Lab-grown versions of the gems have upended the traditional diamond industry, snatching customers and market share in a relatively short span of time. That’s threatening an industry which a small handful of diamond companies have long dominated.
While the diamond industry’s stronghold may be on shaky ground, it might not be doomed to failure after all.
Gem Diamonds, a London-listed miner, saw an uptick in diamond sales during the first half of 2024 to $77.9 million, up 8.8% from the same period last year.
During this time, the company sold nearly 5,000 more carats, a unit to measure the weight of diamonds. Gem Diamonds sold 11 diamonds worth more than $1 million each, generating $29.5 million in revenue in the first six months of the year, it said in its latest earnings published Tuesday.
The report comes at a time when rough diamond prices have dipped due to a confluence of different reasons, from lackluster spending appetite to the popularity of cheaper alternatives.
The diamond industry has suffered high-profile setbacks that have added to its tensions. For instance, De Beers, the dominant British company that once controlled 85% of diamond mining, has faced volatile diamond prices because customers favor lab-grown variations. Last month, the group said it would slash production as it grapples with its future after being sold by commodities giant Anglo-American.
That’s not all—younger shoppers seem to be falling out of love with natural diamonds. Lab-grown diamonds now account for nearly a fifth of all diamond sales globally. The bad reputation attached to their sourcing is one reason prompting customers to switch. But it’s been accelerated by the pricing of lab-grown alternatives (sometimes as much as 80% lower than real diamonds) amid high inflation, making it a more value-for-money purchase for cash-crunched buyers.
Jewelry companies have started to recognize this trend. Pandora, for instance, pivoted to lab-made diamonds in 2021 and has seen its business flourish since. The company’s CEO Alex Lacik told Bloomberg on Tuesday that people will buy more lab-grown diamonds in the next 10 years than natural ones as “consumer perception swings really fast.” That’ll deal yet another blow to the traditional diamond market.
There may also be a broader shift underway as shoppers look to gemstones such as rubies and sapphires for their engagement rings.
The rise of lab-grown gems
Overall, the global market for lab-grown diamonds is estimated to reach $59.2 billion by 2032, more than double its value in 2022, according to Allied Market Research data. The volume of lab-grown diamonds being cut and polished while fetching a fraction of the natural stone’s pricing means it presents a longer-term change for the industry.
Meanwhile, other companies, such as De Beers, have experimented with offering real and synthetic diamonds hand-in-hand but ultimately saw that the economics of pursuing a business in lab-grown alternatives didn’t make sense.
It’s going to get quicker and possibly cheaper to start making lab-grown diamonds in bulk—and that’s not great for the existing diamond market. But the growing delta between these two gems could open up new opportunities.
“We are getting to a pivot point where the profitability of retailers selling lab-grown is a lot less than it was in the previous three to five years,” Paul Zimnisky, an independent industry analyst, told the Financial Times in July.
“This could be a catalyst to returning to natural diamonds. Retailers aren’t loyal to lab-grown or natural diamonds, they’re loyal to making money.”
Only time will tell what this means for companies like Gem Diamonds, which exclusively mines real gems.
