How Mined and Lab-Grown Diamonds Can—And Must—Coexist
For much of the 21st century, diamond prices had remained relatively stable. Over the past three years, however, the value of smaller round cut natural diamonds has diminished dramatically, with the price of stones between 0.5 and 1 carat dropping by over 50% between 2023 and 2026. The price of 1-2 ct. round cut diamonds dropped about 15% over the same timeframe, while larger diamonds have more or less held steady.
It’s easy to spot an inverse relationship between the rise of lab-grown diamonds as a viable consumer product and the sudden crash of natural diamond values. At the same time however, excess production during the Covid era led to a glut of mined diamonds entering the market. But there’s another factor that may work to stabilize the price of some diamonds: geological scarcity. An artificially constrained supply kept diamond prices steady for years, but as mines around the world near the end of their operating lifespan, natural diamonds are becoming a geologically scarce commodity, which may have the effect of stabilizing or even pushing prices back up.
Whether or not mine closures help stabilize falling prices, one thing is for certain: retailers now have an opportunity to set a clear distinction between lab-grown and natural diamonds, ensuring the long-term strength of both markets. Both kinds of diamonds have a place in the industry, and as natural diamonds become scarcer and lab-grown diamonds more ubiquitous, the successful businesses will be the ones that figure out how to sell both.
Diamond Scarcity Then: Artificial Constraints
For decades, De Beers controlled some 80-90% of the global diamond supply. During this time, it wasn’t geological rarity keeping diamond prices high. Following the discovery of the Kimberly mine in 1872, more deposits were discovered throughout South Africa and Botswana, followed by discoveries in Russia, Australia, and Canada. Whenever De Beers discovered a new deposit, or whenever other producers attempted to flood the market, De Beers locked up excess inventory in underground vaults in London to artificially constrain supply and maintain high prices. De Beers kept a stranglehold on supply in other ways. The company offered pre-packaged boxes of rough diamonds to “Sightholders” (their name for their group of pre-approved buyers). When demand softened, they simply throttled back sales and removed businesses from their Sightholders lists.
Between 1998 and 2004, De Beers’s monopoly fell apart, broken by antitrust lawsuits in the US and Europe and the rise of independent mines in Canada and Australia refusing to sell through De Beers. As a result, the company dissolved its strategic stockpile and shifted to a traditional public corporate model. As their ability to artificially impose scarcity through monopoly power fell, so did the price of diamonds.
Diamond Scarcity Now: Geology and Geopolitics
Today, nature is picking up where De Beers left off, with major mines around the world reaching or nearing the end of their operating lifespan. Argyle mine in Australia, which produced about 90% of the world’s pink diamonds and millions of carats of industrial diamonds, shut down in 2020. Some of Canada’s most important mines, including Diavik and Ekati, are fully or nearly depleted. Miners are having to dig deeper into existing mines to find usable product, an expensive prospect leading to bankruptcy for some mines.
Overall, global mined diamond production dropped from its peak of over 150 million carats in 2017 to under 100 million carats today. Production doesn’t seem to be picking up any time soon, as there have been no major kimberlite pipe discoveries in over 20 years. In fact, experts say we passed “peak diamond”—the point in history in which diamond production reached its maximum rate—in 2017.
The global diamond supply also faces geopolitical challenges. Western sanctions against Russia’s state-owned mining company Alrosa have restricted diamond flows into major Western finishing hubs and has forced major changes to the global diamond supply chain. Alrosa historically accounted for about 30% of global rough output.
Diamond Market Outlook
For the reasons listed above, production isn’t likely to ramp up any time soon. Mining operations are slowing down, and today De Beers controls only about 25% to 30% of the market, compared to its historic 80% to 90% monopoly control. Rather than operating on stockpiles of diamonds meted out with price control in mind, today’s fragmented diamond market operates on near-immediate supply chain demand.
At the same time that diamonds are becoming naturally scarcer, lab-grown diamonds have become ubiquitous, significantly cutting into natural diamond sales. Lab-grown diamonds are chemically identical to mined diamonds, the two being indistinguishable in most respects. This fact has caused a great deal of consumer confusion, so much so that in 2019 the FTC had to step in and regulate how lab-grown diamonds are marketed, even as it redefined “diamond” to no longer include the word “natural.” For the diamond trade to thrive, the industry must find a way to clearly distinguish these two categories of diamonds in ways that preserve the value of each.
Recommendations for Retailers and Manufacturers
Given this scenario, the best way forward is to create clear and distinct positioning for natural and lab-grown diamonds. This requires understanding the appeal of both natural diamonds and lab-grown diamonds as well as understanding the type of customer to whom each type of diamond would appeal. This marketing distinction also must be supported in sales and merchandising decisions.
The story of natural diamonds is one of geological rarity. Lab grown diamonds take only a few weeks to grow. Natural diamonds, on the other hand, develop their special character over billions of years, growing deep in the Earth’s crust and then slowly moving closer to the surface, undergoing the minute chemical changes that make each one unique. It is a sublime, spiritual sensation to be connected to nature and to the massive, unfathomably slow movements of geologic time. It’s a romantic story, but it’s also a story of uniqueness that appeals to those more interested in status or exclusivity. As natural diamonds only become rarer, their luxury cachet will increase.
Customers who have done their research might have learned that diamonds were historically not all that rare, compared to other gemstones. This provides an opportunity to tell the whole story about diamond scarcity outlined in the above sections, from the cartel-controlled supply constraint to actual geological scarcity.
What lab-grown diamonds give customers is accessibility and design flexibility. It is also important to maintain full transparency about their manufactured origin and declining cost curve. You buy lab-grown diamonds to wear every day and enjoy their beauty, not as an investment.
These new marketing stories must be supported by sales messaging and merchandising. Separating the two in consumers’ minds also means physically separating them in the store. Keep natural and lab-grown diamonds completely separate in your cases, catalogs, and sales conversations. Treat selling natural and lab-grown diamonds the same way you’d treat selling steaks and oranges rather than apples and oranges. Both are good, both have their place, but they are not to be compared. One is not a substitute for the other.
Succeeding through marketing bifurcation requires finding the right balance between lab-grown and natural diamond product offerings. High-turnover lab-grown items can generate immediate revenue through high-volume transactions while natural diamonds protect high-dollar margins and preserve long-term store prestige. Inventory control will play a part in this strategy. As lab-grown diamond prices continue to trend downward, holding lab-grown inventory introduces financial risk. Jewelers should maintain lean stock levels and prioritize rapid inventory turnover for lab-grown diamonds.
Finding a Place for Both the Mine and the Laboratory
Both natural and lab-grown diamonds have a place in the future of the jewelry industry. As natural diamonds become scarcer and lab-grown diamonds more ubiquitous, it is up to us to tell the story of each type of diamond clearly and compellingly. They serve two different purposes, and they serve the needs of different types of customers. It is only by recognizing the value of both while separating them in the minds of consumers that the jewelry industry can find long-term success and stability.