Diamonds are not forever – artificial alternatives taking over

Demand for manmade diamonds is soaring, while their natural counterparts are at risk of being replaced as the stranglehold miners once had on the market is weakening, and the costs of mining are rapidly increasing. 

This is feedback from the director of mining at Modern Corporate Solutions, Peter Major, who told Kaya Biz that the demand for natural diamonds and their supply are declining. 

The latest updates from De Beers and mines across Africa and India show that production of the precious gem is slowing.

While this usually results in the price of diamonds rising, manmade diamonds have filled the supply gap and, in some cases, flooded the market, decreasing prices. 

This has placed traditional diamond miners under pressure as they can no longer control the price fluctuations of the precious gem and maintain their profit margins. 

“Demand for natural diamonds is under pressure. Not so much because people cannot afford them, but from competition from manmade diamonds,” Major said. 

Manmade diamonds are identical to natural diamonds. They look good and are durable. Their only limitation is the size of the gem, which currently can only go up to about half a carat. 

However, manmade diamonds do not have to be large as most of the demand for them is industrial and not commercial. This means their size is not significant, as industrial diamonds tend to be far smaller than those found in jewellery. 

The major factor for industrial diamond buyers is the precious gem’s cost. If it can perform the same function for a fraction of the cost, then it is a no-brainer to acquire manmade alternatives. 

Major explained that an almost perfect one-carat natural diamond can be sold for around $30,000, while a lab-made alternative can cost as little as $2,000. 

“This is probably the scariest threat diamond mining has faced in the past 100 years,” he said. 

For the first time in over 100 years, diamond miners such as De Beers and its parent company, Anglo American, do not have control over the market and thus the ability to raise prices at will. 

The rise of manmade diamonds has resulted in diamond miners and traders rethinking what makes the precious gem valuable. 

The initial scarcity of diamonds in India and Brazil made them valuable. However, they had no inherent value or utility, making them little more than precious stones. 

Diamonds are not inherently rare. Rather, diamonds without imperfections that can be used in jewellery are hard to find – below 10% meet that criterion. 

Diamonds’ value only increased in 1938 due to a clever marketing campaign by De Beers and NW Ayer, an American marketing firm. 

Diamonds were historically seen as symbols of power, and the word itself, derived from Greek, means ‘unconquerable’. 

In Europe, until the 15th century, diamonds were only allowed to be worn by Kings and Queens as symbols of strength and courage. 

De Beers launched a new marketing strategy in 1938 to tie diamonds and love inextricably together. This campaign would also make diamonds a necessary purchase for everyone, regardless of income. 

The campaign would have ancient roots, capitalising on the ancient Egyptian and Greek idea that the ‘vein of love’ runs from the tip of one’s ring finger to the heart. 

Diamonds were also strategically placed in popular movies, and De Beers endorsed celebrities, particularly women, with diamonds to wear on the red carpet. 

By 1941, diamond sales in the United States skyrocketed by 55% compared to 1938. 

In 1948, the campaign reached its zenith when a marketer at NW Ayer came up with the famous slogan, “A diamond is forever”. 

However, the price of diamonds has been steadily declining in the 21st century. It dropped by over $1,000 per carat in the last year. 

The price of a diamond is determined by the four Cs: Cut, Clarity, Carat, and Colour. 

Typically, a lack of colour in a diamond enhances its value. However, recently diamonds with colour have become increasingly popular. 

Business Insider reported that chocolate diamonds have grown exponentially in value over the last two decades. 

In 2000, chocolate diamonds went for $1,500 a carat; in 2023, they can go for as much as $10,000 a carat. 

Off-colour diamonds are now more valuable as they are rarer than colourless diamonds. For instance, chocolate diamonds are only mined in a single location in Australia which is running out. 

Diamonds with colour are also much more difficult to make into jewellery as they tend to have more imperfections.  Only 4% of mined brown diamonds can be used in jewellery.