LGD Man Made diamonds are going to change natural diamonds for the better

[distracts]

In all the debate around this issue, I have not heard anyone offer a persuasive argument as to why synthetic diamonds will not follow a similar trajectory to that of synthetic rubies, sapphires,and other true synthetic gemstones with the same optical and chemical properties of the natural. All those alternatives have found a separate niche in the jewelry trade, at the same time that their natural mined counterparts continue to increase in price. Why should diamond be different in that regard?

I suspect they will be just like those other synthetics. So far they are - relatively little traction when at the same price (or more expensive) than their natural counterparts, gaining in popularity as a substitute for the natural as the price drops, until the price drops to where it is seen as "cheap" and therefore worthy only of costume jewelry. I think lab diamonds are currently so popular in bridal jewelry because they are only moderately less expensive than mined diamonds - maybe a $4000 ring instead of a $10000 ring, or whatever. When it drops to the difference being a $400 ring or a $10000 ring, I think you'll see more people opt back for natural diamonds, just because of the way human minds work and perceive value. If the price stabilized at $2k-$4k for a 1-2 carat ring, I think THEN there would be a problem. But DeBeers is already trying to undermine that possibility with their Lightbox brand. I'd look out for Lightbox reducing prices incrementally over the next 5-10 years.

 

[bv_jewels]

Man Made Diamonds could change natural diamonds for the better.

Cut Quality

The most profound discovery I made at the 2019 Vegas JCK jewellery trade fair was man made round brilliant cut (RBC) diamonds look better than their natural equivalent. Most larger than 1/3rd of a carat diamonds I saw at several booths had fantastic Ideal-Scope images where-as less that 30% of GIA XXX natural diamonds have acceptable Ideal-Scope images. The worst I saw would have had an HCA score of under 3 and most were near HCA 1.0 with a fair number under 1.

The reason for this is that growers know the width of the stones they will cut from each slab and so they stop the growth as soon as they reach the desired predetermined carat weight. Why grow any deeper? So since depth is the constraint most CVD RBC’s are cut around Hearts and Arrows to slightly shallow proportions.

I predict that when choosing between a natural and a CVD diamond the wonderful sparkle and larger apparent size of the man made diamond will surprise the pundits and the larger CVD diamonds will take a bigger chunk of the engagement ring market than others are expecting.

In a perfect world this may encourage diamond cutters to improve their cut quality.

Secondly, diamond cuts that favour larger spreads, like marquise, pear shapes and ovals, should also share this fortunate CVD trait. However Emerald cuts, asscher and cushions require greater depth and I saw very few attractive stones in these cuts.

Finally, since the rough material is not rare, nor expensive, I imagine creative cut designs will flourish in the CVD domain.Infact if anyone reading this wants to participate in a man made diamond cut design competition, my Cut Group associates and I would love to talk to you.

So how can the above change natural diamonds for the better?

The industry needs a good kick up the rear. Shape up or die out is the message. Investors are pulling funds from prospectors (speaking from experience as an investor in a great prospect in the Simpson Desert Australia). Banks are backing away from supporting manufacturers as natural prices are falling.

Innovate or die ye dinosaurs, living on the back of a single cut design that turned 100 just a few days ago!

Grading

As technology improves, dial a colour and clarity is becoming reality. De Beers probably have the very best CVD technology and Light Box claim they do not need to do HPHT treatment to enhance / remove brown colour. Light Box diamonds are not given a grade as they are apparently +G and +VS2. As a consistently manufactured product De Beers claim there is no need for grading as the stones are all relatively colourless and eye clean. ‘Fit for purpose’.

Taking out the grading is huge cost saving. Natural high quality diamond requires third party lab certificate, which is almost $100 / Ct. Added to this is the cost of shipping and insurance to and from the lab, plus capital locked up by the time taken to perform the grading increasing holding costs.

If LGDs are inhouse graded (for less than $5 a stone) and a buyer disagrees with the grade, the consequences would not be a big deal since rarity is not what man made diamonds are about. There would likely be less challenges.

LGDs material transparency has more meaning, although this desperately needed index is not yet available from any lab.


Cost of Manufacture

Because large CVD diamonds have high or high enough clarity, the need to plan around inclusions using expensive equipment and expert engineers, planning the cut is cheaper and faster.

With no strict XXX grading there is less need for the mass market to manufacturers to control polishing quality.

According to Janak Mistry of Lexus Softmac Surat India a CVD polisher is paid $0.1 to remove 0.01 Ct by polishing.

