Photo by: Bloomberg
VANCOUVER (miningweekly.com) – An analysis from independent New York-based diamond analyst Paul Zimnisky has shown that prices for synthetic laboratory-created diamonds are falling at an accelerating pace.
Lab-created diamonds have enjoyed a 71% year-on-year improvement of its discount to natural equivalents over the past 12 months. Today, synthetic diamonds sell about 30% to 40% cheaper to their natural equivalents, compared with discounts in the range between 11% to 20% a year ago.
“Lab-created diamonds are becoming less expensive relative to natural equivalents as investment in lab-diamond production technology has rapidly improved production economics in a relatively short time frame. This has led to rapid relative supply growth and an environment that is more price competitive for lab-diamond manufacturers,” the analyst pointed out in his most recent blog post.
However, Zimnisky pointed out that actually gauging lab-diamond supply growth is difficult, since the global proliferation of lab-diamond production facilities in recent years, from China to Russia to the US, has made tracking production figures challenging, especially given that the companies involved are private and proprietary in nature.
Further complicating the process is the range in quality and scale at which lab-diamonds are being produced.
Natural diamond production quality can be segmented as about 40% gem-quality, 20% near-gem-quality and 40% industrial-grade. Gem-diamonds are used in jewellery, industrial-grade diamonds are used for abrasive and other industrial applications, and near-gem diamonds are used for both jewellery and more-specialised industrial applications, with the split of use dependent on market prices and demand, the analyst explained.
“It is important to note that natural industrial-grade diamonds are simply seen as a by-product, as the presence of gem-quality diamonds in a deposit are what drive the economics behind natural diamond production decisions,” he advised.
In the case of lab-diamonds, the ability to create higher-quality gem-diamond product economically is a relatively recent development – within the last decade. Even with the recent developments in technology, current lab-created production of true gem-diamonds only represents less than 10% of global output, estimated at fewer than five-million carats, which compares to natural gem-quality output of about 60-million carats, based on 40% of an estimated total natural production of 147-million carats in 2018.
The business of manufacturing lab-created diamonds for industrial applications (typically referred to as synthetic diamonds) has been around for decades, and the industry currently supplies more than 99% of global industrial diamond supply for use as abrasives.
Lab-production of near-gem-quality diamonds is where supply analysis gets especially challenging, Zimnisky noted, adding that producers of synthetic industrial-quality diamonds have been advancing their production capability through improved technology, which has enabled them to increase the quality of their products from industrial to near-gem quality.
Given that billions of carats of industrial-quality diamonds are produced each year, it becomes apparent that lab-created near-gem production could be in the hundreds-of-millions of carats; and some of this product is being passed off for use in jewellery – which is primarily used to embellish larger stones and for use in pavé settings,” Zimnisky said.
Dealing with the encroaching threat of lab-created diamonds has spurred the natural diamond industry into action, proactively developing affordable screening technology so that lab-created diamonds of all quality and sizes used in jewellery can be properly disclosed and sold as such.
Zimnisky said it seems inevitable that the price spread between lab-created and natural diamonds across all sizes and qualities will continue to widen as lab-diamond production continues to accelerate. This is especially true in the case of generic lab-diamonds, those that are not supported by a manufacturer or retailer's brand.
Over the medium-to-longer term, Zimnisky said he expects the discourse surrounding lab-created diamonds to shift from jewellery to application in high-tech developments, such as processing chips, optics, laser devices and thermal conductivity equipment. The unique properties of diamonds make the application potential exciting and wide, and the scientific and tech community has just begun to scratch the surface of its potential.
“The high-tech industry enthusiastically awaits economically available mass-produced high-quality diamonds – the lab-diamond manufacturers know this and most are just using jewellery as a stepping stone,” he said.