Synthetic Diamonds Are Giving Industry Yellow Fever
October 09, 03“We are seeing a sudden and rather unexplained increase of yellowish goods in our production,” was a rather quite innocent remark made by one of the world’s largest diamond manufacturers. However, I was quite shocked and upset. Could it mean, I wondered, that, unwittingly, huge volumes of man-made diamonds (synthetic diamonds) are entering into the diamond market – and we simply don’t know about this? Not everybody is conscious of the fact that the vast majority of synthetic diamonds are fancy yellow or modifications thereof. Such colors are extremely rare in nature and this fact alone should alert suspicion. It is extremely unlikely that a major manufacturer, with steady sources of rough supply, would suddenly see a dramatic increase of yellowish goods. In the course of normal business, especially with smaller goods, most traders “wouldn’t notice.” And then there are others who “wouldn’t care.”
The likelihood or possibility that high-quality “man-made” synthetic diamonds would be produced for jewelry purposes – and their potential for “misrepresentation” -- has been an issue of concern since 1954, when General Electric first produced synthetic diamonds. In the 1960’s, it was “whispered” that the Russians were using so-called “BARS” diamond-growth technology and the literature recalls a never formally confirmed “slip of the tongue” remark by a De Beers official (in the 1980’s) who didn’t rule out that some synthetic rough may have appeared in their buying and selling assortments. A major U.S. sightholder, years ago, confirmed having had found synthetics in a DTC sight box.
My concern today is not so much with the synthetic (laboratory grown) U.S. Gemesis and Apollo diamonds, but rather with obscure situations of which there is little information. In Armenia, for example, the "Almast" synthetic diamond producing plant has started issuing 5-6 new types of diamond-cutting presses, enabling it to significantly increase their already enormous production of synthetic stones. According to Khachatur Zakharyan, the managing director of "International Business Center," which owns the plant, within the first eight months of 2003, the factory produced 8 million carats of synthetic diamonds. With the new equipment, the production volumes may reach 2-3 million carats monthly, he said.
I hope that the man is exaggerating – but I don’t know that. I am afraid he may be telling the truth. If a single plant alone indeed is capable of producing 25 million carats a year (all diamond mines together produce 120 million carats a year of natural diamonds), then the ramifications may be enormous. There is little doubt that there are by now quite a few factories engaged in the production of man-made diamonds.
What should be of considerable concern is that the entire production of the synthetic stones produced in the “Almast” plant is exported to Russia and Iran. Both countries – but especially the latter one – cannot be reasonably expected to adhere to western product disclosure principles. In the hands of the wrong parties, some of this production also could be applied by ideologically motivated groups aiming at undermining the stability of the diamond market or gaining some fast cash.
Maybe, the industry ought to assess the synthetic environment again and challenge some of our conventional wisdoms. The industry has always been told by De Beers Gem Defensive People that no harm would come to the diamond industry, provided (1) the synthetic nature of the stones are disclosed; and (2) affordable (or accessible) detection mechanism differentiating the synthetic stones from others are widely available. As journalists, that is exactly what we always have reported.
In reality, the potential dangers to market stability has never been analyzed as such, as it has been assumed that “detection” ability reduces or eliminates the risk – and that the high production costs of synthetic diamonds would make the whole subject hypothetical anyway.
Is it? If a manufacturer who has manufactured goods for many decades suddenly complains about the high degree of yellow goods in his polished production, can we afford to ignore that? The Sunday Herald recently published a story titled “Perfect diamonds made in 72 hours: US factory manufacturing gems indistinguishable from real thing.” Their first paragraph reads as follows: “They have bewitched lovers, bedazzled women and brewed greed in the hearts of men, their glittering allure forged amid three million years of geology's white heat. Beguilingly pure, coveted and formerly rare, diamonds may still be forever, but now a Massachusetts factory is knocking them out in three days flat.”
Then a crucial point is being made: the company doesn’t like to call its diamonds “synthetic”. "These stones are not synthetic. They have been grown as opposed to mined but are as real as any diamond can be, meeting all the requirements and bearing every characteristic of a natural stone," says Robert Linares, chairman of manufacturers Apollo Diamond. "We are currently working with a number of distributors and retailers to offer consumers high-quality gems that will sell at a discount of up to 30%. In a live demonstration on ABC's Good Morning America, representatives from New York's International Gemological Institute failed to pick the manufactured stone from a selection of natural diamonds. Only identifying the man-made gem after using advanced equipment, the baffled experts concurred that a regular jeweler’s chance of spotting the ringer amounted to "zero".
