The Indian diamond manufacturing sector is leaning more heavily toward lab-grown diamonds (LGDs), increasing exports of loose lab-grown diamonds, mainly to the US. These exports seemingly are coming at the expense of natural diamonds, with the total value of LGD exports rising 2% year to date, while the value of exported natural diamonds declined 9%.
And yet, while the volume of LGD exports reached 60% of total diamond exports in August, by value they represented just 12%.
Why are Indian Diamond Manufacturers Shifting To Lab-Grown Diamonds
Although LGDs still account for a relatively small portion of India’s overall diamond activity, Indian companies seem to have a strong belief in the future of lab-grown diamonds. Their low, and decreasing, average export value of $61 per carat hides a number of economic advantages.
First, there is faster sell-through, which supports steady and growing cash flow. While natural diamonds can take two years to sell at retail, LGDs can sell within a few months.
Another important benefit is high gross margins and profitability. Coupled with improved cash flow, this creates an appealing profit proposition.
The prospect of high-tech applications is alluring as well, particularly as a way to diversify. The potential windfall if these applications materialize is helping fuel their patience.
In addition to all of this, there is another element driving the Indian market toward LGDs that has not been really discussed: control.
How LGDs Give India Control Over its Supply Chain
For decades, the Indian diamond industry was largely dependent on mining companies. Manufacturers had to work hard to prove that they deserved rough diamond allocations. Now they can take their destiny into their own hands, deciding what goods they produce, at what pace, and how they manage their inventories.
The way forward, in the eyes of many Indian traders, is to keep one leg in natural while expanding their activities in lab-grown diamonds. They fear that natural diamonds could lose consumer interest, while hoping that technological developments, if they materialize, will take their family businesses far into the future.
It’s a wild ride, and they’re riding it willingly.
Contact us for deeper insights into the Indian diamond trade, the data behind these trends, and how LGDs are shifting market control to India. Explore our lab-grown diamonds backgrounder, and LGD retail insights.
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Do you have any information on how much rough the LGD Indian trade buys from China relative to how much rough is produced in India? Thank you.
Hi Mark, yes, we have those figures. Please email me.