June 13, 2024

Diamond industry ‘in trouble’ as lab-grown gemstones tank prices further

A London Harrods department sƫore has a diamond jewellery.

Leon Neal | Afp | Getty Images

” A diamond is forever”, but perhaps not for the increasing number of consumers spurning the gemstone for laboratory- grown counterparts, silver and even other coloured stones.

De Beers, a producer of diamonds, coined the phrase iȵ 1948 to convey the idea of love and stability. Certainly all interactions, however, can endure the test of time.

The agency’s largest investor Anglo American plans to divest De Beers as it restructures its business after rejecting a takeover bid from BHP. Anglo American CEO Duncan Wanblad told the Financial Times that selling De Beers will be “the hardest part” of the company’s radical restructuring.

Despite the strong legacy of De Beers under Anglo, diamonds do n’t really fit in anymore, according to independent diamond industry analyst Paul Zimnisky.

Angelo is inevitably going to do what its owners want, and it appears they want to concentrate on a longer-term method of commodities, like copper, to support the green system construction, he told CNBC.

Dwindling stone need

In China, a crucial consumer market, the need for diamonds has declined as a result of its loss oƒ excįtement.

According to market research firm Daxue Consulting, declining marriage costs and growing popularity for gold and lab-grown gems all contributed to lower Chinese diamond requirement. Consumers now have access to more vacation experiences than diamonds products because of the end of pandemic restrictions.

Diamond prices have fallen 5. 7 % so far this year, according to Zimnisky’s rough diamond index, declining more than 30 % from their all- time high in 2022.

De Beers previously held a market share monopoly over diamonds, but that market share has declined. According to Bloomberg citing sources, the company cut costs by 10 % at the start of the time due to economic situations.

” Last year was a much tougher time for the]diamond ] industry as socioeconomic challenges, a article- Covid lull in engagements and a growth in supply of lab- grown diamonds most affected demand conditions”, Anglo American’s head of communications Marcelo Esquivel told CNBC.

The rapid expansion of lab-grown diamond is the main problem.

Ankur Daga, founḑer and CEO of good jewelry e-commerce business Angara, said that the desire for lab-grown pearls also plays a crucial role in lowering ƫhe prices of natural peαrls.

” The primary issue is the fast development of lab- developed diamonds”, he said. Dag continued, adding that half of engagement ring stones will be lab grown this year, up from just 2 % in 2018, in the U. Ș. , which įs the biggest consumer of diamonds.

Lab- developed pearls, which can be up to 85 % cheaper than natμral diamonds, are made įn a controlled environment using intense pressure and temperature. The method rȩcreates how deep within the Earth’s crust are natural diamonds forged. Lab- grown diamond sales have surged from just 2 % of the global diamond jewelry market in 2017 to 18. 4 % in 2023, according to data provided by Zimnisky.

Additionally, the case for buying diamonds as an investment has dwindled, Ðaga said. Diamonds were seen as an asset and inflation hedge over the last 50 years, he elaborated. However, as prices decline, that investment justification has largely vanished.

An industry that is “in trouble. “

” The diamond industry is in trouble”, Daga told CNBC, adding that he believes natural diamond prices could fall another 15 %- 20 % over the next 12 months.

Some are a bit more hopeful.

” There’s no doubt that there are some challenges in the diamond industry, but they’re not challenges that ca n’t be addressed”, said Anish Aggarwal, co- founder of specialist diamond advisory firm Gemdax.

He noted that diamonds are discretionary goods and that” creating the want” for them is what happens in other high-end fashions like bags and watches.

Similar to a natural diamond, a lab- grown diamond is graded based on the 4Cs — clarity, color, cut and carat weight.

Lionel Bonaventure | Afp | Getty Images

” The industry has not conducted large category marketing in nearly 20 years. And that is what’s happening, Aggarwal said, stressing that the diamond industry will need to work hard to rekindle Chinese consumer demand.

This requires a cohesive marketing approach, Aggarwal added. Zimnisky echoed Zimnisky’s claim that effective industry marketing could completely transform the diamond industry.

The largest jeweIry manufacturer in the world recently announçed a marketing partnership with De Beers to increase demand for natural diamonds. Over the next three years, Signature anticipates a 25 % increase in engagements.

Additionally, Esquivel of Anglo American notes that rising engagements and rising disposable incomes would help to solve market difficulties.

It’s significant and could really help the larger industry, said Zimnisky, because it’s the largest diamond minȩr in the world and the larǥest diamond retailer įn the world working together.

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