The Diamond Market Crash: How the Once-Unbreakable Industry is Cracking
How Lab-Grown Alternatives, Geopolitical Tension, and Shifting Values Are Reshaping the Future of Diamonds
For decades, diamonds were synonymous with wealth, love, and luxury. They adorned engagement rings, royal crowns, and red-carpet celebrities. But in recent years, the lustre of the diamond market has dulled. Prices are down, production has fallen, and an unlikely contender—the lab-grown diamond—is giving natural diamonds a run for their money. Let’s explore the factors driving this dramatic shift in the diamond industry.
1. Declining Production and Plummeting Prices
In 2023, global diamond production dropped to 111.5 million carats, marking an 8% decline—the lowest level since the Kimberley Process began tracking diamond production. The total value of diamond production also fell by 20%, amounting to $12.73 billion, with the average price per carat dropping by 14% to $114.
One of the biggest players in the market, Russia’s Alrosa, reported a 4.6% decrease in its 2024 diamond output. Alrosa plans to suspend some production activities in 2025 and reduce its workforce, a response to persistently low prices and market volatility. The company’s production cutback highlights the broader industry's struggle with oversupply and weakened demand.
2. The Rise of Lab-Grown Diamonds (LGDs)
Lab-grown diamonds have emerged as a disruptive force in the diamond industry. Once a niche product, they’ve become mainstream—and for good reason. Lab-grown diamonds are chemically identical to natural diamonds, but they come at a significantly lower price. A 1-carat lab-grown diamond can cost up to 80% less than a natural one, making it an attractive option for consumers who want luxury without the hefty price tag.
Lab-grown diamonds are also marketed as a more ethical and environmentally friendly alternative. Unlike mined diamonds, they don’t involve land disruption, displacement of communities, or questions about conflict financing. Companies like De Beers, long seen as a stalwart of natural diamonds, have even shifted to producing lab-grown diamonds through their Element Six subsidiary.
The growth of lab-grown diamonds has created an oversupply in the market, pushing natural diamond prices down. This shift reflects a change in consumer preferences—younger buyers are increasingly driven by price, sustainability, and ethical considerations.
3. Geopolitical and Economic Shocks
The diamond industry’s reliance on geopolitical stability has proven to be a significant vulnerability. The 2022 Russia-Ukraine conflict had ripple effects on the diamond supply chain, as Russian diamonds—which make up a significant portion of the global supply—faced international sanctions. This disrupted the flow of rough diamonds to major polishing hubs like Surat, India.
In Surat, tens of thousands of diamond polishers faced financial hardships due to factory shutdowns and production cuts. Without access to Russian rough diamonds, the supply chain slowed, causing delays and reduced productivity. The impact was so severe that industry groups called on global markets to relax sanctions on Russian diamonds, arguing that livelihoods in places like India were at stake.
The geopolitical crisis exposed a key vulnerability in the diamond supply chain—its dependence on a few major producers. As a result, calls for diversification of supply sources and more self-reliance have grown louder.
4. Changing Consumer Preferences and Demographics
The traditional narrative that “a diamond is forever” is no longer as compelling to younger generations. Millennials and Gen Z consumers have different spending habits, values, and lifestyle priorities. Unlike previous generations, they’re less inclined to see diamonds as essential purchases, especially for engagement rings.
In China, the one-child policy’s lasting effects are visible in demographic shifts. With fewer people getting married, the demand for engagement rings—a major driver of diamond sales—has declined. At the same time, younger consumers are shifting their preferences toward gold as an investment, given its perceived stability compared to diamonds, which are seen as more speculative.
Consumer sentiment has also shifted toward minimalism and sustainability. People are less interested in lavish, high-priced displays of wealth. This shift away from ostentatious consumption has fuelled interest in alternative gemstones and non-traditional jewellery, further weakening demand for diamonds.
5. Technology and Market Innovations
Technology has played a role in reshaping the diamond industry—both as a disruptor and an enabler. Lab-grown diamonds, after all, are the product of technological innovation. Companies have developed sophisticated methods to create high-quality diamonds in a matter of weeks, compared to the millions of years it takes to form natural diamonds.
De Beers’ Element Six focuses on advancing lab-grown diamond technology for industrial use, such as semiconductors and quantum computing. But beyond production, technology is also revolutionizing diamond sales. Online retailers, virtual showrooms, and augmented reality (AR) apps allow customers to “try on” diamond rings virtually before purchasing. This digital shift has democratized access to diamonds, but it’s also intensified price competition.
6. The Psychological Shift in Luxury Consumption
The definition of luxury is changing. Where luxury once meant exclusivity, heritage, and craftsmanship, today’s consumers see luxury as personal fulfilment, authenticity, and sustainable living. A generation that values self-expression over status symbols is more likely to spend on experiences than expensive jewellery.
For many young buyers, a lab-grown diamond—which is optically identical to a natural diamond—fulfils the "luxury" requirement. It’s a shift from owning something rare to owning something ethical and affordable. This shift poses an existential threat to natural diamonds, which have long been marketed as "rare" and "unique."
7. Industry Responses and Adaptation
The diamond industry isn’t taking these changes lying down. Major stakeholders like De Beers have introduced "track-and-trace" initiatives to assure customers of the ethical origin of their diamonds. By providing transparency in the supply chain, they hope to appeal to the values of younger consumers.
In response to the growing popularity of lab-grown diamonds, natural diamond companies are focusing on the concept of “value beyond the stone.” They’re doubling down on the idea that natural diamonds have a story—a tale of billions of years of natural formation—which lab-grown diamonds cannot replicate. De Beers has even launched its own line of lab-grown diamonds, albeit at a premium, aiming to control both ends of the market.
Another approach is to focus on niche markets and create “branded” diamonds. This tactic involves marketing certain diamonds as "special" or "unique" due to their origin or story—for instance, promoting Canadian diamonds as conflict-free or highlighting diamonds with a specific colour or rarity.
8. The Road Ahead
The fall of the diamond market is not a one-time event—it’s an ongoing shift in consumer behaviour, geopolitics, and technology. The rise of lab-grown diamonds, disruptions from the Russia-Ukraine war, and the changing values of Millennials and Gen Z are reshaping the entire industry.
To thrive in this new reality, natural diamond producers must innovate. Companies that once relied on exclusivity and heritage must now embrace transparency, sustainability, and technology. They must find ways to tell compelling stories about their products, connect with consumers on an emotional level, and prove their value in a world where lab-grown diamonds look and feel exactly the same.
As consumers demand more value, ethics, and transparency, the era of the "unquestioned diamond" is over. What lies ahead is a market that will reward adaptability, innovation, and integrity. For an industry built on the promise of “forever,” the challenge now is to ensure it has a future.
Blood Diamonds, no more.
Mukul Maurya