Lab-grown diamonds put natural gems industry under huge pressure

Lab-grown diamonds put natural gems industry under huge pressure

Subject: Science and tech

Section: Msc

Introduction:

• The Lab-grown diamonds sparkle the same as mined natural gems.
• Mined natural gems are more than a billion years old and laboratory-made rocks are new and cost less than half the price of natural gems.
• “Lab-grown diamond (LGD)’s the same product, same chemical and the same optical”
• Machine-made diamonds, first developed in the early 1950s,later due to technological advancement commercially-able process is developed less than a decade ago.

Global share and export stats:

• $89 billion global diamond jewellery market is being reshaped by Manmade gems, especially in the west Indian city of Surat where 90% of the world’s diamonds are cut and polished.
• As per Industrial data- Lab-grown diamond exports from India tripled in value between 2019 and 2022, while export volumes rose by 25% between April and October 2023 from 15% earlier.
• The global market share by value of lab-grown gems sharply increased from 5% in 2018 to 18.5% in 2023, and will likely exceed 20% this year.
• This increased pressure on natural gems industry already affected by geopolitical turmoil and slumping demand.

Humanitarian and environmental factors: 

• “Conflict diamonds” from war zones are kept off the market through the international Kimberley Process certification scheme. It leverages Lab-grown diamond producers.
• -Natural gems uses energy intensive process having environment concerns and electricity derived from carbon-heavy sources, though gradual green energy shift like solar is occurring at low scale.
• Such environmental and humanitarian claims have helped make lab-grown stones a popular choice for engagement rings.

Justification: 

In February 2023,17% of diamond engagement rings sold in the U.S. — the world’s biggest consumer of natural stones — used lab-grown gems and now to 36%.

Perfect storm:

• According to India’s Gem and Jewellery Export Promotion Council (GJEPC)– Indian lab diamond makers exported 4.04 million carats between April and October 2023, a 42% year-on-year increase, while natural diamond companies in India reported a more than 25% drop, to 11.3 million carats, over the same period.
• During the COVID-19 pandemic, natural gems demand surged due to  luxury purchases but after reopening of economies it dropped due to excess stock and different kind of lack of demand.

Factors for decline in natural gems are as follows: 

• Competition from lab-grown rivals .Slowing economic growth in the all-important U.S. and China markets

Oversupply

• Sanctions against Russian rough-cut diamonds.
• Moreover, India’s natural diamond industry was forced into a rare voluntary import ban on rough diamonds in October.

No monopoly:

Problems of lab-grown industry:

• Supply has skyrocketed
• prices have dropped drastically, with wholesale prices down by 58% in 2023 alone.

Justification: The price of a lower-quality one-carat polished stone had fallen from $2,400 in 2022 to a little over $1,000 in 2023.

However, falling prices will spur demand and prices would come down, because there’s no monopoly in this industry.