Organized Synthetics

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Feb 11, 2016 8:20 AM By Avi Krawitz

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The natural diamond trade should welcome the establishment of the International Grown Diamond Association (IGDA) announced last week even though it may actually serve as a wake-up call for the industry.

For years, the diamond-industry leadership bemoaned a lack of formal communication with their counterparts in the synthetic – or lab-grown – space to resolve issues that weigh down both sectors. Chief among the list of concerns is the threat of undisclosed synthetics being mixed into parcels of natural diamonds. Hopefully, the IGDA will provide such a forum.

In a recent email to Rapaport News, Ernie Blom, president of the World Federation of Diamond Bourses (WFDB), stressed that the WFDB has no problem with the lab-grown diamond product as long as they are clearly disclosed. “Our overriding concern is that synthetics do not cause damage to consumer confidence,” he said. “They must be clearly marked and sold as such.”

One can only hope the IGDA will self-regulate as much as the natural diamond industry does, and incorporate the requirements for disclosure and documentation into its mandate. After all, a synthetic diamond found to be sold as a natural diamond also diminishes consumer confidence in its product.

For now, there is no indication that the IGDA will take on such a role. A spokesperson explained to Rapaport News that the group is not a policing body. “We are a group of like-minded people in the grown diamond industry and have formed the association based on certain best practice principles,” the spokesperson said. “All members would have to follow these and disclosure is a central part of this.”

In a statement February 4, the group outlined that it aims to represent the lab-grown diamond industry, promote grown diamonds as a new choice and educate customers about the unique qualities and applications of grown diamonds. The IGDA seeks to serve as the central point of communication, education, development and growth of the industry, the statement read.

In that sense, the natural diamond industry should take notice. As synthetic producers become more organized, so will awareness of their product. Ultimately, their aim is to increase market share in the diamond jewelry space.

Certainly, the appeal of synthetics is well known. They’re marketed as ethically-sourced and environmentally friendly gems, while arguing that natural diamond mining harms the environment and has a history of funding conflict and human rights abuses. Lab-grown diamonds are also more affordable than their natural counterparts. The IGDA might also argue that synthetics are a necessary product that will compensate for the expected long-term decline in natural diamond supply.

The natural diamond industry, of course, has a robust rebuttal on each point. As one of the most highly self-regulated industries in the world, it has curbed the flow of conflict diamonds, while organizations such as the Responsible Jewellery Council (RJC) have come a long way to ensure there is a clear code of practice for the diamond trade. Mining companies have also made great strides in providing for the betterment of local communities around their mines with tens of millions dependent on the diamond mining sector today.

As for synthetics being more affordable, cost might be used as a marketing tool for the natural diamond industry – start with a more affordable synthetic stone, and then move onto the real thing when you’re ready, the industry might pitch. And while it is true no major mines are projected to be found in the coming years, a diminishing supply should play into the rarity appeal of natural diamonds.

ABN Amro touched on these challenges in a recent report. “The challenge for the natural diamond industry is to make big steps regarding pipeline integrity to somewhat mitigate the sustainable marketing angle of lab-grown diamonds,” it stated.

Ultimately, the natural diamond industry will need to embark on a campaign to remind consumers of its unique proposition, regardless of the traction that synthetics might gain, but also as the synthetics industry has upped its game. The Diamond Producers Association (DPA), established last year, is mandated to do just that, increase generic marketing to promote diamonds at a consumer level and conduct research to gain a better understanding of the general market, along with threats such as synthetics.

One of the interesting developments to monitor in the coming year or two will be the effectiveness of the DPA and the IGDA in their respective activities. It seems they’re trying to achieve the same thing for their respective products. Starting from a lower base, the IGDA might have more to shout about.

A 2014 report by Bonas Group and AT Kearney, commissioned by India’s Natural Diamond Monitoring Committee (NDMC), estimated annual production of gem-quality CVD and HTHP synthetic diamonds is about 350,000 carats, which may grow to around 1.5 million carats in three-to-five years, the report stated. A relatively small volume compared with global natural diamond production of 124.7 million carats recorded by the Kimberley Process in 2014.

The NDMC has ordered an update of the report, which is expected to be published in the second half of 2016, according to spokesperson Sanjay Kothari. That should provide some indication of progress made in the synthetic diamond space. At least, the creation of a global body representing the sector should be viewed as progress. It will be left to the natural diamond industry to engage with the association and push its own agenda to mitigate the threat posed by synthetics.

The writer can be contacted at avi@diamonds.net. Follow Avi on Twitter: @AviKrawitz and on LinkedIn.

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Tags: Avi Krawitz, diamonds, Dpa, IDGA, Jewelry, Rapaport, Synthetics