The future of the diamond market hinges on whether natural gemstones can maintain their traditional allure, according to Pranay Narvekar, head of Pharos Beam Consulting and a business analyst. Speaking on August 11 at the Gem and Jewellery Export Promotion Council in India, Narvekar delivered a presentation titled "Diamond Market Fundamentals and Natural Supply," where he expressed concerns about the long-term viability of the diamond industry.
"At the end of the day, it's still about the diamond dream," Narvekar said. "The key is whether consumers still believe that diamonds are something worth aspiring to. It's about whether people still perceive natural diamonds as a luxury. This is the challenge we face going forward."
Narvekar pointed out that lab-grown diamonds (LGDs) might alter consumer perceptions of diamond value. Displaying an image of a pair of 4-carat earrings, he noted that the current production of 4-carat lab-grown diamonds exceeds the quantity mined by workers over two years.
"When someone wears a 4-carat pear-shaped diamond, you know they’ve spent $100,000 or $200,000," Narvekar explained. "If tomorrow that is no longer a marker, you have a problem... If every diamond is this large, it’s just a paperweight."
However, this situation also poses a risk to the lab-grown diamond industry.
"If the natural industry declines, then the LGD industry must also decline," Narvekar, who is based in Mumbai, said. "Because what they are doing is marketing it as a substitute for natural diamonds. They haven’t marketed it as a lab-grown product. They haven’t tried to build a standalone industry; they’re just an add-on."
Narvekar emphasized that the diamond industry should recognize that they are dealing with different products.
"This is a legitimate business. It’s not a diamond product," he said. "If you treat lab-grown diamonds as diamond products, the entire LGD industry will fail because it can’t be a luxury business."
He cited a quote: "If mankind can convert carbon into diamonds without much labor, the value of diamonds might be less than that of bricks," revealing that this statement was made by Karl Marx in his 1867 publication, Das Kapital.
Narvekar highlighted a larger issue facing the industry: the demand for diamonds, including lab-grown diamonds, has stagnated in dollar terms for nearly 15 years.
"We are selling fewer finished diamonds now than we were 15 years ago," he said. "Unless we start seriously addressing the demand issue, we will face challenges... Don’t expect [retail consumption] to suddenly pick up. To achieve that, you need to invest significant effort and money. The total finished diamond sales in this industry are less than Apple's entire marketing budget."
Following the dazzling highs of 2021, the natural diamond market is now experiencing what he called a "whiplash effect."
"As you move upstream from retail to jewelry to finished and rough diamonds, the magnitude of change increases," Narvekar explained. "It’s like a ripple; a small change on the retail end results in a bigger change on the finished and jewelry ends, and an even bigger change on the manufacturing end, with the rough diamond supply side seeing the largest impact."
While Narvekar believes the current difficulties in the diamond trade are even more severe than those caused by the global financial crisis of 2008-09 and the economic slowdown due to the COVID-19 pandemic, he predicts the natural diamond market will stabilize by the end of this year and then experience steady to positive growth in 2025—provided the U.S. economy remains strong and China’s economy recovers. However, he added that prices are unlikely to rise significantly because miners like De Beers and Alrosa will have excess inventory to sell.
"Miners are producing more diamonds than they are selling," Narvekar said. "This means rough diamonds are still in the ground. Even if the market improves, you won’t see a significant price increase because the miners haven’t depleted their inventories."