Lab created diamonds are rapidly growing in terms of awareness and popularity. They last just as long, look just as beautiful but cost A LOT less.
Why are lab diamonds so much cheaper than mined diamonds? Market manipulation controls supply and keeps the cost of earth-grown diamonds artificially high. Without that continual manipulation, prices would come down. Lab diamonds don’t have the same level of market gaming, which accounts much of the cost difference for these two types of diamond.
What other factors are at play? There are several, actually. We’ll dive in deeper, and discuss them, throughout the remainder of this post.
3 Reasons for a Price Gap That You Might Guess—But You’d be Wrong!
First, “They’re cheaper to make in the lab than mine from the earth”. While this is an explanation that could make sense on the surface, you’d be surprised how little diamonds often cost to harvest from mines. In fact, De Beers has released financial statements in recent years, showing that their diamonds cost about $104 per carat, on average, to produce.
Excavating diamonds from the earth takes dynamite, trucks, backhoes, pickaxes, etc. Producing diamonds in a lab requires incredibly expensive, and highly specialized equipment. Since technology continues to evolve, that equipment needs to be replaced fairly regularly in order to keep up with the techniques and processes that are producing the best results. Between the equipment needed, and the lab quality ingredients needed to form the diamond, the process isn’t inexpensive.
Second, “Lab diamonds are lower quality products, and are less durable.” In reality, lab-grown diamonds are identical to earth grown diamonds. They look exactly the same, in fact, even a professional jeweler or gemologist can’t tell man-made diamond apart from an earth-grown diamond based on visual appearance.
The commonalities between lab diamonds and mined diamonds go well beyond the surface. Lab cultured diamonds are just as hard, which means they’re also just as durable. Diamonds are the hardest natural material known to mankind. They rate at ‘10’ (the highest possible score) on the Mohs Scale of Hardness. That level of hardness doesn’t only apply to earth mined version, lab-cultured diamonds are just as hard—and sometimes even harder than earth-grown versions. This extreme hardness helps protect diamonds from scratches, gouges, and scrapes.
Third, “Lab diamonds don’t have to be transported as far.” Mined Diamonds are produced in countries that span the globe, but so are lab created diamonds. In both cases, shipping over long distances is often required. Individually, diamonds are extremely light, so shipping isn’t a major expense. It can’t be a significant contributor to the cost difference between laboratory diamonds and natural diamonds.
The Actual Causes for a Cost Gap Between Lab Grown & Earth Grown Diamonds
Market manipulation is the biggest cause of the pricing gap between mined diamonds and lab diamonds. Diamonds can command big dollars, only because they’re viewed as rare and exclusive. What would happen if the cost of diamonds fell all the way down to 25 cents per carat tomorrow and prices stayed there from now on? Would Kim Kardashian continue to flaunt big diamonds? Would red carpet runways in Hollywood be peppered with them? No. The wealthy want to wear them as a symbol of wealth and success. The non-wealthy want to wear them to give the appearance of wealth and success. That cycle of demand can only continue as long as prices remain high.
The mined diamond industry understands this concept better than anyone. They control prices, and keep them high, by carefully regulating supply, so it doesn’t outpace demand. If supply is always kept low enough, there’s a simulated rarity, and that’s all that’s required to keep profit margins high and keep the cycle of diamond demand churning.
Competition is a key ingredient if you want lower prices. Without competition, people often have to pay whatever is asked. Generally speaking, the more competition there is in a particular space, the lower ultimate product costs will be. The mined diamond industry isn’t very competitive really. De Beers has operated as a monopoly in the past. It’s reported, that De Beers pressured, coerced, intimidated, and threatened mining operations to ‘play ball’…or get targeted. By shutting them out of important business circles and other tactics, they were able to gain ownership of nearly every significant mine and provided nearly all of the diamond supply for many years. Today, De Beers and the mined diamond industry seem to operate more like a cartel that works together to fix prices.
Labs, on the other hand, are typically real competitors—rather than a united front. The more competition that joins the industry to create diamonds in the lab, the more downward pressure there will on man-made diamond prices. This is one of the biggest reasons that De Beers started competing in the man-made diamond space last year. They hope to become significant competition to bring down prices, and hopefully, drive some players out of business. They also hope to make the product look ‘cheap’ and undesirable to push prices way down over time and ruin the market. They hope that potential buyers will equate inexpensive lab-grown diamonds with Cubic Zirconia.
Technological advances naturally make labs more efficient, bringing down production costs, and also driving down retail costs for lab-grown diamonds. Mined diamonds, on the other hand, have much less impact from regular technological advances. Even if a breakthrough reduced production costs significantly for mined diamonds, they wouldn’t want retail prices to come down in proportion, for the psychology of diamond sales and demand that was mentioned earlier. Decreased production costs, would simply mean that their profit margin goes up.
