“The diamond industry has moved from a relatively stable environment to a highly uncertain environment,” according to a Diamond Insights report published by ABN AMRO and authored by the bank’s Co-ordinator FX & Precious Metals Strategy, Georgette Boele.

Citing the launch of De Beers’ brand of jewellery using lab-grown diamonds, Lightbox, the author foresees that “2019 and the years ahead will see lab-grown diamonds for jewellery entering the growth phase”. 

The conclusion that this will have “serious consequences” for the players in the diamond industry comes as no surprise and is a fact which has been widely discussed within the industry.

“Natural diamond buyers (such as retailers, consumers and jewellery manufacturers) will likely de-stock and hold less inventory,” says Boele. “This will result in lower demand for natural diamonds and weigh on prices. Miners will rethink their strategy in light of uncertainty about natural diamond demand, and questions about the value of a diamond. Lab-grown diamond producers will probably focus on technology to become less energy dependent, or use more sustainable energy sources, to increase the product suite and lower prices for the lab-grown diamonds used in jewellery. Consumers will profit from the wider variety of diamonds at more attractive prices.”

The bank’s analysis is that 2019 and 2020 “will be the years that lab-grown diamonds take off and move from an introduction phase (2018) to a growth phase.”

The author also cites examples of the progress made by some producers of lab-grown diamonds. “For example, New Diamond Technology LLC – a Russian company – has announced that it has produced a 103.50 carats lab-grown diamond,” Boele says. “This is the largest ever lab-grown diamond.”

Another aspect that the report draws attention to is that De Beers plans to sell Lightbox jewellery not only via its own website, but also through retail partnerships. And further, though both De Beers and several other manufacturers of lab grown diamond jewellery have not yet entered the bridal market, Boele observes: “We think sooner rather than later lab-grown diamond wedding jewellery will be part of the offering.”

At the mid-stream level, the article sees diamond manufacturers working both natural and lab-grown goods; whereas upstream, Boele opines that natural diamond miners will “rethink their strategies”.

“The natural diamond miners will have some possible strategies to brace for the growth of lab-grown diamonds,” she observes. “First, they could speed up mining activity to cash in on their diamond reserves. In a few years from now it is highly uncertain if natural diamonds hold their value as always has been assumed. Some producers and/or countries have indicated that they will step up production in the future. De Beers has announced that it expects output for 2018 to reach 35 to 36 million carats. This is the highest output since 2008. In 2019 there will probably be a fall in output because of some production challenges but the output for 2020 and 2021 is expected to surpass the level of 2018. Moreover, Angola has signaled that it will double production. It is unclear if the step-up in production has anything to do with the developments in lab-grown diamonds. However, Alrosa has indicated that it will hold back supply in 2019 to avoid flooding the market.”

The other point highlighted is that miners “could stop searching for new mines as the high exploration costs will unlikely be paid back by future income from natural diamonds”.

Boele also observes: “… miners could launch lab-grown diamonds or team up with a lab-grown diamond producer. We think this will increase the future survival chances of a natural diamond miner.”

On the other hand, producers of lab-grown diamonds will have to gear up for more competition and evolve strategies “to survive in this highly uncertain environment”.

All of this needless to say will impact diamond prices. Boele cites several reasons why this will happen, including lower demand for natural rough as buyers do not hold or build up inventory; the urge of diamantaires and retailers to serve up  a variegated offering (hence taking some budget away from natural diamond to channel it towards lab-grown diamonds); reduced power of the diamond miners; and a possible increase in demand for lab-grown diamond jewellery from consumers.

Moreover, it is not only the prices of natural diamonds which are expected to drop, but also those of lab-grown stones. “Higher lab-grown diamond production and better technology will drive lab-grown prices lower,” says Boele.

The final word? “We are of the view that the consumers are the clear winners,” concludes Boele. “Consumers will be able to buy a diamond at more attractive prices. But they also have to realise that lab-grown diamonds do not hold investment value. In addition, lab-grown diamonds will give consumers larger, better quality stones for more affordable prices. Moreover, a range of colours will be more accessible for consumers.”