When Jenny King-Modlin got engaged two years ago, her partner slipped a 1.3-carat diamond ring on to her finger to signify his love for her.
But unlike the bridal rings that have dominated the global market for decades, hers was manufactured in a factory rather than dug out of the ground — and one-third cheaper.
“To me, it looks like a diamond, it sparkles like a diamond and makes me feel like I’m wearing a diamond,” says the 36-year-old writer and actor, who lives in New York. “It wasn’t just an ethical decision, it was financial, and we fell in love with that exact ring.”
She is not alone. Millions are opting to buy jewellery encrusted with synthetic diamonds, which not only have a similar composition to natural diamonds but also often have fewer defects, making them appear more radiant.
The boom in demand for synthetics is beginning to radically reshape the $89bn global diamond jewellery market.
The market share held by these man-made stones has surged from 3.5 per cent in 2018 to a forecast 16.5 per cent — equal to $14.6bn — in 2023, according to Paul Zimnisky, an independent analyst who collates diamond transaction data from retail market prices. In comparison, natural diamond sales in dollar terms have been flat since 2015.
“The role of a mined diamond will be a niche product. Why pay a factor [more] for an atomically identical product?” said Martin Roscheisen, chief executive of Diamond Foundry, whose output of synthetics makes it the equivalent to one of the world’s top five largest diamond mines.
Prices for a polished 1-carat natural stone have slumped by more than a quarter since their 2022 peak to $5,185, according to Ziminsky, the lowest level in eight years as they face a fresh source of competition.
But prices for synthetics have fallen even further, from more than $5,000 per 1-carat polished stone in 2016 to $1,425, Ziminsky has found. That has been driven by suppliers’ rush into the booming market, outstripping jewellery buyers’ desires, and by economies of scale bringing down costs.
The diverging popularity of natural and so-called “lab-grown” stones has been laid bare this month.
Pandora, the world’s largest jewellery retailer by items sold, raised full-year guidance and said it would expand further in its fastest-growing segment — lab-grown diamonds.
“In 2010, I would’ve been hesitant to go into this market due to a lack of consumer awareness,” Pandora chief executive Alexander Lacik told the Financial Times. “Fast-forward 10-plus years and 60 to 70 per cent of all consumers are aware that there are lab-grown diamonds.”
Canadian miner Lucara Diamond, meanwhile, said it would replace chief executive Eira Thomas. That came after it said there was “doubt regarding [its] ability to meet its commitments”, as cost overruns for an underground expansion at its Karowe mine in Botswana have been compounded by macroeconomic gloom and the growing popularity of synthetic stones.
The first non-natural diamonds were made by General Electric in 1954 for commercial uses such as scalpels, but in recent years technology has made mass production cheaper. At the same time consumers have become more conscious of the perceived financial and ethical cost of mining natural stones.
Some in the industry hope the burgeoning demand for lab-grown diamonds will stimulate a desire for the original versions, forged by intense pressure and heat billions of years ago.
“The positive for the natural business is that there’s an entry-level item that many more can afford,” said Edahn Golan, managing partner of Tenoris, a diamonds analytics company. The hope is that consumers “graduate” to natural diamonds, he added.
But consumers like King-Modlin worry about working conditions at mines and tout the lower carbon emissions that accompany lab-grown diamonds. Miners refute both points, saying they employ thousands of people in impoverished regions while synthetic stone production in India and China is powered by coal.
There appears to be no let up in lab-grown diamond sales. Exports of polished synthetics from India, the world’s biggest diamond cutter and polisher, rocketed to $1.7bn between April 2022 and March 2023, up 28 per cent compared with the previous financial year, according to India’s Gem and Jewellery Export Promotion Council (GJEPC).
Diamond Foundry is planning to double production in the next three years. Even diamond mining industry leader De Beers released its own synthetic gem engagement ring in June.
By contrast, India’s far larger cut and polished natural diamond exports dipped eight per cent in the same period, to $22bn.
“The bad news for the diamond industry is there’s a certain element of cannibalisation. It’s taking place in engagement rings,” said Golan.
But fears are also growing that the price crash in synthetics will unleash bankruptcies across synthetic manufacturers and jewellery retailers.
“The underlying concern is that we are walking towards a bloodbath in lab-grown diamonds,” said Richard Chetwode, managing director of RCC Diamond Consultants.
Al Cook, chief executive of De Beers, the world’s largest diamond producer by value, said there would be short-term pain, in terms of lower profitability, from the rush to synthetic diamonds but the competitive threat would abate.
“The stronger the forest fire burns, the faster it burns itself out. The process of burning feels very hot,” he said.
Some in the diamond industry argue that a turning point has already been reached as retailers no longer see man-made stones as a high-margin business but as a lossmaking one, because the stock is depreciating too rapidly to make a return.
David Kellie, chief executive of the Natural Diamond Council, a lobby group, says that consumers see mined diamonds in a similar way to how Swiss watches came to be viewed when faced with the threat of Apple Watches and Fitbits.
“People don’t buy Swiss watches to tell the time,” he said. “Apple probably sells more watches than the entire Swiss watch industry but does that matter if they’ve grown during that period?”
With seemingly unstoppable momentum on the supply of synthetic diamonds, Zimnisky says that there will be a “shakeout” among lab-grown producers.
“By and large, I think the market went from new, novel and exciting to grossly oversupplied,” he said.
Vipul Shah, GJEPC’s chair, believes that both gem types can coexist but competition, he said, is fiercest between the lab-grown diamond makers themselves.
“Whoever is not able to be competitive in the price [ . . . ] they will be out of the business. That’s what’s happening currently.”
Some lab-grown players are sanguine about the shakeout. Vishal Mehta, founder and chief executive of Dubai-headquartered lab-grown diamond trader Lumex, agrees there is a significant overstock of the gems, with the low prices hurting producers who are debt-financed. But he forecasts that the market will adjust.
“You’re finding the efficient price that will work for the consumers, retailers and growers,” Mehta said. “I think we’ll overshoot it a bit, which is what happens with new technologies.”
Meanwhile the luxury end of the market is trying to stay positive.
One jeweller client of Mehta’s recently crafted a necklace for a Gulf royal using $8mn-worth of mined diamonds, but set the rare gems among $100,000 worth of lab-grown sparklers. The jeweller told him: “I look at lab-grown diamonds like the frame on an Andy Warhol.”
