Those who have shopped for jewellery recently may have been presented with the option of a more affordable, laboratory-grown diamond.
Some retailers present lab-grown (synthetic) diamonds to consumers as a more ethical and sustainable alternative to mined diamonds.
Technological advancements mean that lab-grown diamonds, which were once economically unviable to produce in large quantities, have begun to be produced at scale as the costs to produce man-made diamonds have fallen dramatically in recent years.
According to Bain & Company and De Beers, production costs plunged 92.5% — from $4,000 per carat to just $300 per carat — from 2008 to 2018. As of 2023, lab-grown diamond production costs (for chemical vapour deposition-grown diamonds) have fallen even further, to around US$8 per carat before cutting.
Companies producing lab-grown diamonds are located throughout the world, from developed countries including the United States and the UK to emerging economies such as India and China, which have seen rapid expansion in the lab-grown industry.
Lab-grown diamonds — not to be confused with diamond simulants such as moissanite and cubic zirconia (CZ), which have different chemical and optical properties from diamonds — were first successfully created in laboratory environments by General Electric researchers in the early 1950s.
Diamond is the hardest substance that exists, measuring the maximum possible value of 10 on the Moh’s scale, and its hardness has come in useful in many industrial uses, for example, in tools and abrasives.
Japan’s Sumitomo Electric Industries has since the mid-1980s produced — and continues to produce — laboratory-grown diamonds, mainly for industrial purposes.
However, it took much longer for the creation of gem-quality lab-grown diamonds suitable for jewellery to become viable.
Currently, lab-grown diamonds are grown using techniques called chemical vapour deposition (CVD) or high-pressure high-treatment (HPHT), the former involving the deposition of carbon atoms onto a diamond seed in a gas-filled chamber, and HPHT using high pressure and temperature to dissolve and precipitate carbon onto a diamond seed, which results in the growth of a larger diamond.Economic Value
Natural diamonds form at very specific temperatures and pressure below the earth’s surface over millions of years and are transported to the surface as a result of volcanic eruptions.
Indeed, the conditions used to produce lab-grown diamonds are designed to replicate the temperature and pressure using the HPHT process under which natural diamonds form.
Diamonds are found in the oldest parts of the earth’s surface — known as cratons, and form in what are known as pipes, which are usually found in old continental landmasses including Africa, Australia, Russia, and Canada.
However, only a very small fraction of the pipes that are known to exist can profitably mine diamonds.
This means that there is always going to be a significant supply constraint on naturally-mined diamonds and, therefore, prices will tend to retain — or even increase in — value over time.
One of the primary factors contributing to the high value of natural diamonds is their rarity. Natural diamonds form deep within the Earth's crust over millions of years, limiting their supply.
This scarcity has established a perception of exclusivity, rarity, and prestige that drives their market value.
In contrast, lab-grown diamonds are created in controlled laboratory environments in a matter of weeks or months, leading to a higher supply and diminishing their perceived value.
The prices of lab-grown diamonds have declined in recent years due to the increased efficiency of production methods and increasing competition among lab-grown diamond manufacturers, and as a result, the prices of lab-grown diamonds have fallen rapidly over recent years.
According to diamond industry analyst Paul Zimnisky, 1-carat lab-grown diamond prices fell 27% over the two years from the first quarter of 2021 to the first quarter of 2023; for larger diamonds, the prices have fallen even more rapidly, with 3-carat lab-grown diamond prices dropping by more than half over the same period.
Zimnisky said with more and more players entering the market, supply is growing faster than demand, and prices will continue to fall.
De Beers-backed lightboxjewelry.com sells lab-grown diamonds starting at US$800 (NZ$1,300) per carat, far cheaper than the per-carat prices for lab-grown diamonds that are on offer at a well-known Australasian jewellery retailer.
As of June 20 2023, this well-known Australasian jewellery retailer listed four-claw 1ct and 2ct Round Laboratory-Created Solitaire Diamond Rings in 14K White Gold for sale at NZ$6,999 and $17,499, respectively, while Lightbox was selling six-claw 1ct and 2ct lab-grown solitaire round diamond rings in the same metal (with slightly better diamond clarity and colour grades) for much lower prices of NZ$3,100 and NZ$4,750, respectively.
Lab-grown diamonds are in some cases clearly being sold to New Zealand consumers for far more than what they are being sold for by some other offshore providers.Sustainability
The evidence is inconclusive as to whether lab-grown diamonds are more sustainable than naturally-mined diamonds.
