Looking towards 2019, independent diamond industry analyst and consultant Paul Zimnisky, who covers the natural and the lab-created diamond industry, has identified three themes that will likely shape the diamond industry, exclusively for The Diamond Loupe.
The pricing power of lab-created diamond producers
Even before De Beers announced that they would be entering the lab-created diamond jewelry arena in mid-2018, the price differential of equivalent lab-created and natural diamonds was widening significantly. This is primarily the result of more lab-created supply entering the market and lower-production costs resulting in more competitive pricing amongst producers.
However, given that the price of a mid-quality generic 1-carat lab-created diamond still sells for around $3,700 at year-end 2018, compared to De Beers’ 1-carat Lightbox offering at $800, the lab-created industry is still trying to price the product symbiotically with natural diamonds. Even JCPenney is selling a 1-carat lab-created for upwards of $3,700 to its mostly lower-middle-class demographic in the U.S.
The profit margins for the lab-created producers are quite attractive at the above price points, so it’s no wonder why the industry is reluctant to come down to Lightbox-level pricing. But, as more competitors enter the space and more volume enters the supply chain it will likely become more difficult maintain higher price levels while attracting sufficient consumer demand given where Lightbox goods are priced.
The lab-created producers are in part attempting to justify a higher price point with the use of grading certificates, a way of signifying similarity with natural diamonds, their rarity and thus their prices. However, given that there is no limit to lab-created diamond production or opposition to enhancing the quality of lab-created diamonds, e.g., with HPHT, the grade of a lab-created diamond is arguably irrelevant because theoretically rarity is not part of the equation.
As lab-created diamond prices trend lower, the product is more likely to be sold as a fashion jewelry item, which is less likely to rival natural diamonds for market share.
For the rest of this column: https://www.thediamondloupe.com/opinion-piece/2018-12-13/paul-zimnisky-3-themes-will-likely-shape-diamond