Rapaport Magazine

Facing the Lab-Grown Diamond Challenge

The international diamond industry is making an effort to ensure that lab-grown diamonds are properly disclosed.

By Avi Krawitz
Polished samples manufactured from lab-grown rough by New Diamond Technology, St. Petersburg. The last in the row is the world’s largest synthetic emerald-cut 10.02-carat, E color, VS1 clarity polished diamond.
Photo courtesy New Diamond Technology.

Concern about synthetic, or lab-grown, diamonds extends well beyond ensuring that undisclosed synthetics are not mixed in with the natural diamond trade. Monitoring the synthetic diamond sector is about taking care of the end customer and ultimately protecting the diamond business, said Sanjay Kothari, spokesperson for India’s Natural Diamond Monitoring Committee (NDMC).
   “To save our business we have to attend to our customers to a greater extent,” Kothari explains. “We have to give them the assurance that every diamond has been checked for synthetics, that there is no undisclosed mixing of synthetics and that business is being done in an ethical way.” For that reason, the NDMC was formed in 2013 to enhance consumer confidence by ensuring the proper segregation of natural and synthetic diamonds in the Mumbai trade. A branch is currently being set up in Surat.
   According to Kothari, since the establishment of the NDMC by the Gem and Jewellery Export Promotion Council (GJEPC), measures have been taken in India to provide guarantees to its customers, and ultimately the end-consumers, that the diamond they buy is in fact a natural diamond. Such measures include banning synthetics from the premises of the Bharat Diamond Bourse (BDB) — including in private offices — and increasing the number of testing facilities available to the trade.
   Today, the Mumbai industry has testing available at the Diamond Detection Resource Center (DDRC) at BDB and other facilities, including the laboratories of the Gemological Institute of America (GIA), the International Gemmological Institute (IGI), the Gemological Institute of India (GII), and HRD Antwerp. However, Kothari foresees a time when such facilities will not be necessary, as each company will have a detection machine in its own offices. “The detection machines should be a feature in every diamond office, like a weighing scale used to be,” he says. “It’s just a matter of bringing the cost of the machines down.”
   Members of the NDMC urged developers to bring down the cost of the machines at the Diamond Detection Symposium, which took place at BDB in December. The event showcased technology that is currently available and other tools that are in development in the detection field. Kothari acknowledged that it will take some time before the machines are affordable to smaller businesses, but he is confident that it will become a reality.

Bourses Banning Lab-Grown
   For now, Kothari is encouraged that more people are using the testing facilities that are available. He reasons that the recent decision to ban trading of synthetic diamonds on the bourse premises has brought greater awareness about synthetics among traders. Representatives from other bourses agree that the trade has become more vigilant in monitoring the flow of synthetics, with similar testing facilities available at the various bourses and laboratories in Israel and Belgium.
   Following BDB’s banning order, the World Federation of Diamond Bourses (WFDB) stressed that it is up to each individual bourse to adopt its own rules about trading in synthetics. “Each of our member bourses has full decision-making power regarding which types of diamonds can be bought and sold within their premises as long as the decisions are made in line with the WFDB’s regulations,” says Ernie Blom, president of the WFDB. Blom adds that the federation has no tolerance for such illegal activity as undisclosed mixing of synthetics, and that people found to be involved in such dealing will be removed as bourse members and prosecuted for fraud.
   Stéphane Fischler, a partner at Fischler Diamonds and president of the Antwerp World Diamond Centre (AWDC), stresses that the issue of undisclosed mixing of synthetics should be part of a general initiative to stop criminal behavior in the trade. That would include involving the police in cases where dealers are found to be fraudulent, and naming and shaming them, Fischler says.
   For now, Belgium doesn’t have set rules relating to trading synthetics in the various bourse complexes. The four bourses that make up the Federation of Belgium Diamond Bourses are currently in the process of formulating a policy on synthetic diamonds, a spokesperson for the Antwerp Diamond Bourse says. An announcement is expected later this year.
   The Israel Diamond Exchange (IDE), meanwhile, was the first to ban synthetics from the bourse trading floor, although, unlike in India, businesses can deal with synthetics in their offices within the exchange. IDE renewed its directive last year.

No Recent Major Cases
   Ya’akov Almor, a spokesperson for IDE, observes that there have not been any major cases to date of discovering undisclosed synthetics in Israel. Likewise in Antwerp, there hasn’t been a notable case since IGI discovered over 600 chemical vapor deposition (CVD) synthetic stones that were submitted as natural diamonds to its Antwerp lab in May 2012, which brought the issue to the trade’s attention.
   Similarly, Kothari reports that there hasn’t been an increase in the number of undisclosed CVD synthetics found in India. However, he noted that there has been an increase in undisclosed high pressure-high temperature (HPHT) treated smaller goods in the market.
   Kothari notes that CVDs are mainly produced in the bigger sizes and are therefore easier to detect, but he cautions that the smaller size synthetics that might be mixed in melee parcels are more difficult and time-consuming to find. “We are more concerned about HPHT in the smaller sizes at the moment, as they are not easy to detect,” Kothari says. “Especially after these stones are set into jewelry, synthetics are not detectable at all,” he adds.
   The NDMC appealed to technology firms to focus on developing a machine that can also test jewelry for synthetics, and Kothari reports that one is in development.

