Market in Transition: LGD Price Erosion Sparks Strategic Shift, Natural Diamonds Seek Footing
Trade grapples with dual challenges: managing LGD inventory amid unprecedented deflation while navigating a still-soft natural diamond market.
The diamond industry is navigating a complex correction, marked by a severe price collapse in the lab-grown diamond (LGD) segment and a tentative search for stability in natural diamonds. While some voices proclaim a full-scale revival for naturals, a deeper look at the data reveals a more nuanced picture crucial for every trade player to understand.
The LGD Sector: A Story of Price vs. Demand
The most dramatic shift is unequivocally in the LGD market. Trade insiders report acute pressure as prices for polished lab-grown goods have fallen precipitously.
- Data Point: Independent industry analytics from Paul Zimnisky show the price of a 1-carat lab-grown diamond has fallen by over 80% since 2016, with the most intense deflation occurring in the last 18-24 months. Wholesale prices are now a fraction of their former levels.
- Trade Impact: This has created a significant inventory management challenge. Retailers and distributors who purchased stock even six months ago are facing massive write-downs, squeezing margins and creating a cautious approach to new purchasing.
However, it is critical to distinguish between price collapse and demand collapse.
- Data Point: Signet Jewelers (Kay, Zales, Jared), in its Q1 2025 report, stated that LGDs now represent 36% of its bridal unit sales. This indicates that while the value per carat is down, consumer offtake at the retail counter remains robust in volume terms. The challenge for the trade is navigating this new low-margin, high-volume reality.
The Natural Diamond Market: Stabilization, Not Yet a Revival
The narrative of a booming natural diamond comeback is not yet fully supported by hard market data. The LGD’s value proposition crisis has undoubtedly created a rhetorical opening for natural diamonds, but a broad-based revival remains elusive.
- Price Index Data: The Natural Diamond Index (NDI) from PolishedPrices shows a market that has been flat to declining over the past year. While there may be pockets of improved movement for specific categories, there is no data indicating a widespread, sustained price increase.
- Rough Market Reality: Major miners are still facing headwinds. De Beers, for instance, has continued to offer concessions to sightholders and lower rough prices in response to soft demand. Petra Diamonds’ recent tenders have also realized lower average prices.
This suggests that any “revival” is currently sentiment-driven in specific trade circles rather than reflected in the fundamental price and sales data from the primary and polished markets.
Strategic Outlook for the Trade
The current environment presents distinct challenges and opportunities:
- For LGD Players: The era of high margins per carat is over. The focus must shift to operational efficiency, transparent pricing, and volume-driven business models. Marketing must evolve beyond just price to emphasize design, consistency, and brand story.
- For Natural Diamond Jewellers: The key opportunity is to refocus the conversation on value retention and rarity. However, this is not a return to the status quo ante. The industry must continue to innovate on sourcing, certification, and consumer education to justify natural diamonds’ price point in a world with a cheap alternative.
- For the Entire Industry: Macro-economic factors—inflation, high interest rates, and reduced luxury spending in key markets like China—continue to be a drag on both segments. The health of the overall diamond market is still tied to a broader economic recovery.
The JewelBharat Bottom Line
The market is not experiencing a simple swap of one diamond category for another. Instead, we are witnessing a painful but necessary bifurcation.
The LGD segment is maturing into a high-volume, commodity-like business with severe pricing pressure. The natural diamond segment is being forced to reaffirm its fundamental value proposition in a newly competitive landscape. For the trade, success will depend on understanding this bifurcation and strategically positioning one’s business accordingly, rather than reacting to oversimplified narratives of collapse and revival.
Disclaimer: JewelBharat.com is committed to providing the Indian jewellery trade with accurate, data-driven insights. Our analysis is based on publicly available financial reports, industry indices, and expert commentary.
