Lab-Grown Diamonds vs. Natural Diamonds: Shifting Demand Price and Value
Lab-Grown Diamonds and Natural Diamonds look almost identical when placed side by side. However, their prices and values can sometimes vary greatly.
Let's look at the differences in characteristics, value, and price between these two types of diamonds.
The Difference Between Lab-Grown Diamonds and Natural Diamonds
Lab-Grown Diamonds and Natural Diamonds are both transparent and indirect sunlight emitting a kaleidoscopic spectrum of colors. At first glance, they appear to be identical. But one is more than a billion years old, and the other was recently grown in a laboratory. First, lab-Grown Diamonds are created by a process that involves developing and compressing carbon at high temperatures. Next natural Diamonds are cut from a rough stone into the desired shape and carat weight. Similarly, Lab-Grown Diamonds are grown and then shaped by cutters.
Lab-Grown Diamonds entered the gem and jewelry market in commercial quantities relatively recently. Although they look identical to Natural Diamonds, they have very subtle differences that can only be found by trained gemologists and sophisticated equipment designed for this purpose.
Here are some of the differences between Lab-Grown Diamonds and Natural Diamonds from different angles.
Origin
Diamonds are not only beautiful to look at, but their origins are also very fascinating. Here are some common theories surrounding the source of both Lab-Grown Diamonds and Natural Diamonds, where they came from, and how they were formed.
Lab-Grown Diamonds
In the 1950s, a laboratory first produced artificial diamonds suitable for industrial use. Laboratories first made gem-quality diamonds in 1971, but it was not until the mid-2010s that colorless Lab-Grown Diamonds appeared in large numbers in the gem and jewelry markets.
Currently, Lab-Grown Diamonds are made in two ways: the High-Pressure and High-Temperature (HPHT) method and the Chemical Vapor Deposition (CVD) method.
High-Pressure and High-Temperature (HPHT) diamonds are made in the laboratory to mimic the High-Pressure and High-Temperature conditions under which natural diamonds are formed beneath the Earth's surface. The process produces uniquely shaped diamond crystals that are grown in the laboratory.
Chemical Vapor Deposition (CVD) produces square tabular diamond crystals by breaking down molecules of a carbon-rich gas, such as methane, into carbon and hydrogen atoms, which are then attached to diamond seeds.
Either method usually takes less than a month to grow diamonds of most sizes. However, many diamonds produced by the CVD method require additional treatment, such as heating or irradiation, to enhance or change their color after growing. Lab-Grown Diamonds usually have weighed one carat or less, but as technology and techniques improve, larger sustainable diamonds have appeared in the market.
Natural Diamonds
Natural Diamonds are formed by applying extreme heat and pressure to graphite deep in the Earth's core (mantle), about 150 to 200 kilometers below the Earth's crust. This intense heat and pressure restructures the molecular composition of the graphite and transforms it into the diamond we know today.
Diamonds are found near the surface of the Earth and are mainly produced in South Africa, Russia, Australia, Botswana, India, Brazil, China, and the United States. Anyway, there are a total of about 35 countries that produce them.
However, diamonds are formed in another way as well. For example, black diamonds are said to have originated in interstellar space. Scientists support this theory, claiming that carbonado diamonds were formed in supernova explosions of stars and were once the size of asteroids or kilometer-sized rocks.
Look
There is no apparent difference between high-quality Lab-Grown Diamonds and Natural Diamonds. Both Lab-Grown Diamonds and Natural Diamonds are colorless or near-colorless. They also come in a wide variety of colors. Likewise, Lab-Grown Diamonds and Natural Diamonds come in standard shapes, including round, princess, oval, marquise, pear, cushion, radiant, emerald, and Asscher.
Also, Lab-Grown Diamonds and Natural Diamonds have the same brilliance. Lab-Grown Diamonds with low clarity may have different inclusions from Natural ones.
Sustainability
To produce a 1.00-carat natural diamond from a rock called kimberlite deep in the Earth, it must dig up about 100,000 tons of rock to find a single crystal in it. So, as you can imagine, moving that much Earth regularly to mine Natural Diamonds is not a very sustainable practice.
Also, the mining process is massive in every respect. It requires electricity and petroleum, diesel, gas, gasoline, and other non-renewable hydrocarbons. According to the study, a mined diamond's carbon emissions per carat are two million times higher than Lab-Grown Diamonds. While this exact figure is subject to debate, another study found that the carbon dioxide emissions from diamond mining are equivalent to driving 1.5 million cars for a year.
On the other hand, Lab-Grown Diamonds are more sustainable in that they are more environmentally friendly than Natural Diamonds.
Grading
Almost all gemological laboratories grade natural diamonds on a scale of D-Z color and FL-I3 clarity. However, many gemological laboratories rate lab diamonds differently.
