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Lab Grown Diamonds Pose Threat to Melee Prices

Morgan Stanley says ALROSA more vulnerable than De Beers to growth in Synthetics

Jul 19, 2016 8:34 AM   By Rapaport News
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RAPAPORT... Lab-grown diamonds will probably develop into a niche that would put pressure on the prices of melee diamonds in the long term, according to research by Morgan Stanley.

The investment bank expects lab-grown diamonds to take 15 percent share of the melee market and 7.5 percent share of the larger-gems space. This means lab-grown production will affect melee prices negatively, resulting in the mined melee market dropping 12 percent in value. Prices of natural large-sized diamonds will be unaffected, the analysts said.

The research estimated the size of the global lab-grown market at $100 to $300 million at a wholesale polished level. At the rough level, it is valued at $75 million to $220 million, which constitutes just 1 percent of the global rough diamond market. However, production is likely to rise, particularly as China has a large existing capacity for producing these diamonds.

“Conditions are maturing for lab-grown diamonds to pose a threat to the diamond mining industry,” the report said. “The market may also be ready for an alternative offering [as] younger consumers have not been exposed to marketing by the diamond industry.”

The Morgan Stanley analysts cautioned that ALROSA is "more at risk" than De Beers to the growth in lab-grown diamonds since it has a higher proportional share of melee in its total production. They pointed out that both companies need to invest around $200 million each in marketing, or at least 5 percent of revenue, to combat the threat. 

* Picture courtesy of Scio Diamonds.
Tags: Alrosa, De Beers, diamonds, lab-grown diamonds, morgan stanley, Rapaport News, Synthetics
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