Have lab-grown diamonds changed the diamond industry forever?

around 50% of Diamond Engagement Rings purchased in the United States now contain a Lab Grown Diamond

Kodak never saw it coming either.

Since early 2022, the price of polished natural diamonds has fallen approximately 40% and the industry is being buffeted by negative economic headwinds, an excess of mine supply and too much stock in the cutting centres. However, there is one statistic that cannot be ignored: around 50% of Diamond Engagement Rings purchased in the United States now contain a Lab Grown Diamond (LGD). Is this just another cyclical downturn or are we in the middle of a major structural change?

Diamonds were once the preserve of royalty and the uber-wealthy, but the diamond market has evolved over the past 80 years into more of a mass market product with democratisation of the diamond consumer. Since the late 1970s most polished diamonds below 5 carats were priced against the 4 ‘C’s’ (carat, clarity, colour and cut), which led to standardised pricing in the form of polished diamond pricing lists. Up until the turn of the century these lists were primarily available in the wholesale market, but the arrival of internet pricing soon gave the consumer access to that same standardised pricing. In a world where everyone knows the price of everything, branding is the only differentiator. Without a differentiator, commoditised products end up selling for the lowest price.

It was why one of the questions that De Beers tried to answer when it changed its business model 25 years ago was: “How do you take a necessity (the diamond) priced like a commodity and market it as a luxury priced like a brand?”

Unfortunately, that question remains unanswered. The industry did create hundreds of so-called ‘brands’; origin, cut, settings, etc; the problem was that very few of them were real “brands”. If something does not sell at a premium, it’s not a brand, and most natural diamonds sell at a discount, yet the more that the industry was unable to achieve a premium, the more it becomes fixated with talking about the “product” when the luxury world has spent the last 25 years talking about “values”.

The challenge for most jewellers is not making a sale, it is making a reasonable margin. Ask a jeweller what they are selling and if they reply “VS1, G-H colour, loose polished, 1-caraters” then the most relevant word in their business will be “discounting”, because what they are selling is a commoditised version of “crystallised carbon.” There is no differentiator.

The LGD industry realised that to succeed it simply needed to persuade consumers that natural diamonds and LGDs were the same – “optically, physically and chemically”, but to also position them as “slightly cheaper”. They could then ride on the back of 80 years of De Beers diamond advertising differentiate themselves by claiming that LGDs were “conflict free”.

A larger “ethical” LGD for the same money as a natural diamond or pay less for the same size, created a money printing machine for everyone involved. And it’s no surprise that LGDs real success has been in the United States, because historically America has always been a “discount market”, and “larger for less” plays to that tune.

If all you want in a diamond is the sparkle, then they are in essence the same. Except there is a very real difference between the two, which is why some LGD executives insist on calling natural diamonds “earth mined” diamonds, because “natural” is exactly what differentiates them. The story of their age, rarity, origin; their social and economic contribution but above all, their “social purpose”. It was the failure of the natural diamond industry to tell that story which opened the door to LGDs.

When LGD production exploded, wholesale prices collapsed to around a 95% to 98% discount to their natural diamond equivalent. Prices vary according to quality, but anecdotal evidence suggests that today in the wholesale market, it is possible to buy a single polished LGD for $150 a carat, buy in volume and its possible to pay as low as $80 a carat.

Many retailers have also dropped their LGD prices, but by no means as far, and even pricing LGD at a 20-40% discount to their natural diamond equivalent can still leave a very significant margin. Pandora will sell you a 1-carat LGD ring for $1,950. Helzberg Jewellers (a Warren Buffet company) will sell you a similar LGD for $1,999. It’s very likely that some in the LGD industry are making a gross margin of 200%, some much more for a product that Signet Jewellers sensibly cautiones it customers “Their relative abundance may not ensure the value will hold over time”.

