Lab-grown diamond prices: an inside look

Rob Bates

The lab-grown market is bigger than ever. So why do consumer costs continue to fall?

Economists say that the price of a good is ruled by two things: supply and demand.

Lab-grown diamonds may prove an exception to that rule. Their sales are on the upswing. And while supply has also jumped, growers say they can barely create enough to keep up with exploding demand.

Yet prices are falling—dramatically. In 2017, one diamond grower listed its goods at 55 below Rap (the percentage off the per-carat price of diamonds on the Rapaport Price List). Last year, some lab-growns sold for 85 below. This year, they even hit 90.What’s lower than that?” joked one veteran. “100%?

Pranay Narvekar, founder of Pharos Beam Consulting, believes the lab-grown market will eventually transition to a cost-plus model.Why do they still talk about it as ‘off Rap’that is ridiculous,” Narvekar says. “Just put a price to it.”

Retail has seen similar drops. On online portal Rare Carat, some smaller gems sell for less than the $800 a carat that De Beers Group charges for its Lightbox brand, a once-shocking benchmark that initially caused a furor.

According to diamond industry analyst Paul Zimnisky, in the second quarter of 2016 the average online price for an F–H, VS-clarity 1.5 ct. round lab-grown diamond was $10,300. Five years later, a gem with the same specs saw its price drop by nearly two-thirds—to $3,975.

By contrast, a similar mined gem sold for $12,375 online in the second quarter of 2016, and $12,550 in the second quarter of 2021.

Analysts point to many reasons behind these price declines, including increased competition, initially inflated margins, and the seemingly immutable law that tech items become cheaper to produce over time.Of course, their price is going to go down; it’s a manufactured product,” says Zimnisky, who thinks growers are in part driving the decline.

The big money pot for these producers is high-tech applications,” he says. “The semiconductor industry is five times the size of the jewelry industry. To cater to that industry, they need consistent production, they need to scale production, and they need to get the price low. As the price of the high-tech production falls, that will happen to the jewelry market as well.”

Even lab-grown sellers agree—to a point.

I think prices are going to drop,” says Karan Brahmbhatt, a former tech executive who recently founded the lab-grown e-tailer Brilliant Carbon. “But $500 to $800 a carat is probably about the floor. Otherwise, you are not covering your expenses. You still have to pay for cutting and polishing.”

Brahmbhatt sees the affordable price points as a positive. “We’re democratizing diamonds. We have customers who can buy a 1.5 carat diamond for $2,300. It’s an exciting story.

Lindsay Reinsmith, cofounder of Ada Diamonds in San Francisco, contends that the sector is bound to split in two. “There’s a subset of the market that have an appearance equivalent to high-quality naturals,” she says. “But the quality of a lot of the other goods has really degraded. It’s like there’s gorgeous versus garbage. With little in between.”

Reinsmith says the price of top-notch goods (which Ada specializes in) has mostly held up, if only because there are so few of them. “We’re selling them for the same price we did in 2019,” she says.

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Source JCK Online

Photo © Lightbox.