For natural diamonds, it is advisable to opt for a GIA certificate. However, since GIA does not grade lab diamonds on the same strict scale and AGS does not grade Lab-Grown Diamonds at all, we suggest that you choose a GCAL or IGI USA certificate for your lab diamonds. Both GCAL and IGI use the same D-Z color scale and FL-I3 clarity scale for natural and lab diamonds. GCAL is a rigorous grading lab with a "zero tolerance" grading policy. IGI USA is less strict but is better known and has more experience in lab diamond grading. If you want a more rigorous grading, choose the GCAL certificate. If you are looking for broader recognition, you may want to consider IGI.
Are lab-created diamonds valuable?
The long-term value of Lab-Grown Diamonds as sustainable diamonds is not yet set in stone, as high-quality lab diamonds are newcomers to the jewelry market, and new Lab-Grown Diamond's brands are launched regularly. Therefore, it is possible that in the future, as technology advances, the price and value of Lab-Grown Diamonds will be more affordable, and the value of Lab-Grown Diamonds sold in the past will be lower and more affordable. On the other hand, as consumers learn more about the advantages of Lab-Grown Diamonds, the demand for Lab-Grown Diamonds may increase, and their value and price may rise.
With the creation of Lab-Grown Diamonds and the changing needs of millennials, the demand for natural diamonds has declined. However, with increased education on diamond grading and the invention of diamond grading tools such as the ASET scope, the Natural Diamonds purchased today are of much higher quality than before. As a result, the value and price of high-quality Natural Diamonds have remained relatively constant.
Consumer and Retailers’ Demand for Diamonds
The following sections will introduce the current status and trends of the diamond jewelry market, the resale value and price of diamonds, and the changing demands of consumers and retailers.
Diamond Jewelry Market Current Status and Trends
Across the globe, marriage rates, the bread, and butter of the diamond industry have been declining, with the United States hitting an all-time low in 2018.
Even before COVID-19 hit, Bain & Company predicted that diamond jewelry was headed for a rough patch. In November 2019, the Company released its Global Diamond Industry Report collaborating with the Antwerp World Diamond Center. It predicted that U.S. diamond jewelry sales would decline by 2% and China's by 5%, the world's two largest markets for diamond jewelry.
It's still too early to determine how much diamond jewelry sales have dropped due to the pandemic. Still, since diamond jewelry is estimated to make up about one-fourth ($80 billion) of global jewelry sales ($330 billion) in 2019, it stands to reason that it will suffer commensurately with the rest of the jewelry market.
Resale Value of Diamonds
Let's talk about the resale value of diamonds. You may be thinking that if the situation allows, you or your loved one can sell the diamond for some quick cash. Or, if you later decide to get a different ring style, you may get a good return if you turn in your first ring.
Also, if you keep that ring for the rest of your life, your future children or grandchildren can wear it or sell it. However, buying a Lab-Grown Diamond or Mined Diamond to sell it later is not a good idea. While all diamonds certainly have resale value after purchase, markets can be volatile and resale conditions unfavorable, leading you to lose a lot of money during the sale.
Do Mined Diamonds Have Resale Value?
It is said that the value and price of a Mined Diamond decrease as soon as it leaves the store where someone purchases it. Unless, of course, your diamond ring is exceptionally unique or very large. Mined diamonds are usually resold cheaper for between 30 and 70 per cent of their original price.
The only mined diamonds worth selling would sell those at an auction house. So unless the diamond you are trying to resell is nineteen carats and bright pink, it will simply not make you any money.
Do Lab-Grown Diamonds Have Resale Value?
Lab-Grown Diamonds as sustainable diamonds have very little resale value and price. In other words, if you buy a Lab-Grown Diamond, you will not be able to get back any part of your purchase price value.
For example, if you buy the 1.00ct Lab-Grown Diamond, no jeweler will buy it from you, even if you get a beautiful stone. Instead, a jeweler will use the Rapaport pricing method, the same used for Mined Diamonds, to determine your diamond's wholesale and retail pricing. This method considers the "Four C's" of diamonds: carat, cut, clarity, and color, determining much of the price and value. Then, the jeweler will consider whether your diamond is Lab-Grown or Mined and return to you with a fee if they think your diamond is valuable.
Consumers Look for Cheaper and Sustainable Alternatives
Bain & Company's report emphasizes that "The market for Natural and Lab-Grown Diamonds continues to diverge" and seeks to commercialize Lab-Grown Diamonds as an inferior alternative to Natural Diamonds.
It also acknowledges that the Lab-Grown segment is developing rapidly and sustainably due to technological advancements and growing acceptance across the value chain. The value chain is primarily in fashion jewelry, where a wide range of price-sensitive consumers accept Lab-Grown.
Consumer confidence in Lab-Grown Diamonds has been sustainably growing, leading to the state of the industry today. While consumers covet diamonds of all kinds, luxury brands are out of reach for many consumers, which is a significant reason why affordable Lab-Grown Diamonds are gaining attention in the market.
Lower costs and greater accessibility are expected to broaden the base of consumers and create a new and sustainable category in the diamond industry.
Currently, the demand for Lab-Grown Diamonds continues to grow sustainably, especially among younger consumers who are more interested in ESG (Environmental, Social and Corporate Responsibility).
