- In recent years, consumer preference for diamonds has shifted from mined stones to lab-created ones, as they offer better value and are more aligned with a younger generation’s environmental morals.
- But that shift in demand was hit by a coronavirus-led lag in supply chains due to disruptions in trade, especially from one key diamond-processing country.
- 90% of mined diamonds and 99% of lab-grown diamonds are cut and processed in India, which had one of the world’s strictest lockdowns.
- India temporarily halted all imports during the pandemic, meaning it was unable to receive any goods to cut or polish, clipping the supply chain and lively halving diamond exports by 50% this year.
- “Realistically, there’s very little need for new goods to be put into the marketplace when it comes to mined diamonds,” Amish Shah, founder of a lab-grown diamond company, told Markets Insider.
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Global demand for industrial diamonds is slowly being satisfied by synthetic, or lab-grown diamonds, according to a Statista report.
That means demand for genuine precious stones is slowly diminishing, and there is good reason for that, with buyers now worried about both the environmental impact of diamond mining, and the industry’s historical link to bloody conflicts in Africa.
A large part of lab-grown diamond polishing comes from India, where 90% of mined diamonds and 99% of lab-grown ones are cut and processed, according to data from Bain. But during the pandemic, this trend had stalled.
India had one of the world’s most strict lockdowns and the monolith of the industry, De Beers, threatened to take its business elsewhere.
India’s import moratorium — a temporary restriction on inflow of goods — beginning March onwards meant no rough diamonds were entering the country. For that reason, the country’s polished diamond exports were down 50% year-on-year and gold jewellery exports were down 80%.
That led to almost a $5 billion backlog of diamonds in the pipeline, which is one of the reasons De Beers and its competitors had to drop prices to deal with huge inventory stockpiles.
Dropping prices didn’t really work, with Bloomberg reporting last week that De Beers and competitor Alrosa sold a combined $130 million in rough diamonds in the second quarter, just over 6% of the $2.1 billion in sales they reported in the same period last year.
But even before the pandemic, consumers shifted away from earth-mined diamonds to the more ethical lab-created diamonds just because they have lower carbon emissions compared to their counterpart.
“Realistically, there’s very little need for new goods to be put into the marketplace when it comes to mined diamonds,” Amish Shah, a third-generation diamantaire who left his family’s mined diamond company for his own lab-grown diamond venture ALTR, told Markets Insider.
According to an MVI study, nearly 70% of millennial age-consumers said they would consider lab-grown diamonds instead of mined diamonds for purchase.
When global lockdown restrictions eased in May, sales started opening up and e-commerce platforms saw a triple-digit growth in demand for created diamonds, Shah said.
Mined diamonds in the market were seeing a surplus with no demand while there was immense pressure on the created diamond category to supply more goods, which he explained as indicative of the shift in consumer behaviour as they offered more shine for the buck.
Use of lab-grown diamonds in jewellery are reportedly proven to be an ethically better and less expensive alternative to mined diamonds, and these are increasingly showing high industrial value.