So if a polisher removes 0.25 Ct from a 1.25 Ct automatically blocked of laser preformed stone, he would be paid $2.5.

But to achieve a polished weigh of a natural 1.00 Ct GIA XXX a polisher is paid an incentive of $35.

Janak says: “I know companies who pay $2.1 to finish 0.50 Ct LGD from blocked to finish stage.”

As Symmetry, Junctions, Polish quality and mass recovery is not critical for LGDs, they can be finished on automatic polishing machines, which will reduce cost by 90%.

The Million Dollar Question?

So really Garry? You think this could be good for natural diamonds? Are you dreaming?

Well yes, because the reason these man made diamonds have burst on to the market in larger volumes and with more enthusiasm than anyone expected a few years back is because entrepreneurs and investors smelled huge profits. But good old economics 101 mean supply and demand will result in big and sudden plummeting prices.

Pricing man made diamonds relative to natural diamonds is tantamount to theft. Natural diamonds are rare and finding new mines is getting harder and harder and existing mines are getting older and deeper. Natural diamond prices quadruple with doubling of carat weight. Man made CVD diamonds double in price as carat weight doubles. When supply exceeds demand and reality bites man made diamond prices will fall. When Light Box’s new Portland factory adds 200,000 carats a year to the market, at retail $800 / Ct (irrespective of carat weight) then for perhaps the first time in De Beers history, they will improve the transparency of the diamond industry.

Expect prices to be divided by numbers, not percentages. Pity anyone playing musical chairs with large inventories. Bankruptcies from retailers will domino into the mid market. Borrowers are doomed. Investors will run away.

(There are other big structural problems in the natural diamond world too, but this is enough for one night).

Investors ploughing millions into marketing man made diamonds facing reducing margins and returns will pull back at about the same time as the old dinosaurs of the natural world finally learn they must promote and innovate or die.

So in the end, the natural mined diamond industry will have had a huge wake up call. We may even see a flurry of new designs of cuts with real beauty designed using modern computer and AI tools such as some of those from my old Cut Group associates from OctoNus and Lexus, who contributed some insights to this ramble.

Excellent Overview, Garry...

 

[AprilBaby]

I suspect they will be just like those other synthetics. So far they are - relatively little traction when at the same price (or more expensive) than their natural counterparts, gaining in popularity as a substitute for the natural as the price drops, until the price drops to where it is seen as "cheap" and therefore worthy only of costume jewelry. I think lab diamonds are currently so popular in bridal jewelry because they are only moderately less expensive than mined diamonds - maybe a $4000 ring instead of a $10000 ring, or whatever. When it drops to the difference being a $400 ring or a $10000 ring, I think you'll see more people opt back for natural diamonds, just because of the way human minds work and perceive value. If the price stabilized at $2k-$4k for a 1-2 carat ring, I think THEN there would be a problem. But DeBeers is already trying to undermine that possibility with their Lightbox brand. I'd look out for Lightbox reducing prices incrementally over the next 5-10 years.

Exactly what I was thinking as Im reading this thread. If synthetic diamonds become really inexpensive psychology says the guy is now proposing with a cheap ring and the proposal isn’t quite as amazing as previously thought. Oh wow! A Hundred dollar engagement ring! How romantic! I’m not a diamond snob. I own moissy and would love to own a lab diamond but not for my engagement ring.

 

[Kayelle]

I'm one of those considering a MMD engagement ring purely because I get better 'bang for buck'. To me they are real diamonds due to the chemical properties, and I don't particularly care that it didn't come out of the ground.

I've been looking at stones for the past two years (as my partner and I have talked on and off about getting married 'someday') and have noticed prices falling on MMDs. After reading Garry's post I'm tempted to wait even more.

Prices here in Australia are ridiculous (and quality horrendous for the price you pay in the main chain stores), hence I originally started looking to the US to get a ring.

This has given me a bit to think about!

 

[Garry H (Cut Nut)]

I'm one of those considering a MMD engagement ring purely because I get better 'bang for buck'. To me they are real diamonds due to the chemical properties, and I don't particularly care that it didn't come out of the ground.

I've been looking at stones for the past two years (as my partner and I have talked on and off about getting married 'someday') and have noticed prices falling on MMDs. After reading Garry's post I'm tempted to wait even more.

Prices here in Australia are ridiculous (and quality horrendous for the price you pay in the main chain stores), hence I originally started looking to the US to get a ring.

This has given me a bit to think about!