More and more Jewelry Brands and Retailers Carry Lab-Grown Diamonds
Diamond jewelry is not necessarily purchased for its investment value. Instead, it is an emotional purchase, and that is where the real value lies. There is no apparent difference in quality for the consumer between a Natural Diamond and a Lab-Grown Diamond. The only difference is size and cost, and in that respect, Lab-Grown Diamonds outperform Natural Diamonds.
Consumers tend to believe that the more significant the stone, the greater the emotional investment. That's why more and more jewelers are carrying Lab-Grown Diamonds, and more and more consumers are looking for Lab-Grown Diamonds.
Such as the U.S. brand Sunny Eden™, Sunny Eden™ Diamonds from Hair are the first of their kind to transform a customer's hair into a diamond that bears the unmatched testimony of romance and love, which is more meaningful and valuable compared with natural diamonds. Hair consists of carbon that comprises a diamond. Their state-of-the-art technology converts hair to a lab-grown diamond as authentic and pure as natural diamonds at competitive prices with zero environmental impacts.
Although initially viewed with suspicion, even hostility, by jewelry brands and retailers, De Beers, Swarovski, and Berkshire Hathaway, Richline has adopted the category. In addition, significant jewelers such as Helzberg Diamonds, Signet, and Reeds carry Lab-Grown Diamonds, and many High-End premium brands are expected to sell Lab-Grown Diamonds shortly. Thus, it is the more excellent value and price for the consumer and the higher margins for the retailer.
Price Comparison of Lab-Grown Diamonds and Natural Diamonds
Let's compare the prices of Lab-Grown Diamonds and Natural Diamonds.
There is a vast price gap between the two. It is no surprise that the cost of a Natural Diamond from the ground far exceeds that of a Lab-Grown Diamond. The lower costs of Lab-Grown Diamonds lead to their selling prices being more affordable. The human resources alone are an order of magnitude greater. It takes enormous labor and resources to unearth a treasure, and the price is considerable. Lab-Grown Diamonds as sustainable diamonds are evaluated by the four C's (Carat, Cut, Color, and Clarity) just like natural ones, but even so, the price and value difference is said to be 30-40% cheaper compared to mined diamonds.
The price and value of Lab-Grown Diamonds have been lower in the last couple of years. For example, when De Beers, a 130-year-old diamond group, accepted a Lab-Grown Diamond in May 2018 after years of shunning it, the price and value of a 1ct Lab-Grown Diamond were $4,200, compared with about $6,000 for a comparable Natural Diamond. By the end of that year, the cost of Lab-Grown Diamonds had fallen to about $800. It is believed that different marketing and industrial-scale production are driving this drop.
How Pandemic Changes the Global Diamond Industry
In the wake of COVID-19, mining companies were forced to cancel or postpone sales and cancel major diamond shows for health reasons and travel restrictions. In the few sales events that took place, rough diamond prices were 15% and 27% cheaper than the previous.
In 2020, India's imports of rough diamonds plunged to just $1 million in April from $1.5 billion in February, data from the Gem & Jewelry Export Promotion Council showed.
According to data from the Antwerp World Diamond Center, Antwerp, another diamond hub, saw rough diamond imports fall 20% in the first half of 2020 compared to the same period the previous year. The city's polished diamond exports also fell by 46%.
What other effects did the Covid-19 pandemic have? Here is a summary of the changes in the diamond industry due to the pandemic.
Rough Diamond Production Continued its Downward Trend, Dropping to 111 Million Carats
After peaking at 152 million carats in 2017, rough diamond production has declined at an annual rate of about 5 percent. In addition, production in 2020 was 20 percent lower than 2019 levels. Despite the changes, the composition of diamonds has remained sustainably constant, with medium and large diamonds accounting for 25% of carat production but around 70-80% in value in U.S. dollars.
Lockdowns, Travel Restrictions, and Economic Uncertainty Contributed to The Decline in Diamond Jewelry Sales
In 2020, sales declined by 15 percent, most of the decline occurring in the first and second quarters. Travel restrictions also made the demand for diamond jewelry more regional. However, the market rebounded in the fourth quarter, leading to a strong holiday season worldwide. Preliminary estimates indicate increased consumer confidence and increased retail activity ahead of the holiday season.
Continued Advances in Technology Have Doubled The Production of Lab-Grown Diamonds
Comparing 2019 and 2020, the production of Lab-Grown Diamonds has shown double-digit growth, and retail prices and value have decreased. The price and value difference between natural and Lab-Grown Fancy Colored Diamonds is particularly pronounced and can be ten times higher. In addition to independent Lab-Grown manufacturers, major fashion jewelry retailers have added Lab-Grown Diamonds to their product lines. They further position the category in the fashion jewelry segment and make it accessible to a wide range of price-conscious consumers.
Lab-Grown Diamonds have gone from nothing to the fastest-growing and sustainable category in today's jewelry market in just a decade.
Laboratory-grown diamonds as sustainable diamonds have withstood attempts by interested parties to deny them mined diamonds. As a result, they have come to be recognized as authentic as those produced from the ground. In addition, the price and value of Lab-Grown Diamonds are about 30 percent lower than mined diamonds, driving consumer demand for this new gemstone.
