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Are lab grown diamonds going to become cheaper soon?

Discussion in 'Laboratory-Grown Diamonds /Man-Made Diamonds (MMD)' started by m00sie, Jan 10, 2016.

  1. m00sie
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    by m00sie » Jan 10, 2016
    A number of the manufacturing companies (according to news articles) have made breakthroughs with producing high quality stones towards the whiter end of the spectrum. Do you think this will mean that stones become cheaper in the next 12 months or so?

    Do you think lab stones will become significantly cheaper in the long run as more players enter the market?

    Thanks :)
     
  2. ChristineRose
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    by ChristineRose » Jan 10, 2016
    Stones have been slowly but steadily getting cheaper over the past few years. White grown diamonds are now about 30% cheaper than their mined counterparts. Manufacturers are claiming 50% less, but that clearly isn't true. Personally, I doubt that 30% is true. Price comparisons are very tricky because GIA and AGS won't fully grade lab stones so you have to compare an IGI to other labs. The mall stores (which are largely IGI) aren't selling grown diamonds because it doesn't fit their business model. So you have to rely on vendor assessments and comparisons, and there aren't many to work from. I guess if you compare mall store mined stone prices to Internet grown diamond prices, you might get a 30% savings, but that's true of mined stones as well.

    Stones are likely to become cheaper as the technology can only improve. As for players entering the market, the opposite has happened. There are actually a lot of labs that grow industrial diamonds and many of them set up a synthetic store and grew a few gem quality stones just to see what happened. What happened is that all these people went away. Grown diamonds are still mainly being marketed as ethical and environmentally superior, and most people are still saying they would not propose with a "fake" diamond. People who are looking to save money are disappointed with the 30% savings and start looking at simulants. In other words, people want to spend a lot of money when they get engaged.

    So my guess is that the slow drop in price will continue, but that we aren't actually going to see any spike in production or savings from high volume production.
     
  3. denverappraiser
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    by denverappraiser » Feb 29, 2016
    I'm guessing not, but that's a job for a psychic, not an appraiser. The majority of the costs associated with diamonds, both lab grown and mined, have to do with cutting, distribution, documenting, and so on. There are largely the same on both sides. Cutters have been beaten pretty hard in the last few years and there's not really much savings left on the table there. If anything I expect prices to rise. The same holds for retailers. Discount retailers are selling things for single digit spreads right now. There's not much room here. Labs? Maybe, but so far there's not much pressure and 'discount' labs aren't generally very successful.

    Will big, clean, white, synthetic diamonds become cheap? Maybe. That's certainly what the growers are pushing for. That said, that's what they've been pushing for for 50 years. So far it hasn't materialized. Maybe this will be the year, but I wouldn't bet on it. Ask a psychic.
     
  4. Wink
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    by Wink » Feb 29, 2016
    I have a good friend in the simulant business that sells a LOT of stones each month. He was one of the early growers of synthetic diamonds and thought he might be first to the market, but fortunately kept his mouth shut and then for the next few years poured money into the open pit he had dug.

    He got some great wonderful crystals that were absolutely colorless and Internally flawless. Problem was they are actually harder than mined diamonds since there are no crystal lattice imperfections and when they were polished they destroyed wheels at an amazing rate and ended up with a black coat making them useless for marketing.

    After a few years of trying to overcome such obstacles, and every time he overcame one another popped up, he threw in the towel and kissed all of that money goodbye.

    He did however, sell other synthetic diamonds. He tells me that it is not worth the time and effort that he takes to make the sales. He makes much more money selling the other gems that he creates.

    I may be way off base here, but I would hazard a guess that many of the people selling synthetics are loosing their shirts.

    Here is a quote from Faith Summers, who writes blog articles for me. "If I’m interpreting the data provided in their latest investment snap-shot, the cost of producing the lab grown diamonds that they’re selling, is about twice as much as the sales-price of the diamonds being sold… Now I’m not an accountant, or some fancy-schmanzy CFO, but it seems to me that if you’re spending a dollar to make fifty cents, that you’re not a profitable diamond company, you’re the U.S. Government."

    She was talking about ScioDiamond.

    From their annual report here are some few of the numbers they shared.

    1.56 million dollars in new financing secured in private placement to qualified investers.

    $236,292 Q2 sales
    $461,279 Q2 Cost of goods sold
    $801,469 Q2 total lost after adding in expenses.

    Does not look to me like they will be lowering prices any time soon, and if they ever run out of qualified investors to keep floating their boat, they will soon run out of water to float said boat.

