Lab-grown diamonds are expected to play a significant role in shaping the diamond market in the coming years. However, their impact could either benefit or harm the natural diamond industry, depending on consumer preferences, according to a recent report from McKinsey.
The popularity of synthetic diamonds has surged in recent years, driven largely by their lower prices and perceived ethical and environmental advantages. This trend is creating challenges for natural diamond producers, especially those who have yet to diversify their product lines.
“Natural diamond producers are hesitant to embrace lab-grown diamonds as a cheaper alternative, fearing it could hurt their own markets,” McKinsey said. The report highlighted that nearly 50% of all engagement rings sold in the U.S. in 2023 featured lab-grown stones, a dramatic increase from just 12% in 2019, according to wedding platform The Knot.
As manufacturers continue to improve the quality and availability of lab-grown diamonds, prices are expected to drop. McKinsey outlined three potential outcomes of this trend. First, lab-grown diamonds could dominate the market outside of niche luxury segments. Second, the prices of synthetics might fall so much that they become mere fashion accessories, no longer competing directly with natural diamonds. The third scenario could see consumers, attracted by low prices and the inability to distinguish between natural and lab-grown stones, losing interest in all diamonds. In this case, diamonds might lose their status as a must-have for engagement rings, McKinsey suggested.
The future of the diamond market, McKinsey concluded, hinges on how both consumers and producers respond to these changes.
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