Whatever happens to future LGD retail prices, the category has got itself into the American consumer psyche and that won’t easily change, although there are also two sides to this story. I heard of a jeweller who was recently asked by a HNWI to make a replica of her 8-carat natural diamond ring so she could wear it travelling. The original ring cost $500,000 but he sourced an equivalent LGD for $5,000, and apparently she was absolutely thrilled with it. The question is, will she buy natural again? On the other hand, if in the future a consumer could buy (for example) a 2-carat LGD engagement ring for below $200, how pleased would their fiancé be to receive it – Walmart recently had a 2-carat LGD ring for sale for only $257. How romantic!

The US bridal market (size over quality) is dominated by larger, lower quality diamonds. Since similar sized LGDs are cheaper (or you get a much better quality LGD), either that market disappears, or demand only reappears aner prices have fallen sharply (already happened). It is also likely that LGDs will replace small, lower quality natural diamonds in fashion jewellery – as they may replace the smaller stones in high-end pieces of natural diamond jewellery. Diamond mining companies whose profitability rely on these categories of diamonds probably need to find a new value proposition, or their days may be numbered.

For those in the natural diamond industry who can adapt, there is huge potential. For those that don’t, as the saying goes, “Kodak never saw it coming either”.

Except Kodak did see it coming; they just didn’t know what to do about it. Kodak was killed off by digital photography which ironically, they invented, patented, but didn’t know how to exploit it, so they franchised the technology and made a fortune until their patents expired, and then went bust. Have LGDs done the same to natural diamonds? “No”, the opposite; their success is forcing a complacent industry to change. Have they changed the paradigm? “Completely”.

Source: intellinews

De Beers Adds Grading Specs for Lightbox

De Beers Lightbox Grading

Lightbox has added grading information for its synthetic white diamonds in an effort by the De Beers brand to bring further transparency to the lab-grown sector.

The company will provide technical specifications showing the minimum quality of its stones across cut, color, clarity and carat weight, Lightbox said Monday. It will include these descriptions with each white lab-grown diamond it sells, but will not grade each stone individually. The specifications are based on internationally recognized grading standards, the De Beers-owned company noted.

“This new feature is just one more way Lightbox can instill consumer confidence,” the company added.

An infographic with the information is also available on Lightbox’s website. Those specifications list its synthetic white diamonds to be “near colorless” or better, which the company defines as between G to J, meaning only a trained gemologist can detect a trace of color. The stones all have a minimum clarity of VS, and a cut of “very good.” The stones are still priced at $800 per carat.

Lightbox, which De Beers launched in 2018, does not currently intend to offer grading information for its blue or pink lab-grown diamonds.

Source: Diamonds.net

WD Sues Diamond Growers over CVD Patents

A 9.04-carat round brilliant produced by WD Lab Grown Diamonds in 2018 using chemical vapor deposition.

The companies behind WD Lab Grown Diamonds have filed three lawsuits against competitors, accusing them of infringing patents for diamond synthesis and treatment.

The Carnegie Institution of Washington, a science organization, and M7D Corporation, which trades as WD Lab Grown Diamonds, took action Thursday again six companies that produce or sell diamonds made using chemical vapor deposition (CVD).

One of the complaints targets Pure Grown Diamonds (PGD) and IIa Technologies, which produces CVD goods for PGD. A second filing is against Mahendra Brothers, a De Beers sightholder, and its affiliate, Fenix Diamonds. The third suit takes aim at Altr, another lab-grown supplier, and its owner, R.A. Riam.

Carnegie invented and patented a version of CVD, known as microwave-plasma CVD (MPCVD), that can create a purer diamond because it doesn’t involve electrodes, which often contaminate the product, according to the lawsuits. It also patented a method for enhancing a stone’s visual characteristics through heat treatment at high pressure and temperature. M7D holds the license to both patents, the three similar lawsuits continued.

“The existence of the patents…are well-known in the lab-grown diamond industry, and in particular are well-known by lab-grown diamond manufacturers, importers and sellers,” Carnegie and M7D claimed.

