The diamond industry is in trouble as it loses its sparkle in China

• The diamond industry is in trouble, with declining Chinese demand and the rise of lab-grown options.
• China is the industry's second-largest market, but fewer Chinese are getting married.
• The price of natural diamonds has dropped by 30% from their record high in 2022.

The mined diamond industry is in trouble. In China, the industry's second-largest market, lab-grown varieties, a sluggish luxury market, and low marriage rates are causing it to lose its sparkle.

Duncan Wanblad, the chief executive of Anglo-American, De Beers' largest shareholder, voiced the industry's challenges in an interview with the Financial Times last week.

"It is the one that is real bottom of cycle," he told the outlet, referring to the decline in the price of naturally produced diamonds.

Wanblad said that the company plans to divest its stake in De Beers, the most famous name in diamonds, but added that it would be a challenging and lengthy process.

The Zimnisky Global Rough Diamond Index, which tracks the price change of natural rough diamonds, has shown a steady decline over the past two years.

According to the index, prices have fallen about 6% this year, and have sunk by about 30% from their all-time high in 2022.

In a separate interview with the Financial Times' Chinese edition, De Beers' CEO Al Cook said that although China is the company's most important market, it is also becoming increasingly challenging.

Cook said one issue is a shift in perception of lab-grown diamonds in the country.

Lab-grown diamonds are becoming more popular worldwide, and are cheaper and quicker to produce. The Knot's Real Weddings Study found that nearly half of engagement rings bought in the US last year featured a lab-grown diamond as a center stone.

A social media analysis by Daxue Consulting found that lab-grown diamonds are also gaining traction in China, particularly among cash-strapped younger people.

Even so, De Beers recently announced that it would halt its six-year experiment with selling lab-grown diamond jewelry.

Paul Zimnisky, who runs the Zimnisky index, told Business Insider that he believes the "fad" for synthetic diamonds will start to fade, but in a follow-up email this week, he said that it still impacts supply and, consequently, the price of diamonds.

Zimnisky said another "notable" factor is that the Chinese luxury market has struggled to recover, with demand for diamonds falling far short of the peak levels seen during the COVID-19 pandemic.

During the pandemic, some people spent their money on luxuries like diamonds, since experiential purchases, such as expensive vacations, were mostly unavailable.

Meanwhile, according to Daxue Consulting, a decline in China's marriage rate, which hit a record low in 2022 before rebounding last year, means fewer people have bought wedding and engagement rings.

Broader economic uncertainty in China is also a factor, according to Zimnisky, who said consumers may be choosing gold over diamonds as an investment, since the value of gold has been more stable recently.

However, he told BI that the diamond industry's fate is not set in stone.

"Of course, there will be ups and downs," he said.