Bad news for diamonds

Natural diamond sales are under pressure as consumers seek more affordable and environmentally friendly alternatives. 

At the end of June, the De Beers Group announced the value of rough diamond sales for the fifth sales cycle of 2024. 

The provisional sales for the cycle dropped to $315 million (R5.79 billion) from $383 million (R7.04 billion) in cycle four.

“The northern summer is generally a quieter period for rough diamond sales, and this was reflected in our cycle 5 sales,” De Beers Group CEO Al Cook said.  

“The recent annual JCK jewellery show in Las Vegas confirmed a resurgence in retailers’ interest in natural diamonds in the United States, but ongoing economic growth challenges in China mean we continue to expect a protracted U-shaped recovery in demand.”

While the company’s fifth sales cycle does tend to see some declines in sales, the demand for natural diamonds has been consistently declining for several years. 

For the same sales cycle, rough diamond sales were $450 million (R8.15 billion) in 2023, down from $650 million (R11.77 billion) in 2022. 

Consumers have been increasingly ditching natural diamonds in favour of cheaper and more ethical alternatives. 

While some people are opting for second-hand engagement rings, according to the Telegraph, the industry’s real threat is from lab-grown diamonds. 

According to Statista, the market value of lab-grown diamonds amounted to more than $20 billion (R362.25 billion) in 2021 and is expected to surge significantly to nearly $52 billion (R941.86 billion) by 2030.

They estimated that global nominal lab diamond jewellery sales would amount to $18 billion (R326 billion) in total in 2024. 

From this total, $7 billion (R126.79 billion) is expected to be incremental sales, meaning that these sales do not displace natural diamond sales. Accordingly, $11 billion (R199.24 billion) in lab diamond sales is expected to replace natural diamond sales. 

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

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

For the first time in over a century, diamond miners such as De Beers and its parent company, Anglo American, do not have control over the market. As a result, they can no longer raise prices at will. 

In an attempt to stimulate sales, De Beers cut the price of its diamonds by 10% in January after seeing a complete halt in supply in the second half of 2023.

However, these tactics have been unsuccessful, and diamond prices remain under pressure as consumers increasingly prefer lab-grown alternatives. 

While manmade diamonds look almost identical to their natural counterparts and score the same on the Mohs hardness scale, they are much more affordable.

According to Cape Diamonds, a 1-carat natural diamond would cost approximately R115,000. However, a lab-grown diamond of the same size would only cost R18,400.  

Sustainability and ethical concerns have also contributed to the increasing demand for artificial diamonds. 

“South Africa’s natural, mined diamond sector, along with considerable efforts from the Gemological Institute of America (GIA) and the ‘South African Diamond and Precious Metal Regulator’, have eradicated most environmental concerns through strict diamond certification protocols,” Cape Diamonds said.

This has largely reduced unethical trading and the sale of blood diamonds over the last twenty years.

“However, pressure from the climate crisis continues to grow within campaign groups and the new generation of environmentally-conscious diamond buyers concerned about the preservation of natural resources.” 

“While the impact of emissions from mining and transporting diamonds has yet to be fully quantified, the ‘sustainability-superiority’ contest between natural diamonds and lab-grown diamonds remains unclear.”

“When it comes to determining the sustainability of earth-made diamonds versus lab-made diamonds, one must consider the carbon footprint that results from the creation, transportation and refinement of laboratory-grown diamonds.” 

Cape Diamonds explained that with global diamond brands moving towards ‘carbon-neutral mines’, the future of ethically sourced, environmentally conscience natural diamonds is already here.