Lab-grown diamonds are expected to have a major impact on the diamond market in the next few years, but depending on consumer sentiment, they could prove a boon or a loss for the natural industry.
Over the past few years, synthetics have increased in popularity, primarily due to their lower prices and perceived ethical and environmental advantages, McKinsey said in a report issued Tuesday. The competition is creating problems for the natural-diamond industry, especially those that choose not to diversify their product offerings.
“Natural-stone producers are reluctant to see the value of lab-grown diamonds as a cheaper alternative to natural diamonds, for fear of cannibalizing their own markets,” McKinsey explained. In 2023, nearly half of all engagement-ring stones sold in the US were lab-grown, compared with only 12% in 2019, according to wedding site The Knot.
However, as producers improve the quality and availability of synthetics, prices are expected to decline. This could have three possible outcomes, McKinsey noted. In the first, lab-grown could take over the majority of the market outside niche luxury segments, while the second would see prices for synthetics drop so low that they become fashion accessories and no longer compete with natural diamonds. However, the third scenario is that consumers, driven by low prices and the inability to tell the difference between natural and lab-grown, will lose their desire for all diamonds, they go out of fashion, and are no longer seen as a must-have for engagement rings, McKinsey added.
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