Fellow New Yorker Bob Dylan once famously sang ‘the times they are a-changin’ and for the international diamond industry, those words are poignant in 2022 and beyond.
The industry is undergoing a significant period of change as pressure is applied on a range of fronts, including but not limited to the rise of lab-created diamonds, geopolitical forces, and changing consumer mindsets, namely concerning environmentalism.
For those operating in the retail sphere, keeping abreast of the changes that will come in the next five years is paramount.
Prices
In general, I believe natural diamond prices will be higher and lab-created diamond prices will be lower by the time we reach 2027.
Perhaps most importantly of all, the differentiation between the two products will be more apparent in the eyes of consumers five years from now.
Speaking of natural diamonds more specifically, most medium and larger stones will likely be sold with a certificate of origin, and the supply chain will be bifurcated between Russian and non-Russian goods.
Speaking to lab-created diamonds more specifically, there will be more products sold the way that Lightbox is – fashion jewellery sold in linear price points.
As far as new products, I am of the opinion that we will see lab-created diamond jewelry that is available in shapes,
sizes, and colours that is not possible or economic with natural diamonds.
For example, all-diamond rings and diamonds shaped as symbols, or perhaps as alphabet letters or zodiac signs. These will be available in many different colors.
Also, I predict that we will see a lot more companies offering websites that allow customers to design and create their own custom jewellery in the coming years.
Lab-created diamonds
Since lab-created diamonds have become more mainstream over the past six or seven years, their availability and distribution has been intricately connected to supply. However, in recent years, levels of production have exploded, primarily in China and India.
So, going forward it is going to be a lot more difficult to track lab-created diamond supply and sales, especially as more product is sold globally and on online marketplaces such as Amazon and Walmart in the US.
I am forecasting that global lab-created diamond jewellery sales will exceed 10 per cent of all diamond jewellery sales for the first time this year, with the share even larger in the US.
That share will continue to creep up over the next five years, however, at a slower pace than in the past, as consumers perceive the products as being less substitutable.
One eye on India
The trend of lab-created diamond prices, both as a standalone product and relative to natural diamond prices, has been down and to the right since 2015 or so. That trend remains intact.
Higher energy prices globally could put some stabilisation in nominal lab-created diamond prices in the short term, as that input cost is passed on from the producers, however, longer term I still see lab-created diamond prices aligning more with the cost of production, and not with that of natural diamonds, which is lower than where we are today.
In the coming years, an important supply catalyst will be the Indian government’s move to finance Indian lab-created diamond producers with loans to be used to purchase capital equipment, for example CVD reactors.
The Indian government sees this as a way to stimulate exports. This is likely to lead to a further boom in lab-created diamond production volumes.
So, I expect supply volumes to continue to ramp up, while relative prices continue to retreat.
Where to from here?
For the natural diamond market, continuing to improve supply chain transparency and increasing spend on category marketing are the two key items to focus on.
There is a relatively straightforward solution to most of the natural diamond industry’s biggest challenges.
If a consumer knows the source of their natural diamond – most importantly confirming that it is not a ‘blood diamond – then that provides a story and most importantly, a point of differentiation from that of a lab-created diamond.
As far as marketing, anyone that has followed this industry for long enough understands how instrumental effective marketing is.
The diamond industry lost its way a little bit in this area over the past decade and the prior, however, I sense that things are back on track with the Natural Diamond Council and the work that they are doing.
The rest of the industry should support and contribute to this initiative when possible as everyone will benefit longer-term.
Name: Paul Zimnisky
Business: Paul Zimnisky Diamond Analytics
Position: Independent analyst
Location: New York City, US
Years in the industry: 8