If you can wait till De Beers new Portland Oregon factory is completed and pumping out diamonds at $800 per carat irrespective of carat weight (plus a throw away silver mount) then you will safe money and get a diamond with benefits:
Why Portland -
1. low cost enviro friendly electricity from hydro - most other companies claim wind and solar and that is BS because most use cheap brown dirty coal in 3rd world countries.
2. Educated work force - the factory is right next to a silicon chip factory. But be aware that your choice may take food out of the mouths of artisinal African miners

 

[OoohShiny]

If you can wait till De Beers new Portland Oregon factory is completed and pumping out diamonds at $800 per carat irrespective of carat weight (plus a throw away silver mount) then you will safe money and get a diamond with benefits:
Why Portland -
1. low cost enviro friendly electricity from hydro - most other companies claim wind and solar and that is BS because most use cheap brown dirty coal in 3rd world countries.
2. Educated work force - the factory is right next to a silicon chip factory. But be aware that your choice may take food out of the mouths of artisinal African miners

But will De Beers grow over 1ct?!?

 

[Garry H (Cut Nut)]

But will De Beers grow over 1ct?!?

not sure - they say they are growing 1ct.
And I would trust them to make CVD with high transparency - which is an issue.

 

[Kayelle]

If you can wait till De Beers new Portland Oregon factory is completed and pumping out diamonds at $800 per carat irrespective of carat weight (plus a throw away silver mount) then you will safe money and get a diamond with benefits:
Why Portland -
1. low cost enviro friendly electricity from hydro - most other companies claim wind and solar and that is BS because most use cheap brown dirty coal in 3rd world countries.
2. Educated work force - the factory is right next to a silicon chip factory. But be aware that your choice may take food out of the mouths of artisinal African miners

Thanks for resonding Garry! I really should head to one of your stores and have a look, but I fear they are all out of my budget and I would get depressed just looking .

I was at Southland Shopping Centre yesterday and decided to try on a style to confirm it's what I liked, in one of the generic chain stores there.
Was quoted $10999 (AUD for those in the US) for a 0.8ct H P1 ring in a 18K yellow gold pave setting. I hadn't even heard of P1 in inclusions before (I'm not a diamond expert) and had to look it up. Needless to say it confirmed I need to stay away from those sorts of stores and source elsewhere.

Getting back to the MMD discussion, it's a hard decision to make because I would hate to purchase soon and have prices plummet... but I also want my partner to hurry up and propose and for that he needs a ring

 

[OoohShiny]

Getting back to the MMD discussion, it's a hard decision to make because I would hate to purchase soon and have prices plummet... but I also want my partner to hurry up and propose and for that he needs a ring

I personally think that one has to take the view that any monies spent on MMD are effectively written off - so if one needs a diamond to act as a 'store of value' (rather than an 'investment', which they really aren't except in rare cases) then a Mined diamond would seem a better purchase, based on past long-term values.

Of course, Mined stones trade at a discount second-hand compared to their 'New' prices - somewhere between 10% and 80%, depending on whether there's a buyback or upgrade policy, the specs of the stone, how quickly it needs to be sold... but it is fair to say that they do hold at least some value.

I believe that MMD will also hold some value but, at this point in time, the New and Secondhand markets are so new as to make analysis difficult.

I do think that approaching the purchase of a ring with the mindset that it will/can never be sold is quite good, though - I had the choice of precious metals or something like steel, and in the end I figured that going into a commitment with the mindset of 'what if it ends and I have to sell the ring?' was a pretty negative mindset, lol, so went with the steel ring I really wanted, instead of precious metals 'just in case'!

I totally get that having $$$$ tied up in a ring, that could be useful for unexpected life events, does mean some ability to release the funds again could be beneficial, but I guess we have to hope that life doesn't throw us that curveball, whatever we buy!

 

[Miss_LK]

If you can wait till De Beers new Portland Oregon factory is completed and pumping out diamonds at $800 per carat irrespective of carat weight (plus a throw away silver mount) then you will safe money and get a diamond with benefits:
Why Portland -
1. low cost enviro friendly electricity from hydro - most other companies claim wind and solar and that is BS because most use cheap brown dirty coal in 3rd world countries.
2. Educated work force - the factory is right next to a silicon chip factory. But be aware that your choice may take food out of the mouths of artisinal African miners

Gary, when do you think the factory will be up and running? I've been following Element 6, but I haven't been able to figure out a grand opening/production start date.

I know they are going through hiring processes at the moment. Or at the very least, accepting applications for a number of positions at the facility.