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Diamond Foundry Hikes Output, Prices

Jan 9, 2019 4:55 AM   By Joshua Freedman
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RAPAPORT... Diamond Foundry is increasing its production more than tenfold and raising wholesale prices 15%, as it predicts an uptick in demand for lab-grown diamonds.

The company believes there is a shortage of synthetic-diamond supply while consumer interest in the product is rising. It plans to raise production to at least 1 million carats of rough per year, boosted by a new factory in Washington state, Diamond Foundry CEO Martin Roscheisen told Rapaport News Tuesday.

“After careful monitoring of the market situation over the past months, we see demand increasingly outpacing supply,” the San Francisco-based company said in a note on its website December 21. While more people want lab-grown diamonds than before, “the corresponding supply is not increasing at the same rate,” it added.

Diamond Foundry, which is backed by Leonardo DiCaprio, began production at its new “MegaCarat” factory in the city of Wenatchee in November, and expects to reach its target rate of 1 million carats per year by the end of 2019. The company’s current annual production capacity is 100,000 rough carats, it said.

The company also announced an average 15% increase in the wholesale prices for its rough and polished diamonds, effective January 1, citing the purported supply shortfall. While it is not actively raising its recommended retail prices, its stones are becoming more expensive at the retail level due to demand, a spokesperson explained.

Its assessment of the market contrasts with that of analysts, who estimate that prices of lab-grown diamonds fell in 2018. Generic 1-carat lab-grown diamonds were selling at an average discount of 42% relative to natural stones in late November 2018 compared to 29% in January, driven by improvements in production capabilities, analyst Paul Zimnisky said in a report. Retail prices have nearly halved in the past two years, while wholesale prices have dropped by two thirds, Bain & Company noted in a December report. Global output of polished synthetics is growing by 15% to 20% per year as manufacturing costs fall, Bain added.

De Beers’ launch of its Lightbox lab-grown-diamond jewelry brand last year also put pressure on prices, as the jewelry sells at retail for a standard $800 per carat, regardless of size, well below the prices many synthetics companies had been offering.

Diamond Foundry’s suggested retail prices are $250, $750 or $1,000 per carat for lower-end or “program” diamonds, depending on size. Its “certified uniques” — those generally above 0.85 carats — retail at a 55% discount to the Rapaport Price List, it said. Major e-commerce retail sites such as James Allen and Blue Nile list their equivalent natural diamonds at 30% off the Rapaport sheet, it claimed.

Diamond Foundry admitted there had been some price fluctuation this year, but still expects market dynamics to work in its favor.

“Prices fell in August, but there is presently a massive shortage in the supply of lab-grown diamonds, which is causing a price increase,” Roscheisen said. “We believe this shortage will persist for several years.”

Image: Lab-grown diamonds. (Diamond Foundry)
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Tags: Bain & Company, Blue Nile, Diamond Foundry, James Allen, Joshua Freedman, Leonardo DiCaprio, Martin Roscheisen, MegaCarat, Paul Zimnisky, prices, Rapaport News, Rapaport Price List, retail, san francisco, synthetic-diamond supply, Synthetics, Washington state, Wenatchee, wholesale
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