Different types of customers are served by each type of diamond. People are wanting to use a material object (like a diamond) as a status symbol (class differentiation) are going to be most interested in mined diamonds. They can (and want to) pay a lot for the gem, because the high price tag is what makes them feel a cut above others that can’t afford similar gems.
Buyers of lab created diamonds are people that are value conscious. They love the look, and feeling, of a diamond wedding ring but aren’t planning to get one for some combination of the following reasons.
- They can’t afford to spend what a diamond ring would cost
- They aren’t willing to spend what a diamond ring would cost
- They’re looking for a more environmentally friendly ring
- They’re looking for a more socially responsible ring
Will Prices Continue to Fall Until Lab Diamonds are as Cheap as CZ?
I’ve heard this type of speculations before, but I doubt that will ever happen. Why? There are several reasons:
- Because these lab diamonds are REAL diamonds. Won’t fall to $25 per carat if mined diamonds are $5,000 per carat.
- Because they’re expensive to cut. Since diamonds are so incredibly hard, it takes special equipment, and well-trained cutters, to cut them properly. That adds a fixed cost. CZ is much softer and easier to cut. The process is often done by machine.
- The manufacturing process is highly technical, specialized staff members are costly, and the machinery used to make the gems is incredibly expensive.
The earth-grown diamond industry would love, and encourage, the general concern that man-made diamonds are going to continue to fall in value until they’re as inexpensive as CZ. That narrative helps the earth grown industry defend the high price tag on their goods, and also helps them attack the lab-made market as ‘worthless fakes’. Because man-made diamonds are visually identical, equally durable, but much less expensive, they seem to try every angle and take every opportunity to spin information and attack the lab-grown side of the market.
The Savings from Lab Grown Diamonds Go Well Beyond Dollars & Cents
So far, we’ve talked about the reasons that financial costs are so much lower for lab-grown diamonds than they are for earth grown, but there are other areas of savings that are even more significant—and important.
The Environmental Costs and Savings
Mining can take a heavy toll on the landscape and waterways where excavation is focused. Soil erosion and water pollution are common side effects in many areas. Those ripple effects of mining impact both plant and animal life. They can be devastating at times, leaving some heavily mined areas nearly impossible to inhabit.
Laboratories that grow diamonds certainly aren’t carbon footprint free, but their environmental impact is much lighter than mining companies can offer—especially in unregulated, or under-regulated, areas.
The Social Costs and Savings
You’ve probably heard the terms ‘Blood Diamond’ and ‘Conflict Diamond.’ Both of those terms refer to the violence that takes place when militant groups take control of diamond mines and then use the profit from their diamonds to arm themselves. These groups use their weapons to commit acts of genocide or to challenge governments.
They also will typically compel people to mine the diamonds as forced slave labor. If the can’t, or won’t, produce the diamonds that are demanded of them, they could be beaten, raped, mutilated in some way, or murdered. They become an example for the others that keep the rest of the group working hard out of fear.
In reality, Blood Diamonds turn the stomach of most people around the globe. While steps have been taken to help keep Blood Diamonds out of our market, international groups, including the United Nations have found that they’re continually entering the market anyway. Motivated criminals break rules and smuggle their diamonds across borders to side-step international efforts to ban them. That means that essentially any jewelry shop across the country, or around the world, could have blood diamonds on display, without the shopkeeper’s knowledge. In fact, they might swear up and down that NONE of their diamonds are blood diamonds. The simple truth is that they don’t know that—they can’t know it.
One way to ENSURE that you aren’t purchasing a blood diamond, is to buy a lab created version. You avoid unintentionally funding wars and bloodshed when you buy lab-grown, but you also eliminate the risk that slave labor was used to bring your diamond to market. It just doesn’t seem right to have the symbol of your love, brought to you through an act of hate.
Only a small portion of all mined diamonds are blood diamonds, but even a small portion is a great deal too much. Lab diamonds are SO MUCH cheaper than earth-grown diamonds financially, socially, and environmentally!
Are Lab Created Diamonds Worth Anything?
Lab created diamonds do have financial value. They aren’t cleaver look-alikes, they’re actual diamonds. The lab version is an alternative for people on a tight budget, who don’t want to sacrifice beauty or durability. When sold used, they’re discounted to roughly the same extent as natural diamonds.
Are GIA Certified Lab Created Diamonds More Expensive?
A GIA certified diamond might cost slightly more than a non-certified version, but not always. Jewelers often absorb the cost. Certification provides added confidence to potential buyers. IGI and other international organizations also provide reputable certification services and could be less expensive.
Can You Tell the Difference Between a Lab Diamond and a Natural Diamond?
Lab created diamonds and mined diamonds are so identical, that no one can tell them apart based on look or feel. They look identical and have the same relative hardness. Distinguishing the two would require specialized testing equipment that certification laboratories like GIA and IGI have access to.