The price per carat in the lab-grown diamond market has been drastically changing in recent years due to declining production costs, driven by innovation and growing consumer demand. This market development poses significant competition to the mined diamond (referred to as natural or rough diamonds) industry, forcing a continuous decline in the price per carat. Is it possible for mined and man-made diamonds to coexist in the current market?
The Natural Diamonds Market
The natural diamonds market is largely dominated by major players such as De Beers, Alrosa, and Rio Tinto, who control the majority of the global supply. Due to various market developments, the price per carat has continuously fallen from around $6,500 in 2016 to $5,000 in 2024. Facing increased scrutiny over ethical and environmental concerns, which further influence its market dynamics, natural or rough diamonds are increasingly challenged by competing sectors: lab-grown diamonds. De Beers decided to defer the production and output of jewellery made from mined stones by 15% in their second quarter, highlighting the industry’s struggles.
Mining Industries: Uncertain Times
A struggling industry demands a broader vision. Alrosa, a Russian diamond mining group founded in the early 1990s and comparable to De Beers in size, bought a gold mine in June. One month earlier, Anglo American, a British international mining company, announced plans to list or sell the company within 18 months following a failed £39bn takeover by rival BHP (Australia).
De Beers created a subsidiary, “Element Six,” in 1946 for synthetic diamonds and super-materials manufacturing. Although this branch was established for industrial use (diamonds not to wear but to use in various types of machinery, in simple terms), a focus on the high-tech sector is expected to double revenues by the end of this decade.
Strong Competition: The Rise of Man-Made Diamonds
In the past three to five years, lab-grown diamond retailers have experienced astonishing sales and profit margins. The main driver of this development is the sudden accessibility of diamonds, something that has been marketed for years as precious and unattainable. Now, with growing consumer consciousness, especially among younger consumers, lab-grown diamonds offer a solution against human rights violations, satisfying the desire to obtain these precious stones. Furthermore, following the post-COVID-19 slowdown in demand for luxury goods, these “alternative diamonds” have become increasingly attractive.
Quick Rise, Even Quicker Fall?
Nevertheless, forecasts estimate the lab-grown diamond industry will experience a rapid slowdown: the market is expected to plummet by 20 percent, from $13bn to $10bn, by 2030. Primarily, this shift is associated with the concept of prestige surrounding rough versus man-made diamonds.
Assuming people find comfort in the fact that their gemstones are ethically produced, it is important to investigate whether this is true, considering their production in factories. Only two months ago, in June, 600 employees at Badheri’s production site in Surat (India) protested due to three months of unpaid work. Taking into account an oversaturated market, similar reports can be expected.
Psychological Perspective
Broadly speaking, buying a luxury item makes you feel good. This is not necessarily about labels on items that indicate their cost, but about the satisfaction of the buyer and wearer, knowing the price of an item. It is important to note that value and price are inherently different at this point—a thing is worth what someone else is willing to pay because they ascribe value to it. Now, when discussing the difference between buying a diamond from a lab or from a mine, how might we explain the underlying psychological shift that may be associated with this?
Maslow’s Pyramid of Needs might help in answering this rather complex question. In short, the pyramid is a psychological theory that organises human needs into a hierarchy, starting from basic physiological necessities and progressing to higher levels of psychological and self-fulfilment needs, with each level serving as a foundation for the next. The pinnacle of this pyramid, self-actualisation or fulfilment, is incredibly important for this exploration: people want to continue upgrading, buying better things, and moving further to the top. While there are certainly exceptions to these assumptions and they do not apply to everyone, we are applying this model to a broad consumer group. Considering that a lab-grown diamond is so overproduced and so readily available, why would someone continue to buy it when a diamond traditionally stands for status and prestige? With overproduction at hand, is a natural diamond perhaps considered an overpriced piece of fashion jewellery? “Price is what you pay. Value is what you get”—why would you pay for something that has no actual value, something everyone can have?
Marketing is Key
Moving on from this psychological analysis, it is only natural that marketing initiatives would realise and capitalise on this underlying desire to be distinguished from others, even better than others. In De Beers’ flagship location, machinery has been displayed that allows store visitors to test their diamond’s origin: lab-grown or mined?
Jewellers such as Chow Tai Fook and Signet “warn” customers in-store through labels of the depreciating value of their product with lab-grown diamonds. Why is this important? Let us examine the luxury goods market over the past few years up to today: despite promising future outlooks, post-COVID-19 and combined with the cost of living crisis, it has experienced a drastic decline. However, people have shown a preference for hard luxury investments for investment purposes—watches, jewellery (and art, furniture, tools, etc.). Now, if even jewellers themselves warn against an instantly depreciating investment, why buy it? Further, in the context of gift-giving (to someone else or to oneself), the marking of a depreciating entity discourages purchase. It’s simple yet effective. As mentioned earlier, retailers care about making money, which happens through the sale of a rough diamond at the moment. They have the power to defer or push production in certain areas of their product range—they essentially have to reappraise their assets as the market shifts.
Future Outlook
When considering the customer group and their reasons for purchasing a diamond, one should not underestimate the importance of perceived value. Assuming that buying a diamond (in the form of jewellery) is a measure to create a certain status symbol, one naturally desires to acquire the best of the best. Now, the continuously dropping price per carat of a lab-grown diamond plays an important role when considering buying a diamond: Am I receiving my money’s worth? Is there even anything special about it when it can simply be grown in a lab?
It seems that lab-grown diamond prices have fallen too far, offering a rather optimistic outlook for the further development of the rough diamond industry. Unfortunately, when it comes to these types of industries, the chase after profitability among retailers will continuously outpace the opportunities for more ethical practices. Even though we have learned that in the assumed ethical branch of the diamond industry, workers’ rights are quickly undermined, heavily influencing the sale factors of the product. Following the shift in consumer perception and consumption habits, rough diamonds may be catalysed back to their former glamour.
With the slowdown of lab-grown stones previously described, findings from the Boston Consulting Group (commissioned by De Beers) concluded an estimated market expansion from $43bn in 2023 to $54bn by 2030.
Natural and lab-grown diamonds may coexist, but not without tension, especially in the wearable market where their conflicting values of tradition versus affordability and ethics create a divide. The increasing commoditisation of lab-grown diamonds threatens to erode the prestige of natural diamonds, making true harmony between the two unlikely.