Carnegie and M7D are seeking damages and a judgment declaring that the six companies violated their patents. The companies were not available for comment Sunday.

Source: Diamonds.net

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Labs Refute Claims HPHT Escaping Detection

IIDGR AMS2 synthetic diamonds test

Major gemological laboratories have rebuffed claims that detection machines are failing to spot synthetic diamonds that have undergone irradiation.

In a trade alert last week, Diamond Services argued that the treatment, generally used to alter the color of a stone, can mask the phosphorescence effect when diamonds created using High Pressure-High Temperature (HPHT) undergo scanning at room temperature.

While detection machines can often identify HPHT diamonds because they phosphoresce — or glow — under ultra-violet light, certain devices fail to spot some of those stones that have been subject to irradiation, the Hong Kong-based diamond-technology company argued.

However, De Beers and the Gemological Institute of America (GIA) have denied the impact of such a phenomenon on their machines’ ability to sift out HPHT synthetics.

“The International Institute of Diamond Grading and Research (IIDGR) confirms that its instruments AMS2, SYNTHdetect, DiamondView and DiamondSure are all effective at screening HPHT synthetic material which has been irradiated and is tested at room temperature,” the De Beers-owned grading unit said in a statement last week.

“Any business using these devices can have full confidence that any such material will be detected without the need to undertake tests at different temperatures,” it added.

Meanwhile, although detection devices based on phosphorescence may not be able to detect some HPHT-grown irradiated synthetics, the GIA’s machines can spot them, the Carlsbad, California-headquartered laboratory stressed.

“The ability of the instruments that GIA uses to differentiate natural diamonds from HPHT and CVD [chemical vapor deposition]-grown synthetic diamonds, including the GIA iD100 gem-testing device and the GIA Melee Analysis Service, is not affected by irradiation treatment,” the GIA told Rapaport News.

Examining diamonds at the temperature of liquid nitrogen can be an extremely accurate method of detecting synthetics, while a technique called Raman spectroscopy is a simple way of spotting irradiated diamonds, according to Joseph Kuzi, founder and president of Diamond Services.

“Our latest findings indicate that the diamond and jewelry trades should show extra caution, but we do not claim that irradiated HPHT-grown synthetic diamonds are undetectable,” Kuzi said.

Source: Diamonds.net

Lab Finds 3ct. Synthetic Diamond with Fake Report

Synthetic diamond with fake report

A grading laboratory in China has discovered a synthetic diamond masquerading as a natural stone, complete with a forged inscription and a falsified report.

The National Gemstone Testing Center (NGTC) in the city of Shenzhen received a round-brilliant, 3.1-carat diamond ring, which it subsequently graded as F or G color and VS clarity, it said last week.

However, when gemologists checked the laser-inscription code that was already on the girdle, using an online certificate-verification service, they found the grading report bearing that number was for a natural diamond with similar, but not identical, characteristics. The certificate they saw online was for an H-color, VS1-clarity diamond.

The Chinese lab carried out tests that confirmed the stone in the ring was synthetic, created using chemical vapor deposition (CVD). The inscription and accompanying paper report, purporting to be from an international grading laboratory, were fakes, the NGTC said.

The stone had a type of impurity, known as a “silicon-vacancy center,” that is extremely rare in natural diamonds but common in CVD diamonds, helping the scientists identify its origins. It also had other characteristics that indicated it was synthetic, such as showing green fluorescence under ultra-violet light.

While this was not the first case of its type — the Gemological Institute of America last year found a synthetic diamond with a forged inscription — it is rarer for a Chinese lab to make such a discovery, NGTC noted. It is also one of the larger synthetic diamonds to have cropped up with false credentials to date, the lab added.

“The growth technology of CVD synthetic diamonds has been making great progress for decades in [terms] of size, color and clarity,” the lab said. “Recently, the distinct characteristics of the synthetic diamond are becoming less, and it is more difficult to differentiate.”

Source: diamonds.net