Industry
Lab grown diamond prices plummet in global markets, but producers unfazed
Summary
- Makers of LGD are optimistic with prices remaining stable over the past three months, and domestic buyers taking a shine to this variety
MUMBAI : Indian buyers just warming up to the idea of owning lab grown diamonds (LGDs) should take note of a consumer alert by a global trade doyen that the prices of these stones have fallen 30% this year.
Over the past three years, according to Martin Rapaport, the decline is 67%.
The chairman of US-based Rapaport Group, whose diamond price list is the global benchmark for pricing natural diamonds, sounded an alarm on social media about the price crash–which should be a big worry for Indian exporters of lab grown diamonds. Except, they see other silver linings.
“Some jewellers are pushing synthetic diamonds because they can make huge profit margins. This won’t last because synthetic diamonds are crashing to hundreds and even tens of dollars per carat," Rapaport said. “This is because they are available in unlimited supply."
The retail price of 2 carat LGD has plunged from a peak of $4,690 in July 2020 to $1,535 in October, he said.
Indian producers of lab grown diamonds, who mainly rely on exports, conceded that prices had dropped by 50-60% over three years in the business-to-business (B2B) segment–between manufacturer and wholesaler /retailer–owing to abundant supply.
But they also expect the prices to have bottomed out and to stabilise at current levels, besides growing interest from domestic buyers.
The correction, they said, was owing to declining demand because of rising interest rates in the United States and increasing competition.
“LGD prices have on average come off by 50-60% over the past three years because there is no monopolistic pricing power, unlike in mined diamonds, and due to increasing supply," said Smit Patel, director of Surat-based Greenlab Diamonds, one of the world’s largest producers of lab grown diamonds with a 200,000 carat per month capacity.
“Selling prices are trending slightly above cost prices across caratage and I expect stabilisation around these levels," he said.
Patel also said the Indian customer appetite for LGDs is steadily increasing.
“We are getting enquiries from retailers across India in a sign that LGDs are increasingly gaining share amid rising customer confidence. From being 100% export-oriented since opening up in FY19 (financial year 2018-19), our share of exports stands at 80% and domestic sales at 20% in FY23."
Domestic sales were nearly negligible in FY22, he said.
Retail prices of natural diamonds too have fallen by 30-35% this year, said Anup Zaveri, managing director at Mumbai-based Real Illusion LLP.
Zaveri , who also runs a natural diamond cutting and polishing factory called Polar Star in Mumbai Seepz, expects the share of domestic consumption of LGDs to grow from $140 million now to $300-400 million over the next three years.
India, which cuts or polishes nine out of 10 of the world’s mined rough diamonds, saw exports of polished diamonds fall 29.37% year-on-year to a provisional $9.96 billion between April -October, according to the commerce ministry-sponsored Gem and Jewellery Export Promotion Council.
Exports of polished LGD over the same period fell 25.84% to $832 million.
“Prices of LGDs would stabilise around the current levels of $800-1,000 per carat at the retail level in India," said Ritesh Shah, founder, ALTR, a producer of lab grown diamonds.
“Margins have moderated to around 50-60% from much greater levels, and would hover around current levels with supply having moderated significantly and demand picking up," he said.
