Diamond Tzar on Lab Grown Diamonds: If You Want To Have Children, You Need To Buy a Natural Diamond

In his New Year message,diamond industry tzar, Martin Rapaport, or as I like to call him, “he who mustbe obeyed” delivered an unfettered rant about lab grown diamonds.

This is certainly not the first time,nor will it be the last time the issue of lab grown vs natural diamonds hasbeen raised. In fact, animosity has been brewing within the diamond industryfor some time now.

When lab grown diamonds first arrivedon the scene, many in the industry, including myself didn’t see them as athreat to natural diamonds, mostly due to the fact they weren’t really pricecompetitive with natural diamonds. In fact, a quick search of Martin Rapaport’s news site,reveals only 10 articles mentioning lab grown diamonds up till December 312017. However, with the price of some lab grown diamonds coming down 80% in thelast four years, their popularity has exploded, and thus consumer demand hasmade them hard to ignore.

The “Emotional andFinancial Security” of Engagement Rings

In his message, Martin Rapaportstates:

“The basis of diamond and jewelrydemand is the need for emotional and financial security. The need for securityand commitment is fundamental to human nature and directly related toprocreation. No matter who you are, where you are, or when you are, if you wantto have children, you need financial and emotional security. It’s Darwinian.”

Now I think most people would agreewith the last part of that statement, that is you need some sort of financialand emotional security to have children. However, whether or not this isrepresented through the purchase of jewellery is another issue. Many peoplewill argue that jewellery is inherently sentimental, thus the price shouldn’tplay a part in its sentimental value. Others may argue that spending 5,000dollars or more on an engagement ring is financially reckless and could bespent on much more useful things such as housing or education. Heck, if you’repolitically progressive, then you may even argue that engagement rings areinherently misogynistic.

via GIPHY

It is also important to note that themodern diamond industry, and the popularisation of diamonds for use inengagement rings was created by DeBeers after World War 2. Therefore, therecertainly isn’t anything “Darwinian” about a diamond engagement ring.

It is also important to note that themodern diamond industry, and the popularisation of diamonds for use inengagement rings was created by DeBeers after World War 2. Therefore, therecertainly isn’t anything “Darwinian” about a diamond engagement ring.

Are Lab Grown DiamondsThe Bitcoin of Diamonds?

Martin goes on to say:

“Synthetic, man-made, laboratory-growndiamonds (LGD) are the Bitcoin of the diamond trade. In fact, they are worsethan Bitcoin because they lack any element of scarcity. The value of thesediamonds is consistently falling. Despite their lack of natural scarcity, theyare sold as comparable to natural diamonds without full disclosure as to theirinability to retain value.”

This statement is completely false.The fact is, that most jewellers have been selling natural diamonds for manyyears and are fully aware of the value of a natural diamond. These jewellershave gone through the ups and downs of diamond pricing over the years – takinghuge losses when prices fall, and reaping windfalls when prices go up.Therefore, a reputable jeweller will explain to their clients that the biggestdifference between lab grown and natural diamonds is the price, and that labgrown diamonds will only go down, whereas prices for natural diamonds willfluctuate from year to year.

Also, the Bitcoin reference is quitebizarre. Whether or not you’re a “crypto bro” or think cryptocurrency isessentially a Ponzi scheme, the fact is that Bitcoin has gone up more than 20fold from early 2017 to early 2023.

Diamond Elitism

 In the end, the labgrown vs natural diamond debate boils down to elitism. Those that buy and selllab grown diamonds are seen as “lower caste”. As Martin concludes:

“They are also a threat to thefundamental message of diamonds. Let me make it clear: Engagement rings are notcostume jewelry.”

Such elitism can also be seen inthe December issue of Jeweller Magazine:

“Lab-created diamonds don’t align withour product offering or values as a company.”

Now I’m not sure how people who havepurchased engagement rings with lab grown diamonds feel about a supposed expertcalling their engagement ring a piece of costume jewellery, nor do I know what“values”, apart from elitism, that selling only natural diamonds espouse.

Lab Grown Pricing

As stated earlier, some lab growndiamonds have gone down 80% in the past four years. Industry analyst EdahnGolan has an written an excellent article on lab grown diamond prices, stating:

“Lab-grown rough diamond prices havebeen falling as well. The primary driver is not a lack of demand or a decreasein the cost of production. It is the result of the action of one large grower.”

Obviously lab grown diamonds willcontinue to go down in price, however, it is fair to say that no one reallyknows how low they will go. What I think will happen is that lab grown diamondswill adopt more of a fixed price per carat model, meaning a 2ct lab growndiamond will cost double what a 1ct lab grown diamond will, which is differentfrom natural diamond pricing which is typically exponential. If you think aboutthe growing, cutting and retail overhead costs, it is fair to say that, as ofJanuary 2023, we’re not far from a bottom, with a 1ct D/VVS2 excellent cut round brilliantselling for just overA$1,000 including GST.

Scary Times for TheDiamond Industry

Whilst some retailers and others inthe industry show their elitism by only selling natural diamonds, perhaps theyare just scared of what lab-grown diamonds will bring?

If lab grown diamonds gain any sort oftraction and capture 20 percent, 30 percent, or even 50 percent of the diamondmarket, many in the diamond industry will be in trouble. Gone will be the daysof making thousands of dollars of markup on a single diamond ring, hencejewellers will have to go back to, heaven forbid, making and designingjewellery! Also, with the capital requirements of natural diamonds eliminated,the business model of diamond wholesalers whose main purpose is to providecredit to retailers will be ripped to shreds.

The Future of Lab GrownDiamonds

Lab grown diamonds will continue growin popularity, and decrease in price. My prediction is that in the comingyears, they will continue to chip away at the market share of natural diamonds.Whilst some in the industry will flat out refuse to deal with lab growndiamonds, I have a feeling that, much like the use of the internet to selldiamonds and jewellery, most will eventually come around, especially when themarket forces them to.