Global glut drives down Indian lab-grown diamond prices by 45%

Glut in the artificial diamond market globally has led to a dramatic decline of as much as 45% of the prices of Indian lab-grown diamonds (LGDs) in the last financial year. About 40 million carats of lab-grown diamonds was recorded in 2023-24. This figure is about 33% more than the production recorded in 2022-23 which sent the prices tumbling, The Economic Times has reported.

The fall in prices appears to have sliced off the extra profits lab-grown diamond companies were charging and has brought them down to the level of normal profits.

Predictably, the global glut has also triggered a fall in the exports of lab-grown diamonds from India. In April 2024 Indian shipments abroad came down by 18.2% to a value of $83.77 million compared to the same month a year ago. However, there has been a saving grace too in the domestic market. Demand inside the country has risen in tandem with rising gold prices prompting consumers to opt for lab-grown diamonds to contain the cost of the jewellery.

In 2023-24, about 16 million carats of these diamonds were grown in India.

“Prices have fallen by 45% in FY24. Any further decline in LGD prices will lead to severe losses for LGD manufacturers and will not be sustainable. The decline in LGD prices in FY24 simply erased supernormal profits and led to normalisation of profits across the value chain in the industry,” Pooja Sheth Madhavan, MD of Limelight Diamonds, a chain of lab-grown diamond stores, told the newspaper. This chain has expanding presence in 25 cities across the country.

“This decline in prices has significantly increased the time required to repay the loan taken for purchasing LGD machines which in turn is creating a huge barrier for entrants in growing LGDs. This has led to quality and price control in the hands of credible growers,” Sheth Madhavan added.

Many natural diamond companies have stepped into the lab-grown diamond business, the reason being G7 countries imposing sanctions on diamonds originating from Russia. This decision has severely impacted the business of the natural diamond companies. Simultaneously, the economic slowdown in the developed markets have also decelerated exports to the US and China. It has prompted natural diamond companies to step into the lab-grown diamond business.

The lab-grown diamond business has expanded so much in India that the number of reactors in the country could stand at 6,000.

“The growing demand for LGDs in India and abroad has prompted me to change my business model. Now 85 per cent of my business constitutes LGDs and 15 per cent is natural diamonds. Demand for LGDs is growing at a fast pace in the US, UK, Australia, Canada, South America, and the Far East. India is a comparatively new market, but it is growing at a fast pace too as LGD is more affordable,” Tony Mehta, founder of Gogreen Diamonds told the newspaper.

Lab-grown diamond costs a mere fraction of natural diamonds. While one carat of good quality natural diamond can cost anywhere between Rs 4-4.5 lakh, a similar quality lab grown variety can be purchased for only Rs 35,000.

Natural diamond prices have stabilised now after suffering volatility in H1 of 2023-24.