What makes the present situation so dramatically different from previous years is not the available synthetics technology, but the growing determination by its proprietors to achieve market-share. The high-pressure/high-temperature (HPHT) technology used by Gemesis to produce yellow synthetic diamonds is not new. The growth method, in terms of the temperatures and pressures accessed and the growth chemistries used, are similar to those that have been used by major synthetic diamond manufacturers for over 40 years. The main difference is that the presses used presently by Gemesis, which first emerged from Russia in the early 1990’s, are considerably smaller and cheaper than those used by industrial diamond manufacturers. This limits production to one synthetic diamond per growth run so that many hundreds of presses would be required to achieve significant volumes. Gemesis presently has some 27 pressed. It plans to install 16 growth units per month, bringing it to 300 units within two years. If these plans are realized, it will produce close to 20,000 carats a year.
These are not small volumes for one single supplier. The GIA, as recent as its Winter 2002 issue of Gem and Gemology, tries to reassure the public. “Such apprehensions [i.e. the potential for misidentification] have overshadowed the fact that only a very small number of gem-quality synthetic diamonds have entered the marketplace (approximately 1,000 carats annually). In spite of their limited availability, synthetic diamonds have been studied extensively, and the means to distinguish them from natural diamonds have been widely publicized. To date, large-scale commercial production of synthetic diamonds for jewelry use has not been fully achieved.”
We believe that it may well be necessary to review the conclusions about rarity and lack of large-scale production. No doubt, the vast majority of synthetic diamonds would be very small stones; colors and sizes for which no certificate-demand exists. The GIA may – with the very best intentions – not have the tools the measure to sheer size of the synthetic market, especially with production taking place mostly in Eastern Europe. We don’t have the exact figures either, but we get daily feedback from manufacturers and traders. And we don’t like what we hear.
Aware of the sensitivity involved, we wouldn’t even write about the subject if we didn’t believe there is a real issue out here. And the issue is not one of small stones only; Gemesis, using its latest equipment, needs only 80 hours to produce a single synthetic diamond crystal up to 3.5 carat in size. It is currently planning the design of equipment with a larger growth chamber in order to produce crystals up to 15 carats.
Let me quote the Sunday Herald article again: “The difficulty of identifying Linares's ersatz gems is due to the fact that they are effectively real diamonds. Manufactured in a secret laboratory near Boston using a process called chemical vapor deposition, in which intense heat and pressure are applied to make molten carbon atoms attach to a tiny diamond seed - ultimately creating a flawless three-carat stone in around 72 hours.
“The news has provoked a horrified reaction in fashion circles. Appalled, many sticklers for style fear that after centuries of high status, couture's crowning adornment is about to be robbed of its sheen. "It's simply disastrous. Diamonds are special due to their rarity and value, they're something people aspire to and that make you feel wonderful when they're worn," said celebrity stylist and fashion expert Ceril Campbell. "No girl would feel the same way about her engagement ring if she discovered it had been spat out by a machine the week before."
“No less alarmed is the diamond industry itself. For decades firms like De Beers - the sector's biggest player - have controlled diamond prices by maintaining a $4bn stockpile, but, with companies such as Florida's Gemesis Corp also perfecting their production processes, manufacturing now looks set to explode. Upon hearing that the gem he'd just valued at $5000 had actually been made for less than $100, top Antwerp dealer Aron Weingarten summed up the turmoil facing his business: "Unless they can be detected," he said, "these stones will bankrupt the industry," concludes the Sunday Herald.
Don’t hold your breath. This industry isn’t going bankrupt so fast.
But the public may well accept the fact that non-mined diamonds are, indeed, diamonds. Some clever marketing firm may suggest that a good honest homegrown Florida diamond may be rarer and more valuable than a questionable African-origin stone. Some of the synthetics go for $2500 p/c polished; that isn’t cheap!
In a rather odd way, the synthetic diamond producers reap some of the benefits of Supplier of Choice. Supplier of Choice is triggering a proliferation of brands. Many of these will not be lasting, as the manufacturers will encounter either rough availability problems or not enjoy the margins to sustain expensive and continued brand maintenance programs. The synthetic producers will also use brands (as, for that matter, do cubic zirconia producers) – but they will have both the supply certainty and the financial resources to sustain long-term promotion programs. In the end, one might get “brand confusion” among consumers – and the fact that some brands may be synthetic may get lost in the noise. In the past, the generic advertising of De Beers focused solely on the product, the natural diamond. Brand-competition provides a different market environment.
Stephen Lussier at De Beers has often been quoted comparing synthetic diamonds and natural grown diamonds as selling a real Picasso or a fake. Every woman would like to have “the real thing”. That becomes difficult, however, if even seasoned traders don’t recognize what is, indeed, the “real thing”. It becomes even more difficult when brand marketing may actually convince the public that the homegrown diamond is just as ever lasting and valuable as its mined counterpart. There are various future scenarios related to synthetics – and many involve chilling thoughts…which, for time being, are better left unsaid.