Thursday, May 24, 2012

Man made diamonds: Are they the future?

In the last week we have been reading about hundreds of man-made diamonds (MMD's) that were submitted to IGI for grading without disclosure.  Various observers tried to delve into the sourcing of the stones.  Rob Bates at JCK considered this a serious problem, as it could affect consumer confidence (rightly so), and expressed the hope that there will be some kind of "black box" solution.  Chaim Even-Zohar went into a full story about the history of Gemesis, which is being mentioned as a possible source of the stones, though they totally deny that presumption.

I suggest that the starting point should be a realistic assessment of what has occurred and has been occurring for some time.  And what we need to consider for the future.

MMD's (produced by HPHT and CVD processes) and HPHT treated diamonds have been in the market now for years.  In both cases, the essential fact is that the temptation not to disclose is powerful.  The added profits can be huge.  Leon Tempelsman of Lazare-Kaplan, which markets Bellataire diamonds (HPHT enhanced) has complained in the past that his company markets the stones with full disclosure while others do not.

There is lots of evidence indicating that abuse is fairly broad and constant - GIA has dropped clients that send in MMD's without disclosure; retailers have discovered these stones in their stock, often by accident; even the major auctions houses, who check every diamond, have found such stones.  They are everywhere.  I was not surprised some years ago to hear that small MMD's had been salted into parcels of naturals.  The world has plenty of people who would not think twice about doing that.  "They are diamonds," they would say, "aren't they?"  "So who cares."

It takes time to "grow" diamonds, whether by HPHT or CVD processes. That tilts production and sales towards smaller goods (at least for now).  For the crooks, the fact that larger, better goods are almost always sent to a lab for grading leads them to move smaller goods and find ways to hide the bigger stones.  In the IGI case last week, stones from .30 carat to about .75 carat were identified as MMD's.  The stones being sent to a lab was something the original supplier might not have anticipated.

Common sense tells us that Pandora's box has been opened, and we are not going to stuff MMD's back in.  So what are we really looking at?

  • The major impediment to MMD's having an impact on the diamond business has been production levels.  We know that production will only rise, and at some point it will rise quickly.  As it does, cost will drop, as is the case in every technology.
  • Mine production will tail off in the years to come, according to every informed expert, and the hole could well be filled by MMD's.
  • MMD's have an important edge.  They require power, but are not environmentally damaging; can be produced anywhere in the world (meaning not in conflict areas); and could someday represent a consistent and dependable supply.  Those facts alone will drastically change how diamonds are sourced, distributed and marketed.  Once MMD's take hold in the open market, mining will become undesirable and unprofitable, only contributing to the shift to MMD's.
  • Jewelry manufacturers will support the use of MMD's.  There could be significant reduction in the cost of producing a diamond intensive  piece (maybe offsetting high gold costs to some degree?), and continuity of production will be enhanced.
Synthesizing materials have been a part of the industrial/technological revolution, and in many cases it was for the preservation of natural resources.  We are careful about harvesting coral, minks, lizard skins, and rosewood.  Any product that is a luxury is particularly susceptible to attack if abuse, sustainability or environmental degradation is involved.  (Oil, as an opposite case, has been the cause of great abuses and wars - but it is, unfortunately, an essential product.)  I do not doubt that a strong story could be told about averting abuses related to diamonds in exchange for space-age technology.  Isn't it wiser to foresee the rising prominence of MMD's (even if it takes another decade) and devise a great transition that will assure the long term attraction of diamond jewelry? 

I have felt this way for a long time, and I know that there are many people who disagree.  They say that only billion-year old diamonds forcibly extracted from gaping holes in the earth hold the magic that people want.  There are many vested interests who dearly want to maintain that.  But does anyone really want to rely on that assumption, to base a business on that?  Especially when MMD's seem to be selling just fine?  

One more point.  I am not one particularly inclined to believe in conspiracies, but consider this trend.  BHP and Rio Tinto want to sell their diamond mines.  The Oppenheimers have sold out.  De Beers has announced a major investment in Element 6 (their mmd-producing division).  Is there something they all know that we do not?  Is the old diamond cash cow fading away?


  1. Ben, that's a good observation about the mining companies. I don't know that it's a conspiracy per se, but possibly a group of people who all see writing on the wall far sooner than the market. I think MMD's will become de rigueur in the marketplace. It will be toughest on the luxury market because the mass market may simply take the amethyst approach and let customers know that any piece using melee may contain synthetics, but a luxury consumer spending $50K on a diamond piece probably won't want synthetic accent stones, even if he knows about them.

  2. The mining companies are mostly seeing that diamond mining is not a growth area. But I would expect that they are assessing all risks relative to the immense costs of opening a new mine (never mind finding one). If the product can go man-made, or if financial viability can be severely affected, then all that is enough to step back. De Beers, as you know, has much more complicated issues, but the bottom line has to be the same. Get out while the getting is good.