Lab-Grown Diamonds Have The Entire Market Bending the Knee As Prices Tank

Carol Channing, meet your new best friend: lab-grown diamonds (LGD). And fellas, this one won’t cost two months’ salary. To the naked eye, LGDs are nearly identical to natural ones. Except they cost a fraction of the price, can be manufactured in a shorter time period and are more environmentally friendly.

Are they real? Per the International Gem Society, LGDs are considered real with the same chemical and physical structure as real diamonds. And their popularity has rapidly grown in recent years — driven by interest among younger generations and changing perceptions:

• Since 2018, the market share of synthetic diamonds has jumped from 3.5% to a forecasted 16.5% in 2023, per Diamond Analyst Paul Zimnisky.
• In 2022, LGD jewelry sales grew 38% — with this year’s sales already surpassing the previous year in August and continuing to eat into natural diamond sales.

Two years after rolling out their first LGD collection, the world’s largest jewelry retailer, Pandora (OTC:PANDY) — whose stock is up ~65% this year — is launching additional LGD products with a significant expansion.

Prices drop down by more than one knee

For producers supplying retailers, strong demand doesn’t always translate to rising profits. Lower-cost Indian LGD producers, which cut and polish ~90% of the world’s supply, have flooded the market and pushed prices down for both lab-grown and mined diamonds:

• Between 2016 and 2023, LGD prices have fallen over 70% from $5K down to $1.4K (FT).
• In the past year, one-carat natural diamond prices have fallen 26% from $5.5 to $4K.

Last week, the second-largest US LGD producer filed for bankruptcy, while the world’s largest natural diamond producer, De Beers, has cut prices by as much as 40% in some categories. The stock of its parent company, Anglo American (OTC:NGLOY), is down 27% this year, with De Beers’ profits falling 60% in the first half of 2023.

Hold off on the proposal: According to Fortune, five years ago, LGDs were priced 20% lower than natural diamonds. Today, it’s ~80%. De Beers expects the gap to rise even further and eventually will be positioned as two different products. Say goodbye to the “two months pay” engagement ring rule.