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2023-09-03 20:20:27
Unveiling Asia's Open Championship: An Unforgettable Journey Awaits on September 4th, 2023Diamond demand is plummeting due to the rise of lab-grown stones, prompting De Beers to slash prices by over 40%
One of the most sought-after types of rough diamonds in the world is experiencing a significant decline in prices, as more Americans opt for engagement rings made with lab-grown stones. Overall, diamond demand has weakened following the pandemic, as consumers prioritize travel and experiences over luxury spending. However, the market for cheaper one- or two-carat solitaire bridal rings, popular in the US, has seen a much sharper drop in prices.
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Industry insiders attribute this downturn to the soaring demand for lab-grown stones, particularly in the price-sensitive US market. The synthetic diamond industry has strategically targeted this category and is now reaping the rewards. While the impact is limited to the rough diamond market, it is causing significant disruptions in the diamond industry.
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This pricing collapse raises questions about whether the decreased demand for natural diamonds in this category signifies a lasting change. Additionally, industry experts wonder if lab-grown gems will eventually gain traction in the more expensive diamond market, typically dominated by Asian buyers.
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Leading industry player De Beers maintains that the current weak demand is a temporary downturn caused by post-pandemic economic factors. While acknowledging some level of competition from synthetic stones, the company does not view it as a structural shift. De Beers has responded to the declining demand by aggressively reducing prices for select makeables, a category of rough diamonds that can be cut into high-quality bridal ring centerpiece diamonds.
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De Beers, still holding a significant market share in the rough diamond industry, has implemented more than 40% price reductions in the past year, including a 15% cut in July. These aggressive reductions are highly unusual for the benchmark product, leading traders to compare the situation to a speculative bubble crash. The current price of select makeable diamonds remains higher than the "secondary" market, where traders and manufacturers sell among themselves.
De Beers faces challenges from lab-grown diamonds and declining profits
The skyrocketing popularity of lab-grown diamonds is evident in India, responsible for about 90% of global diamond cutting and polishing. Lab-grown diamonds now account for approximately 9% of diamond exports from India, a significant increase from 1% five years ago. This surge in lab-grown diamonds, with their substantially lower prices, has impacted De Beers' profits, which decreased by over 60% in the first half of the year.
De Beers adapts to the changing market
De Beers has responded to the weakening demand by offering its buyers increased flexibility. Sellers can now defer contracted purchases for the remainder of the year for diamonds larger than 1 carat. While lab-grown diamonds currently pose a threat to natural stones, the synthetic diamond industry is also suffering. The price of lab-grown diamonds has plummeted even more sharply than natural diamonds, leading to greater price differentials between the two categories.
The future of lab-grown diamonds and natural diamonds
De Beers anticipates that lab-grown diamond prices will continue to decline due to increased supply, further distinguishing them from natural diamonds. The company believes that the finite and rare nature of natural diamonds sets them apart from their lab-grown counterparts. As lab-grown diamonds become increasingly affordable, De Beers expects them to differentiate themselves as a separate product from high-end bridal options.
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