Friday July 12, 2013 13:58
A few weeks ago, a 1.29 carat colorless “E” synthetic with almost no inclusions (the largest of its kind) hit the polished diamond market.
Synthetics have been produced since the 1950’s, but the technology has been almost exclusively used to supply the world with industrial grade stones, not gem-quality diamonds. In 1954, General Electric successfully implemented a super high-pressure, high-temperature (HPHT) technology that was capable of producing a diamond in a laboratory that was chemically identical to that of a natural one. The process involved exposing carbon and graphite to extreme pressure and temperature, mimicking the natural diamond creation process. Almost 60 years later, versions of this process are still used to supply 98% (See Figure 1.1) of the world’s industrial grade diamonds. But, attempts at using HPHT to economically produce gem-quality stones have fallen short, as most lack clarity or size and have a yellowish or brown hue.
Source: The Kimberly Process, Bain & Co., Tacy LTD, Paul Zimnisky analysis
About a decade ago Chemical Vapor Deposition (CVD) diamonds began to appear in the gem diamond market. The CVD method can produce diamonds in a lower pressure environment than HPHT, using a gas such as methane and a substrate to grow diamonds. Diamond composition can be controlled to create a single crystal form allowing the production of very clean colorless diamonds over one carat in size much more economically then HPHT.
While HPHT has the advantage of using fewer ingredients and producing more diamonds more quickly, making the process most suitable for producing industrial grade diamonds, CVD is more suitable for manufacturing higher quality diamonds because the process permits more refined control over the chemical properties.
The record breaking 1.29 carat stone mentioned above was created by Florida based Gemesis Corporation (private) using CVD. The diamond is currently for sale on the company’s website for $7,633, about 38% cheaper than a natural equivalent which can currently be found on the market for around $10,500.
The impact that clean, colorless gem-quality synthetics will have on the jewelry market will greatly depend on consumer demand for non-natural diamonds, as synthetics currently only account for approximately 2% of supply (See Figure 1.1). But even as the availability of high quality synthetics continues to improve, there is no indication that gem buyers demand for natural stones will change. This was proven to be the case for rubies and sapphires, as high quality synthetics have been available for over 100 years, but their availability has not reduced the demand for natural stones, and the premium for natural over synthetic has held over the years. It will take substantial shifts in marketing campaigns and consumer attitudes for synthetic diamonds to pose a significant threat to natural diamonds in the jewelry market.
On a De Beers investor call in November 2012, when asked if the company is concerned about synthetics taking market share away from natural diamonds, an executive said, “we maintain the dream and the emotion and the symbolism and the luxury and the value associated with the natural diamond.” On the same call De Beers went on to express the importance of disclosure of synthetics to alleviate customer concern of being sold a synthetic when paying for the price of a natural. Technology has recently been developed capable distinguishing synthetic from natural diamonds in a way that is financially and technically within the reach of jewelers. In addition, there is an inherent incentive for jewelers to use proper disclosure when selling synthetics, as it would be fatal for a jeweler to be caught selling an undisclosed synthetic as a natural.
Synthetic gem-quality diamonds will most likely have a greater impact on technology than jewelry. There is pent up demand for affordable flawless diamonds in the semiconductor industry in particular. Since diamonds have a higher thermal conductivity than any other material, diamond microprocessors can run at speeds that would cause ordinary silicon chips to melt. Flawless synthetics are demanded in other high-tech applications as well, including infrared radiation transmission and high-sensitivity sensors. Up until now, diamond use in high tech industries has been limited because the cost has been prohibitive, but expect this to change with the greater availability of high quality synthetics.
REVISION – Friday July 12, 2013
Upon further research, I have concluded that 2013 estimated mine production of gem-quality diamonds should be closer to 50 million carats, and industrial-quality production should be closer to 80 million carats. In addition, I estimate recycled diamond supply to be closer to 5 million carats in 2013. Figure 1.1a represents these revisions.
Source: Bain & Co., Tacy LTD, Kimerbly Process, Paul Zimnisky analysis
*Based on an estimation of 130M carats mined in 2013, of which only approximately 40% will be of gem-quality, with the balance being industrial grade.
By Paul Zimnisky