Small, but Growing Market Share
   While anecdotal evidence suggests that incidents of undisclosed synthetics are not on the rise, there is still some uncertainty as to the size of the overall synthetics market.
   A 2014 report commissioned by the NDMC, conducted by Bonas, an international diamond broker and consultancy firm, and A.T. Kearney, a worldwide business consultancy, estimated that global output of gem-quality CVD and HPHT synthetic diamonds was approximately 350,000 carats a year and could grow to around 1.5 million carats in the next three-to-five years. In January, the NDMC commissioned the researchers to conduct a follow-up report that would provide some measure of progress in the synthetics market over the past two years, Kothari says. The report is expected to be published in the second half of 2016.
   Some feel that the hype about synthetics is overstated given its small production. “After all, it represents less than .5 percent of annual natural diamond production,” Almor observes. However, analysts at ABN AMRO bank argued in a recent research report that it could be a game changer for the diamond industry, particularly as lab-grown diamonds gain greater consumer acceptance in the long term. Among their advantages, ABN AMRO noted, they are more affordable than natural diamonds, have marketing appeal as an ethically produced product and could compensate for the expected long-term decline in natural diamond supply.
   “The challenge for the natural diamond industry is to take big steps regarding pipeline integrity to somewhat mitigate the sustainable marketing angle of lab-grown diamonds,” the ABN AMRO report stated. Fischler adds that the natural diamond industry has to state its case more forcefully that natural diamonds have a unique proposal that has been appreciated and valued for centuries.
   Blom believes the bourses are up to the challenge, as the WFDB has made “transparency, responsibility, sustainability” its central theme at the upcoming World Diamond Congress in Dubai, with the issue of undisclosed synthetics being an integral part of the agenda.
   “The WFDB has no problem with such stones as long as they are clearly disclosed,” Blom concludes. “Our overriding concern is that synthetics do not cause damage to consumer confidence.”

The Big Picture
By Svetlana Shelest

   In the middle of 2014, the Russian company INREAL launched a new project, New Diamond Technology (NDT), with the ambitious goal of spurring production of lab-grown diamonds to exceed the global industry’s known achievements in this area. To accomplish this, INREAL developed its own unique multiseed growth technology to be used along with the world’s most powerful equipment, the 5,000-ton high pressure-high temperature (HPHT) cubic presses. “We nicknamed the project the Sestroretsk Diamond Pipe,” Nikolay Khikhinashvili, general director of NDT told Rapaport Magazine, “because we hope eventually to be able to produce as much rough as an average ALROSA mining division, as challenging as that sounds.”
   As for the prospects of the lab-grown diamond industry on the whole, there are some dramatic developments at hand, according to Alexander Kolyadin, chief executive officer (CEO) and NDT’s technical director. The past two years saw a serious increase in the volumes of lab-grown diamond crystals appearing on the market, as well as the number of companies producing them worldwide. The majority of production facilities are located in South and Southeast Asia, while research and development hubs supplying technologies are operating in the U.S., Israel, U.K., Germany, France, Russia and Ukraine.
   Among the producers, China has taken the lead by continuously stepping up its production capacities. At the moment, the country runs about 7,500 high-capacity HPHT cubic presses and over 25,000 low-capacity presses producing diamond powders used industrially. Having saturated the global market with this product with its annual supply of over 10 billion carats of powder, China seems now focused on taking over the more lucrative niche, i.e., the production of small, 1 millimeter to 2 millimeter, colorless single-crystal diamonds. Henan Huanghe Whirlwind International Co., Ltd. alone is planning to go online with up to fifteen hundred 3,000-ton and 4,000-ton cubic presses by the end of 2016, while Jiaozuo Huajing Diamond Co., Ltd. is already running four hundred 5,000-ton cubic presses, all dedicated to the production of this type of product. The average production rate is known to be 8 carats to 10 carats of crystals per one press, per each growth cycle, which lasts between 27 and 32 hours.
   “Even if the growth rate stays the same, this means that in two to three years’ time, every second crystal of diamond melee moving in the global pipeline will be lab grown,” explains Kolyadin. “Right now, China manufactures about 150,000 to 200,000 carats of small single-crystal diamonds per month, and most of them end up in India’s polishing shops,” he goes on to say. “While the global diamond industry is going through a crisis, it is all down to the economics. Just compare the $30 to $50 price tag of 1 carat of small synthetic diamonds with the $150 to $200 for the same amount of natural crystal or sawable smalls.”
   Kolyadin believes that the next two steps that will be made by the diamond-growing industry in the future will be the serious reduction of growth rates of crystals and a technological breakthrough that will allow the use of nonmetal solvent-catalysts in the HPHT production cycle. This will make the task of identifying lab-grown diamonds as such much more difficult than at present.
   As for the producers of large and extra-large high-quality lab-grown diamonds, both Khikhinashvili and Kolyadin are firm in their opinion that the main application for their products is in the area of high technology. “Over 90 percent of the lab-grown diamonds produced worldwide wind up being cut and polished, but it happens because the quality requirements for synthetic diamonds to be used, for example, in robotics, electronics, advanced optics and medicine are much higher and tougher to meet than for the application in jewelry,” explained Kolyadin, “which is why research and development is our top priority, and we hope to report new achievements soon.”

Article from the Rapaport Magazine - April 2016. To subscribe click here.

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