from 11-20% a year ago to 28-40% today, according to a survey of prices. "For example" he writes, "a white, 1-carat round diamond that is VS (very-slightly included) in clarity, F-H (near-colorless to colorless) in color, VG-ideal cut, with no-to-low florescence was selling for approximately $4,850 in March 2017 but is now $4,350 in March 2018, a 10% decline. However, over the same period of time the price of an equivalent natural diamond went from $5,850 to $6,150, representing about a 5% increase. Thus, the discount of the lab-created diamond relative to the natural equivalent was approximately a 17% in March 2017, but is now about 29%, a 71% year-over-year increase." Zimnisky's price analysis can be found here.

The price differential is when it comes to smaller (0.5 carat) and larger (1.5 carat) stones tells a similar story as they are discounted by 28% and 40% respectively, but the decline is more pronounced when one realizes that the year-over-year discounts have increased by 100% and 145%, respectively. Laboratory-grown diamonds are, "becoming less expensive relative to natural equivalents as investment in lab-diamond production technology has rapidly improved production economics in just the last few years. This has led to rapid relative supply growth and an environment that is more price competitive for lab-diamond manufactures", Zimnisky writes. A quick glance at the selection of synthetic diamonds available on Alibaba.com quickly demonstrates how deep the discounts are, and how cheaply one can acquire synthetic diamonds.

Are high-tech applications the real goal of synthetic diamond producers?

Zimnisky notes, "The business of manufacturing lab-created diamonds for industrial application (typically referred to as synthetic diamond) has been around for decades, and the industry currently supplies >99% of global industrial diamond supply for use as abrasives (production is in the billions-of-carats for context)." He adds, "Lab-production of near-gem-quality diamonds is where supply analysis gets especially challenging. Producers of synthetic industrial-quality diamonds have been advancing their production capability through improved technology which has enabled them to increase the quality of their product from industrial to near-gem quality. Given that billions-of-carats of industrial-quality diamonds are produced each year, it becomes apparent that lab-created near-gem production could be in the hundreds-of-millions of carats. As lab-diamond production continues to accelerate, it seems inevitable that the price spread between lab-created and natural diamonds across all sizes and qualities will continue to widen, especially in the case of generic lab-diamonds, those that are not supported by a manufacturer or retailer's brand." 

Interestingly, Zimnisky concludes that the real breadwinner for laboratory-grown diamonds may end up being the production of higher-quality stones for use in high-tech products, and perhaps this was the intention after all. "Medium-to-longer-term expect the dialogue surrounding lab-created diamonds to shift from jewelry to application in high-tech developments such as processing chips, optics, laser devices, and thermal conductivity equipment. The unique properties of diamond make the application potential exciting and wide, and the scientific and tech community has just begun to scratch the surface of its potential. The high-tech industry enthusiastically awaits economically available mass-produced high-quality diamond, the lab-diamond manufacturers know this and most are just using jewelry as a stepping stone."