Lab-grown diamonds a rage in China and the West, but trend eludes India

Topics diamond

For some decades, De Beers, the world’s largest diamond miner, has been focusing on a product that essentially competes with its core business: synthetic or lab-grown diamonds (LGDs). Initially, the UK-headquartered major produced LGDs for industrial purposes through a subsidiary called Element Six. Then in 2018, it set up Lightbox Jewelry, a fashion jewellery business built on LGDs.

This retail line from the conglomerate that controls a third of the world’s natural diamond business is the strongest signal yet of a growing market that offers India major opportunities for exports and creating a domestic market. Being lab-created, LGDs are considerably cheaper than natural diamonds — they cost about $800 or Rs 56,800 a carat compared with Rs 4 lakh a carat for a benchmark variety of polished diamonds (they should not be confused with Cubic Zirconia, which is a cheaper variety of stone).  

With global natural diamond supplies predicted to start declining from this year (unless new mines are found), LGDs are gaining ground as a useful disruptive technology. They account for just 4 per cent of natural diamond market right now, but are projected to grow to around 15 per cent by 2030.  

Paul Zimnisky, a New York-based independent diamond analyst and consultant, estimates that LGD production has grown 35 per cent in 2019 (about 4-5 million rough carats), over the year before. Ziminisky excludes diamonds below 0.5 carat but, according to Bain and Co, it is on this sub-one carat category that producers are now focusing.

What’s driving this growth is falling prices. Zimnisky said LGDs are selling 45 to 55 per cent less than the price of equivalent natural diamonds, down from a 35 to 45 per cent discount a year ago. According to De Beers’ research, consumers view LGDs as a product category distinct from natural diamonds. “Following the launch of Lightbox Jewelry, wholesale prices for LGDs decreased by around 60 per cent within a six-month period. Retail prices have also seen consistent declines, having fallen by around 20-30 per cent since the start of 2019,” a company spokesman said. This trend is consistent with prices for laboratory-grown ruby, sapphires and other precious stones, which retail at 10 per cent the price of the natural stone.

This trend has, however, eluded India, one of the world’s largest exporters of polished natural diamonds and gems. India accounts for 15 per cent of global LGDs, mainly in polished form, and exports virtually all it produces. In contrast China, which produces about 40 per cent of LGDs, mainly in the form of roughs, accounts for 10 per cent of global demand, the largest after the United States.  

Cultural factors chiefly account for the poor LGD market in India. As the Global Diamond Industry Report (prepared by Bain and Antwerp World Diamond Center) pointed out, “Acceptance of lab grown diamonds in India is negligible as people seek spiritual meaning in the natural gemstones.” This apart, rich consumers in India prefer the uniqueness of natural diamonds.

Adds Rajiv Popley, director, Popley Group, which has jewellery stores in India and in Dubai, “Indian consumers have always valued higher quality jewellery. Through mythology & history, premium gemstones and high quality diamonds have always been iconic to the Indian community.”

Even if the domestic market doesn’t acquire critical mass, the LGD market offers India’s languishing gems and jewellery business a sparkling new opportunity. India is the world’s second largest LGD producer, and in the April- December 2019 period, India’s polished LGD exports doubled to $312.06 million, according to the Gems and Jewellery Export Promotion Council (GJEPC). Exports of natural polished diamond exports, by contrast, have been down 17.89 per cent to $14.67 bn in the same period.

According to GJEPC vice chairman Colin Shah, “With the help of new technology for lab grown diamonds manufacturing, LGDs are expected to redefine the global gem and jewellery industry. Newly developed categories of LGD are characterised with the same properties of natural diamond but with a difference of cost, time and has positive ecological impact because they don’t have to be mined.”

In India, the traditional jewellery processing centres of Mumbai and Surat are centres for LGDs (the latter mainly for polishing). Many traders also prefer to deal in import of rough LGDs from China and export polished ones to the US, the largest market for India’s polished diamonds. In India, however, many of these players prefer to remain low profile because they have been trading or dealing with natural diamonds, which has been through a rough patch recently.

De Beers’ Lightbox Jewelry is expected to change the rules of the game. Element Six is currently constructing a new LGD production facility in Gresham, Oregon to produce stones for Lightbox; this facility will ramp up to full production over the course of the next year and will have the capacity to produce around 200,000 – 250,000 polished carats of LGDs annually. Prices are expected to fall further when this line comes to market, suggesting an opportunity for jewellers to create a vibrant new market in India

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