    Just sayin...

    Wink
     
  5. denverappraiser
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    by denverappraiser » Feb 29, 2016
    One of the things that annoys me from time to time is the claim that lab stones are 30% cheaper than comparable mined stones. They deliberately make it difficult to compare but I’ve not seen this to be true.

    For example:
    1.01/F/VS2/round. That’s about as mainstream a stone as I could search for. Since Puregrown is the source of that claim, I’m going to use them as the benchmark. They don’t sell directly to the public anymore but they’ve got plenty of dealers. They’ve got one in stock.
    http://www.brilliantearth.com/lab-diamonds-search/view_detail/1948668/
    IGI paperwork, VG cut, $5,150.

    Natural diamonds are, of course, easy to find. Most of the big internet houses don’t sell IGI graded goods but there are a few out there who do.
    Here’s a mined F/VS2/1.01/vg cut with IGI for $4224.

    http://www.b2cjewels.com/dd-7898817-1.00-carat-Round-diamond-F-color-VS2-Clarity.aspx

    Between them and some competitors, I see a half a dozen or so comparable stones. That one is the cheapest, but the most expensive mined IGI stone of these specs I can find online is this one for $5,870.

    https://enchanteddiamonds.com/diamonds/view/R101-QLSH87??

    On average, the mined stones are actually slightly cheaper than comparable synthetics, but I"ll be happy to concede that it's close enough to be irrelevant. The median stone is $4880. On the other hand, THEY are the ones claiming a price differential.
     
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  6. Wink
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    by Wink » Feb 29, 2016
    That is just absolutely AWESOME information Neil.

    And of course, those prices assume that anyone still wants a "very good" cut when the real translation of that is AGS3 or lower, usually lower.

    Isn't the whole purpose of getting educated about diamonds to end up with one that is the most beautiful, sparkly and exciting diamond you can find, whether it be real or synthetic?

    There are so many well heeled investors willing to throw money at this that they may someday succeed, but I for one, am not holding my breath. (Nor investing!)

    Wink
     
  7. denverappraiser
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    by denverappraiser » Feb 29, 2016
    Re: Investment.
    I’m told that the brass ring for the growers isn’t jewelry at all, it’s electronics. The electrical properties of diamonds are very special and it has the potential that a sufficiently pure wafer of diamond could be 1000x better than the current wafers of silicon. Becoming a supplier of THAT would be a pile of money on a scale that us mere jewelry people never imagined.
     
  8. Wink
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    by Wink » Feb 29, 2016
    And then we will all be gladly buying the nearly instantaneous computing speed in our computers and our phones and tablets. Using synthetic diamonds that we would never deign to wear.

    Now THAT'S irony at its best!

    Wink
     
  9. ChristineRose
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    by ChristineRose » Mar 1, 2016
    I don't really think of Brilliant Earth as being comparable to B2C though. Take a look at their brick and mortar. I don't think B2C even has brick and mortar. But not comparable is kind of obvious as lab vs. mined is as big a distinction as discount vs. full service. If you look at BE's Canadian stones in that range, they're way more expensive.

    Of course then we're comparing IGI to GIA, so another dead end.

    D.NEA has only a handful of stones in stock, but they've got a 1.01 F SI1 for $4,000. That's in the lower half of B2C's range for comparables. A .5 carat VVS2 H with an estimated AGS Excellent for $1,340 beats B2C on all but the worst cut stones. So I think the 30% is at least supportable for lower colors, if not proven.

    The lack of GIA and AGS is pretty bad for the market, I'll certainly say that. Good Old Gold also is using rogue AGS cut grades. I'm dying to know what AGS thinks of this trend.
     
  10. denverappraiser
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    by denverappraiser » Mar 2, 2016
    Actually I was comparing IGI to IGI. That's why the hunt was a little difficult and why I was looking at B2C. Rather few of the Internet dealers sell IGI, and the PS admin doesn't allow them to be listed here. Since nearly the entire business of MMDs is online at the moment, it seems only fair to compare online to online. Until recently, Puregrown sold directly and it was easy. I just picked BE becasue they're a Puregrown dealer who has an easy to navigate database. As you point out, these things makes a difference. What drives that 30-40% statistic that they like to drop, by the way, is that fancy colors are wildly different. They're careful to say things like the 'average' synthetic diamond is cheaper. Tossing in a 2 carat red into that formula tilts the scale rather quickly, even if we're talking about averaging 1000 stones.
     

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