De Beers to sell synthetic gems at rock-bottom prices
De Beers hasn’t even opened its first synthetic diamond store, but its looming entry into the market for man-made gems has already shaken the industry.
The unit of Anglo American said three months ago that it plans to sell lab-grown diamonds at a fraction of the going rate, undercutting rivals like Chatham Created Gems and Diamond Foundry. That’s already cut the price of manmade gems, furthering De Beers’s aim of increasing the premium paid for the diamonds it mines in Botswana, Namibia, South Africa and Canada.
De Beers will target younger consumers with its lab diamonds, sold under the Lightbox name for about $800 a carat. That’s a fifth of the price of existing man-made stones and one-tenth of the cost of buying a similar natural gem.
While De Beers says its strategy will eliminate customer confusion over man-made diamonds and their natural counterparts, some producers are crying foul. The lab-grown industry has filed a complaint with the Federal Trade Commission, accusing De Beers of price dumping and predatory pricing.
“De Beers aren’t stupid,” said Chatham Chief Executive Officer Tom Chatham, who filed the complaint. “They know how to grow diamonds, but this equipment is not cheap. They are selling below cost.”
De Beers CEO Bruce Cleaver has said he expects its lab-made gems to be profitable, while adding that it’s not going to be a big business for the company.
Diamonds grown in labs have the same physical characteristics and chemical makeup as mined stones. They’re made from a carbon seed placed in a microwave chamber and superheated into a glowing plasma ball. The process creates particles that crystallize into diamonds in weeks. The technology is so advanced that experts need a machine to distinguish between synthesized and mined gems.
While De Beers has never sold man-made diamonds for jewelry before, it’s good at making them. The company’s Element Six unit is one of the world’s leading producers of synthetic diamonds, which are mostly used for industrial purposes. It has also been producing gem-quality stones for years to help it tell the difference between natural and man-made types.
So far, De Beers’s strategy seems to be working. The premium natural diamonds command has widened since the company’s May announcement, with the 1-carat and half-carat stones it’s going to be producing suffering the biggest price declines, according to industry analyst Paul Zimnisky. The discount on a half-carat manmade stone has ballooned to 38 percent from 24 percent, Zimnisky’s data shows.