Lab-grown diamond producer Diamond Foundry has claimed that the amount of energy required to mine diamonds is 10 times that of the energy required through its production process.
A 2014 report by the American consulting firm Frost & Sullivan found that mined diamonds require twice as much energy per carat as those grown in a lab.
But other reports have come to the opposite conclusion: A report from Trucost in 2019 — who were engaged to carry out the study by the Diamond Producers Association (DPA), which represents the seven largest diamond producers in the world (accounting for 75% of global diamond output) — found that estimated greenhouse gas emissions associated with lab-grown diamond production are around three times greater than natural diamonds (160 kgs of CO2 per polished carat of mined diamonds, compared to 511 kgs of CO2 for a lab-grown diamond).
The report analysed the total value contribution of the DPA members, considering not only economic benefits but also socio-economic and environmental benefits and impacts, and found that the DPA members created net benefits of $16 billion in 2016, with socio-economic and environmental benefits outweighing environmental and socio-economic impacts by nearly 1,700%.
Of course, there is the possibility of “own-industry bias” in these reports, and there is a need for more independent academic studies on the topic.
But just as car manufacturers improved their products' sustainability by introducing hybrid and electric vehicles, diamond mining companies are doing the same.
For example, De Beers and parent company Anglo American, in conjunction with academic researchers, is also actively researching carbon-offset methods to improve the sustainability of their mining operations.
Diamond and diamond jewellery website diamonds.co.nz emphasises its commitment to sourcing ethical and sustainable natural diamonds by, for example, using only suppliers that comply with the Kimberley Process (the process established in the early 2000s to prevent blood diamonds from coming onto the market), by offering Canadian diamonds as an option to customers, and by improving diamond supply chain traceability and transparency through the adoption of blockchain technology.Beneficiation
The mining industry is a significant employer and driver of economic growth in, for example, regions of Canada as well as Botswana.
In Canada — the world’s third-largest diamond producer — diamond mining is the largest private sector employer of Aboriginal and First Nations peoples in Canada on a proportional basis.
The diamond mines in Canada are generally in remote regions of the country, such as the Northwest Territories, where employment is scarce.
When Botswana gained independence from Britain in 1966, it was one of the poorest countries in the world, but the discovery of diamonds not long after, in 1967, contributed to Botswana's rapid economic growth.
Diamonds now make up nearly 90% of Botswana’s export revenue, 35% of government revenue and 20% of GDP, and the country is now considered upper-middle income, with a GDP per capita of over US$6,800 as of 2021.
The diamond industry has enabled Botswana’s government, in conjunction with diamond giant De Beers, to invest in improved infrastructure, education, and healthcare, which has led to Botswana making significant strides in reducing poverty and improving living standards.
The above-mentioned 2019 Trucost report stated that “the creation of highly remunerated employment opportunities represents a key contribution of the DPA members to local livelihoods in communities surrounding the mine sites”.
Are the environmental impacts, which are often reversible, and the carbon emissions associated with mining, sufficient to prevent people in Botswana from enjoying the benefits of economic growth and moving into the middle class?
Are they sufficient to deny jobs to the people in the northern regions of Canada, who have limited alternative employment opportunities?Sentimental Value
Natural diamonds have a long history of being associated with emotions such as love, commitment, and celebration. Alexander the Great brought diamonds back to Macedonia from India in 327 BC, and by the 1400s, diamonds were fashionable among the European aristocracy.
Pieces of jewellery containing natural diamonds are often cherished as family heirlooms, which are passed down from generation to generation, and they hold sentimental value as a consequence.
The fact that natural diamonds have been the result of millions of years of natural processes — not days or months of growth in a factory — contributes to their sentimental value.
On the other hand, lab-grown diamonds lack the same historical significance and emotional attachment — their synthetic nature diminishes their ability to give rise to the same emotions and sentimental value, ultimately affecting their market desirability, resale value, investment potential, and worth.
Overall, the value that customers are getting — and whether they are getting fair prices and are receiving an item that will hold its value — is highly uncertain when it comes to lab-grown diamonds.
There are large variations in the prices that lab-grown diamonds are being sold for, which will likely eventually lead to consumers’ dissatisfaction.
The possibility of further technological advancements, leading to even cheaper production methods, also creates uncertainty regarding their future value and whether there will be an ongoing market for synthetic diamonds.
Author: Rory Bunker is a Data Scientist/Economist, with experience in the jewellery industry and holder of a GIA Graduate Diamonds Diploma, who is currently based in Japan.