De Beers Sightholders Embracing Synthetics

RAPAPORT... Few in the diamond industry were surprised by the news that Rosy Blue chief Dilip Mehta had launched an independentlab-grown business. It's been an open secret for months that majormanufacturers of natural diamonds have been exploring the sector, Rosy Bluebeing just one of them.A significant number of De Beers' approximately 80 sightholdersare already trading in synthetics or considering doing so, market consultants toldRapaport News. Many of them are focusing on the engagement-ring market,and are working under separatenames from their natural businesses to ensureclear segregation."Margins[on synthetics] are better than natural diamonds currently, as anyone involvedin that market can tell you," explained Russell Mehta, Rosy Blue's managingdirector. "In the currentnatural-diamond environment, we're losing money on every single rough-diamondpurchase we make from primary sources. You can ask any direct customerof mining companies - every single company is losing money."Dilip Mehta's new company will soon begin manufacturing lab-grownpolished in Surat using rough produced in China, The Times of Indiareported Tuesday. "This one is our own venture andnothing to do with Rosy Blue," Dilip Mehta, Russell's uncle, was quoted as saying.Rosy Blue itselfhas already been toying with the category: It recently started supplyingsynthetic polished when customers demand it, Russell Mehta noted in aninterview with Rapaport News. Rosy Blue will not necessarily buy from Dilip Mehta's new venture, butis "free to source [lab-grown diamonds] to meet its requirements from anysource that meets its quality, price and service criteria," Russell Mehtaadded.Exports on the riseIndia has seen a sharp rise in its trade of syntheticdiamonds 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 thesame period a year ago, according to data from the Gem & Jewellery ExportPromotion Council.Somecompanies see the sector as an opportunity in itself, while others are using itto hedge their business, noted Anish Aggarwal, a partner and co-founderof diamond consultancy Gemdax. However, they must also consider whether thosemargins will last, he argued."Going into lab-grown just because natural is not makingmoney for you is probably not a long-term business plan," he said. "A long-termbusiness plan is to develop a solid value proposition for lab-grown, in thesame way it's important to build a solid proposition for natural."Synthetics best practicesDe Beershas been preparing forthe inevitability that more of its clients will move into synthetics. Themining company is working on guidelines to ensure its customers market lab-grownin a fair way and avoid false or misleading statements. For example, it willnot allow companies to claim that lab-grown diamonds are more environmentallyfriendly than naturals, or that the natural industry harms people, StephenLussier, De Beers' executive vice-president of consumer and brands, stressed atthe Dubai Diamond Conference in September.Thecompany is in the business itself: In 2018, it launched Lightbox, a line offashion jewelry featuring lab-grown diamonds. It is promoting the category as alow-cost, fun product, pricing the items at $800 per carat, and insisting thatnatural diamonds are still consumers' jewelry of choice for importantmilestones such as engagements.De Beerssaid it would not actively stop sightholders from marketing synthetics forbridal jewelry, as Signet Jewelers, for example, does with its line oflab-grown diamond pieces on its James Allen site.However,it is updating its Best Practice Principles (BPPs) with new rules to ensure sightholders andaccredited buyers avoid false claims about synthetics, and plans to release thechanges in January as part of its annual review of the BPPs. Theexisting document, which outlines the conditions of receiving natural roughsupply, mandates full disclosure, and bans clients from using misleading termsfor synthetic diamonds such as 'natural', 'real' or 'cultured.'A matter of principle"Sightholders are of course at liberty to make their owndecisions about their commercial activities and approach, as long as theiractivities comply with the BPPs," added Feriel Zerouki, De Beers' senior vice president ofinternational relations and ethical initiatives. "This places a range ofrequirements on sightholders relating to responsible behavior with [lab-growndiamonds], including disclosure, segregation and testing, but each businessmakes its own decisions about [its] commercial approach."In the coming two months, the miner will also publish aseparate statement of principles that will act as a guideline to help promoteconsumer confidence, dealing with issues such as misleading statements, Zeroukiexplained.The executive would not say how many sightholders wereactive in the synthetics market. But the number is likely growing, an industryconsultant noted on condition of anonymity."There's an absolute flood of [De Beers], Rio Tinto orAlrosa sightholders looking into or already involved in lab-grown," theconsultant said. "You could go down the list of rough cutters, and with veryfew exceptions, a great many of them are already looking to buy supply orinvesting in growers themselves."Image: De Beers' Global Sightholder Sales offices in Gaborone, Botswana. (De Beers)