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De Beers Sightholders Embracing Synthetics
Miner prepares new guidelines for clients with lab-grown businesses
Nov 12, 2019 7:12 AM
By Joshua Freedman
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RAPAPORT... Few in the diamond industry were surprised by the news that Rosy Blue chief Dilip Mehta had launched an independent
lab-grown business. It’s been an open secret for months that major
manufacturers of natural diamonds have been exploring the sector, Rosy Blue
being just one of them.
A significant number of De Beers’ approximately 80 sightholders
are already trading in synthetics or considering doing so, market consultants told
Rapaport News. Many of them are focusing on the engagement-ring market,
and are working under separate
names from their natural businesses to ensure
clear segregation.
“Margins
[on synthetics] are better than natural diamonds currently, as anyone involved
in that market can tell you,” explained Russell Mehta, Rosy Blue’s managing
director. “In the current
natural-diamond environment, we’re losing money on every single rough-diamond
purchase we make from primary sources. You can ask any direct customer
of mining companies — every single company is losing money.”
Dilip Mehta’s new company will soon begin manufacturing lab-grown
polished in Surat using rough produced in China, The Times of India
reported Tuesday. “This one is our own venture and
nothing to do with Rosy Blue,” Dilip Mehta, Russell’s uncle, was quoted as saying.
Rosy Blue itself
has already been toying with the category: It recently started supplying
synthetic polished when customers demand it, Russell Mehta noted in an
interview with Rapaport News. Rosy Blue will not necessarily buy from Dilip Mehta’s new venture, but
is “free to source [lab-grown diamonds] to meet its requirements from any
source that meets its quality, price and service criteria,” Russell Mehta
added.
Exports on the rise
India has seen a sharp rise in its trade of synthetic
diamonds in the last year as more companies move into the market. Exports of lab-grown polished more than doubled to
$200.3 million in the six months ending September 30, from $97 million in the
same period a year ago, according to data from the Gem & Jewellery Export
Promotion Council.
Some
companies see the sector as an opportunity in itself, while others are using it
to hedge their business, noted Anish Aggarwal, a partner and co-founder
of diamond consultancy Gemdax. However, they must also consider whether those
margins will last, he argued.
“Going into lab-grown just because natural is not making
money for you is probably not a long-term business plan,” he said. “A long-term
business plan is to develop a solid value proposition for lab-grown, in the
same way it’s important to build a solid proposition for natural.”
Synthetics best practices
De Beers
has been preparing for
the inevitability that more of its clients will move into synthetics. The
mining company is working on guidelines to ensure its customers market lab-grown
in a fair way and avoid false or misleading statements. For example, it will
not allow companies to claim that lab-grown diamonds are more environmentally
friendly than naturals, or that the natural industry harms people, Stephen
Lussier, De Beers’ executive vice-president of consumer and brands, stressed at
the Dubai Diamond Conference in September.
The
company is in the business itself: In 2018, it launched Lightbox, a line of
fashion jewelry featuring lab-grown diamonds. It is promoting the category as a
low-cost, fun product, pricing the items at $800 per carat, and insisting that
natural diamonds are still consumers’ jewelry of choice for important
milestones such as engagements.
De Beers
said it would not actively stop sightholders from marketing synthetics for
bridal jewelry, as Signet Jewelers, for example, does with its line of
lab-grown diamond pieces on its James Allen site.
However,
it is updating its Best Practice Principles (BPPs) with new rules to ensure sightholders and
accredited buyers avoid false claims about synthetics, and plans to release the
changes in January as part of its annual review of the BPPs. The
existing document, which outlines the conditions of receiving natural rough
supply, mandates full disclosure, and bans clients from using misleading terms
for synthetic diamonds such as ‘natural’, ‘real’ or ‘cultured.’
A matter of principle
“Sightholders are of course at liberty to make their own
decisions about their commercial activities and approach, as long as their
activities comply with the BPPs,” added Feriel Zerouki, De Beers’ senior vice president of
international relations and ethical initiatives. “This places a range of
requirements on sightholders relating to responsible behavior with [lab-grown
diamonds], including disclosure, segregation and testing, but each business
makes its own decisions about [its] commercial approach.”
In the coming two months, the miner will also publish a
separate statement of principles that will act as a guideline to help promote
consumer confidence, dealing with issues such as misleading statements, Zerouki
explained.
The executive would not say how many sightholders were
active in the synthetics market. But the number is likely growing, an industry
consultant noted on condition of anonymity.
“There’s an absolute flood of [De Beers], Rio Tinto or
Alrosa sightholders looking into or already involved in lab-grown,” the
consultant said. “You could go down the list of rough cutters, and with very
few exceptions, a great many of them are already looking to buy supply or
investing in growers themselves.”
Image: De Beers’ Global Sightholder Sales offices in Gaborone, Botswana. (De Beers)
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Tags:
De Beers, Joshua Freedman, lab-grown diamonds, Rapaport News, Sightholders, Synthetic diamonds, Synthetics
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