Are lab-grown diamonds a threat?

Dr. Gaetano Cavalieri has served for the past 19 years as president of CIBJO, the World Jewellery Confederation.

Uniting national jewellery and gemstone associations from more than 40 countries, including Russia, and many of the industry’s major corporations and international associations, CIBJO is the industry’s oldest international organization, having been established in 1926.

In 2006, the CIBJO was the only organization granted the official status of a consultant to the UN Economic and Social Council on the development of the global jewelry industry.

Gaetano Cavalieri kindly agreed to answer a question from Rough&Polished related to lab grown diamonds.

In your address to the virtual World Diamond Congress on September 15, you spoke about the long-term challenge posed to diamonds, and even jewellery in general, which could come as result of the public not making a clear distinction between natural and laboratory-grown goods. Why do you consider this to be so critical a threat?

Let me first emphasize that the comments I made were in no way intended to question the legitimacy of laboratory-grown diamonds, nor the integrity of those who trade in them in a transparent and virtuous manner. CIBJO believes that the laboratory-grown diamond sector is entitled to a place in our industry, in the same way that any other legitimate sector is entitled, and it should be subject to the same rules and expectations. Among those expectation are all people handling laboratory-grown diamond taking appropriate measures to ensure that customers understand exactly what they are buying, and in this case that is a product that is fundamentally different to a natural diamond.

Dr. Gaetano Cavalieri

The concern that I expressed during the virtual World Diamond Congress is about those who seek to blur the line distinguishing between natural and laboratory-grown goods, through statements they make, or conversely statements they do not make. If consumers do not clearly understand that two product categories are involved, with each operating according to different economic models, then in effect the consumer is being deceived.

Allow me to explain. In a large section of the laboratory-grown diamond market today, consumers will be charged prices that essentially are discounts on the market prices of natural stones of equal quality. The problem is that that the consumer does not always know that the discount has been growing steadily, as more laboratory-grown diamond manufacturers enter the industry, the volume of laboratory-grown diamonds grows, and the cost of production falls. Over time, it is not unreasonable to expect that we will see the same result that we saw in the coloured stone sector, where the cost of synthetic goods is tiny fraction of the price of natural coloured gemstones, even those of significantly lower quality. This came about simply because of economics.

Consumers will begin to become aware this widening price differential when they seek to upgrade a piece of jewellery, substituting the laboratory-grown diamond for a natural stone, or when they try to sell their goods on the secondary market, or get them appraised for insurance purposes. They’ll discover the value of the jewellery is mere fraction of what was originally paid. They will feel cheated, and their anger may be directed not only to those who sold them the laboratory-grown diamonds, but against the diamond and jewellery trade in general. We should never forget that consumers have choices when deciding how to spend their discretionary income.

At CIBJO this is an imminent problem we have been aware of for some time already, and it is why we set up a Laboratory-Grown Diamond Committee, including representatives of both the laboratory-grown diamond sector and the natural diamond sector. Our goal has been to formulate a set of trading principles that will clearly and unambiguously inform consumers what they are buying, enabling them to make a reasoned and rational purchasing decision.

We firmly believe that natural and laboratory-grown diamond sectors can both prosper and even complement one another, if they are actively transparent about what they are selling. But if that transparency is not complete, then the consequences for all of us could be dire. –Alex Shishlo for Rough&Polished