00:00Well, let's get more on this. Paul Zimnitsky is an independent diamond analyst and consultant.
00:05Paul, thanks for joining us. We're just hearing there that lab-grown diamonds are no different
00:10apart from how they're manufactured. So why would people still buy the earth-mined ones?
00:16Yeah, I guess I would just note to start, it's been an extremely volatile period for the diamond
00:20industry over the last five years. We went from record demand as recently as 2022 to this,
00:26you know, generational route that we're going through now. And I think the key is to understand
00:31that there's been a series of forces at play all at once. Like you said, it's the mainstream
00:36introduction of cheap man-made diamonds that certainly diluted the market. But there's also
00:40been a considerable fall off in demand for diamonds in China. China has been the second largest consumer
00:45of diamonds for two decades. Then we have industry marketing has been under decline since the Western
00:50sanctions were imposed on Russia. Russia is one of the largest producers of diamonds, so they were a
00:55big contributor to marketing. And then we had like the tariffs in the U.S. last year, which led to,
01:00I would say, import hesitation of diamonds in the U.S. And the U.S. is the largest consumer of
01:06diamonds.
01:06So there's been multiple things happening at once that kind of led us to where we are today.
01:10You mentioned there about weaker demand in China. Why was that?
01:15So I think Chinese consumers tend to see fine jewelry as a store of value. And since diamond prices have
01:22been soft, I think it's turned off some Chinese consumers, you know, especially as the gold price
01:26has spiked. And then I think there's also the macro issues in China and the cultural crackdown on
01:32conspicuous consumption. And we're seeing this across the whole luxury complex in China. It's not just
01:38diamonds. So diamonds, not the status symbol that they once were.
01:44Yeah. Yeah. I mean, I guess I would just note that, I mean, we've had man-made gemstones for
01:47decades now. What's changed is how, you know, how much prices of the manufactured diamond has
01:54essentially crashed in a relatively short period of time. I would estimate that lab-grown diamond
01:59prices have fallen 90% plus in just five years or so. There's no rarity component to this. It's a
02:05manufactured product. We can essentially make, you know, as much as we want, whenever we want.
02:09And demand for this product has, I would say, inversely correlated with price. So as the price
02:16of these lab-grown diamonds has fallen, you know, demand has picked up. And I think that's definitely
02:21impacted the natural diamond industry as well. China is the biggest producer of lab-grown diamonds.
02:27How do you expect this industry to keep developing? So to give you some context, China basically took
02:33over the market for industrial diamonds in the 1980s. So these are diamonds used for abrasive
02:40applications like construction or mining equipment. And China will produce 10 billion carats of those
02:46sorts of diamonds this year alone. And to give you context, we'll produce, say, 90 million carats
02:52of natural diamonds. And only maybe 40% of those will be good enough for jewelry. So it kind of
02:57shows you
02:58how much of the manufactured of the lab-grown diamonds we could make. And that's why I continue
03:02to see, continue to expect to see the price to fall. And I think as the price falls, I think,
03:08you know, consumers are going to, you know, start to realize that natural diamonds are a different
03:13product. I think when you look at, you know, just celebrities, you know, engagement after engagement,
03:18the, you know, celebrities tend to still want natural diamonds. I think wealthier consumers still want
03:22natural diamonds. So I think, you know, as the dust settles with the novelty of this lab-grown
03:27diamond product, I think, you know, consumers are going to want to come back and want the real
03:32thing. But we're certainly in a lull at the moment. Paul, thank you. Paul Zimniski,
03:36Independent Diamond Analyst. Thanks for those insights.
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