How lab-grown diamonds are disrupting traditional mining and jewellery-making

Glittering diamonds sparkle the same - but there exist key differences between gems found naturally and those synthesised in labs. While mined natural gems are more than a billion years old - formed under extreme pressure and temperature; the rocks produced in a laboratory are relatively new and cost less than half the price of a mined diamond.

Ex-board member of Bharat Diamond Bourse, Rajeev Kashikar informs, "Though trained jewellers can tell the difference between lab-grown and natural diamonds, there's nothing on the surface basis which one can distinguish between the two." It's this challenge of visual homogeneity between the two gems that has sparked a discourse in the diamond mining and jewellery-making industry.

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Man-made gems have begun to reshape the 89 billion dollars global diamond jewellery market, he adds. As lab-grown diamonds begin to replace traditional mining, countries with economies dependent on diamond mining might be affected in permanent ways. If not immediately, then in due course, man-made diamonds begin to consolidate into a large market.

Mimicking jewels in labs
In the west Indian city of Surat where 90 percent of the world's diamonds are cut and polished, diamond merchants are adopting a new technology. In Smit Patel's gleaming lab, technicians drop crystal diamond ‘seed' slices into reactors mimicking the extreme pressure far underground. "Once the customer sees it for herself, they are sold. I believe this is the future," said Patel, director of Greenlab Diamonds and the third generation of his family to deal in diamonds.

Reactors in labs such as Patel's are pumped full of carbon-containing gases such as methane and the crystal grows under heat and pressure. Rough diamonds are then taken to another facility where hundreds of workers design, cut and polish the stones. From seed to ring-ready jewels, his team takes less than eight weeks to produce a diamond virtually indistinguishable from a mined gem. "It's the same product, it's the same chemical, the same optical properties," Patel said.

Lab-grown diamond exports from India tripled in value between 2019 and 2022, while export volumes rose by 25 percent between April and October 2023, up from 15 percent in the same period a year earlier, according to the latest industry data published by Future Market Insights. "We've grown at 400 percent year on year in volume," Patel reveals.

Real vs. machine made: Dilemma for Indian buyers
Considering the deep-rooted cultural habits of Indian consumers, how extensively will lab-grown diamonds (LGDs) penetrate the market?

Ramesh Kalyanaraman, the executive director of Kalyan Jewellers shares that "In the case of lab-grown diamonds, we have yet to witness significant interest from consumers. Furthermore, fluctuating prices, both globally and nationally, contribute to the uncertainty regarding the future of lab-grown diamonds."

With a customer-centric approach, Kalyanraman has no immediate plans to introduce lab-grown diamonds as a product segment, until there is a clearer alignment between demand and supply. Thus, the consumer perception of machine-made diamonds also emerges as a crucial factor in deciding the fate of mined gems.

While Richa Sinha recently went shopping and opted for a lab-grown emerald. In an interaction with Midday, she says, "The shopkeeper placed two stones on the table in front of us for a stone review. We were immediately drawn to the lab option for its brilliance. When we asked which was which, we were surprised at the lab option and even more surprised to hear the stone was about INR 1,00,757 while the near-identical natural beside it was INR 12,59,472. I went with the lab alternative, no contest."

Like any other industry, even the diamond segment has a distinct structure that drives demand. One such factor is the availability of alternatives for customers, while another is the presence of substitutes. Currently, LGDs fall into the category of alternatives to natural diamonds. It will take a considerable amount of time for synthetic gems to evolve into a true substitute for natural diamonds, outlines Kashikar.

However, the global market share by value of lab-grown gems rocketed from 3.5 percent in 2018 to 18.5 percent in 2023, states New York-based industry analyst Paul Zimnisky. Thus, underscoring the rising consumer preference for lab-grown alternatives to real diamonds.

Slump in demand for real diamonds
Indian lab diamond makers exported 4.04 million carats between April and October 2023, a 42 percent year-on-year increase, according to India's Gem and Jewellery Export Promotion Council (GJEPC). In contrast, natural diamond companies in India reported a more than 25 percent drop, to 11.3 million carats, over the same period.

While natural diamond sales during the Covid-19 pandemic surged as affluent shoppers sought to brighten lockdowns with luxury purchases, demand dropped when economies reopened. Top companies were left holding expensive excess stock.

Ajesh Mehta from D. Navinchandra Exports, whose group is one of global diamond giant De Beers Group's authorised buyers, or "sightholders", said it was the worst slump in his 30-year career. "This is a different kind of lack of demand," Mehta informs. "Everything came like a perfect storm."

Factors other than competition from lab-grown rivals included slowing economic growth in the all-important US and China markets, as well as oversupply and sanctions against Russian rough-cut diamonds. India's natural diamond industry was forced into a rare voluntary import ban on rough diamonds in October.

Impact of budget
Earlier in July, Finance Minister Nirmala Sitharaman, proposed a reduction in basic customs duty on gold and silver to 6 percent and platinum to 6.4 percent. The reduction in the basic customs duty on gold, silver and platinum was welcomed as it has been a long-pending demand of the gems and jewellery industry.

Speaking of the impact this move shall have, Kalyanaraman highlights that "The recent reduction in custom duty has led to a substantial increase in customer inquiries and showroom walk-ins across the country. This clubbed with seasonal offers has played a critical role in further accelerating interest from millennial and Gen-Z consumers toward jewellery buying. Addressing this consumer demographic, jewellers are strategically aligning their offerings through deliberate expansion in our product portfolio to address changing preferences." This could also include lab-grown gems however, he didn't hint at it.

Do LGDs promise any hope for the future?
Machine-made diamonds were first developed in the early 1950s but it took technological leaps to create a commercially viable process less than a decade ago. Producers boast that their gems come at a lower carbon cost, although there are questions about whether the energy-intensive process is any better for the environment.

Patel said his lab uses solar energy from the local grid, although others suck up electricity from carbon-heavy sources.

And while mined gem sellers claim that conflict diamonds from war zones are kept off the market through the international Kimberley Process certification scheme, lab producers argue their facilities guarantee a clean record. Such environmental and humanitarian claims have helped make lab-grown stones a popular choice among consumers.

Additionally, LGDs are generally considered better for the environment compared to mined diamonds. Their production involves less land disruption and reduces the risk of habitat destruction and water contamination associated with mining. Also, they have a smaller carbon footprint since they avoid the extensive energy use and greenhouse gas emissions of traditional mining operations, shares Kashikar.

However, LGDs don't enjoy a monopoly in the markets. The industry has had its problems, too. Supply has skyrocketed and prices have dropped drastically, with wholesale prices down by 58 percent in 2023 alone, according to industry analyst Edahn Golan.

Retailers in Surat share that the price of a lower-quality one-carat polished stone had fallen by more than half of it original value. Additionally, WD Lab Grown Diamonds, the second-biggest US producer of man-made stones, filed for bankruptcy in October. But Patel argues that falling prices will spur demand. "We knew that prices would come down because there's no monopoly in this industry," he adds.

(With inputs from AFP)

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