Diamond necklace from Harrods, London.
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“Diamonds are forever,” but perhaps more and more consumers are turning away from this gemstone in favor of their lab-grown counterparts, gold and even other colored gemstones.
This slogan was coined by diamond magnate De Beers in 1948 to convey an impression of security and romance. But not all relationships stand the test of time.
The company’s largest shareholder Anglo American Plans to spin off De Beers for business restructuring after rejecting De Beers’ takeover bid BHP Billiton. Anglo American Chief Executive Duncan Wainblood told the Financial Times that selling De Beers would be “the most difficult part” of a complete restructuring of the company.
“Despite De Beers’ strong legacy under Anglo American, diamonds are no longer suitable for the industry,” said Paul Zimnisky, an independent diamond industry analyst.
“Anglo American will ultimately do what its shareholders want, and they appear to want a long-term strategy focused on commodities that support green infrastructure, such as copper,” he told CNBC.
Decreased demand for diamonds
As the appeal of diamonds in China, a major consumer market, has waned, so has demand.
Falling marriage rates and the growing popularity of gold and lab-grown gems have lowered demand for diamonds in China, market research firm University Advisors said. The end of pandemic restrictions has also led consumers to shift spending toward travel experiences rather than diamond products.
According to the Zimnisky Rough Diamond Index, diamond prices have fallen 5.7% so far this year and are down more than 30% from their all-time high in 2022.
De Beers once had a monopoly on the diamond market, but its share has declined. Bloomberg quoted sources as saying that economic conditions led the company to cut prices by 10% at the beginning of the year.
“Last year was a tougher time for businesses [diamond] “Economic challenges, a post-COVID lull in participation and an increase in the supply of lab-grown diamonds have all impacted demand conditions,” Marcelo Esquivel, head of communications at Anglo American, told CNBC.
The core issue is the rapid growth of lab-grown diamonds.
Preference for lab-grown diamonds is also playing a key role in driving down natural diamond prices, said Ankur Daga, founder and CEO of fine jewelry e-commerce company Angara.
“The core issue is the rapid growth of lab-grown diamonds,” he said. Daga added that in the United States, the second-largest consumer of diamonds, half of engagement ring gemstones will be lab-grown this year, up from just 2% in 2018.
Lab-grown diamonds are 85% cheaper than natural diamonds and are created in a controlled environment using extreme pressure and high temperatures. The process reproduces the forging process of natural diamonds deep in the earth’s mantle. According to data provided by Zimnisky, sales of lab-grown diamonds have soared from accounting for only 2% of the global diamond jewelry market in 2017 to 18.4% in 2023.
In addition, Daga said the number of cases of buying diamonds as an investment has declined. He elaborated that over the past 50 years, diamonds have been viewed as an asset and an inflation hedge. But as prices plummeted, that investment case has largely disappeared.
An industry in trouble
“The diamond industry is in trouble,” Daga told CNBC, adding that he believed natural diamond prices could fall another 15%-20% over the next 12 months.
Some are more hopeful.
“There is no doubt that there are some challenges in the diamond industry, but they are not unsolvable,” said Anish Aggarwal, co-founder of Gemdax, a professional diamond consulting company.
He pointed out that diamonds are a discretionary product and it is a case of “creating demand”, as is the case in other luxury segments such as high-end watches and bags.
Similar to natural diamonds, lab-grown diamonds are graded according to the 4Cs (clarity, color, cut and carat weight).
Lionel Bonaventure | AFP | Getty Images
“The industry has not done large-scale category marketing for nearly 20 years. We are seeing the consequences,” Agarwal said, adding that the diamond industry needed to work hard to reignite Chinese consumer demand.
Agarwal added that this requires a cohesive marketing approach. Likewise, Zimniski said meaningful industrial marketing could revolutionize the diamond market.
Just recently, Signet Jewelers, the world’s largest jewelry retailer, announced a marketing partnership with De Beers to drive demand for natural diamonds. Signet expects participation to grow 25% over the next three years.
Anglo American’s Esquivel also noted that higher participation and rising disposable income will help alleviate market challenges.
“This is a partnership between the largest diamond miner in the world and the largest diamond retailer in the world, so it’s significant and can really provide a boost to the larger industry,” Zimniski said.
