Diamond prices in free fall in a key corner of market
One of the world’s most popular types of rough diamonds has plunged into a pricing free fall, as an increasing number of Americans choose engagement rings made from lab-grown stones instead.
Diamond demand across the board has weakened after the pandemic, as consumers splash out again on travel and experiences, while economic headwinds eat into luxury spending.
However, the kinds of stones that go into the cheaper one- or two-carat solitaire bridal rings popular in the US have experienced far sharper price drops than the rest of the market.
The reason, according to industry insiders, is soaring demand for lab-grown stones.
The synthetic diamond industry has paid special attention to this category, where consumers are especially price sensitive, and the efforts are now paying off in the world’s biggest diamond buyer.
The shift doesn’t mean engagement rings are about to go on deep discount — the impact is limited to the rough-diamond market, an opaque world of miners, merchants and tradespeople that is several steps removed from the price tags in a jewellery store.
However, the scale and speed of the pricing collapse of one of the diamond industry’s most important products has left the market reeling.
Now, the question is whether the plunging demand for natural diamonds in this category represents a permanent change, and — crucially — if the inroads made by lab-grown gems will eventually spread to the more expensive diamonds that are typically dominated by Asian buying.
Industry leader De Beers insists the current weakness is a natural downswing in demand, after stuck-at-home shoppers sent prices soaring during the pandemic, with cheaper engagement rings having been particularly vulnerable.
The company concedes that there has been some penetration into the category from synthetic stones, but doesn’t see it as a structural shift.
“There has been a little bit of cannibalization. That has happened, I don’t think we should deny that,” said Paul Rowley, who heads De Beers’ diamond trading business. “We see the real issue as a macroeconomic issue.” –Bloomberg