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August 4, 2014

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Home » Business » Biz Special

Synthetics pose a conundrum for world diamond industry

Source: Agencies | August 4, 2014, Monday | Print Edition

DIAMONDS are a girl’s best friend — but only if they are natural.

That is the message mining companies and luxury jewelers are keen to instill in consumers as the diamond trade faces a growing challenge from the production of synthetic diamonds.

Global diamond jewelry sales are worth more than US$72 billion a year, according to the World Diamond Council, and jewelers like Tiffany and diamond miners led by De Beers stress that a jewel mined at great expense, and often with great risk, is infinitely more valuable than one made by man.

But it can be hard to tell the difference. Synthetic diamonds can be manufactured in a laboratory to the extent that they have the same properties as natural ones, raising the risk that a synthetic product could one day inadvertently end up in a luxury jeweler’s showroom.

“God help the major diamond jeweler, be it Cartier, Tiffany, Van Cleef, anybody, who puts a piece of jewelry out there and it’s later found to be having synthetic diamonds in it without disclosure. That fear is what’s driving the industry,” said Martin Rapaport, chairman of the Rapaport Group, which is the primary source of diamond price information around the world.

Synthetic diamond production is still small: annual output of gem-quality rough synthetic diamonds is less than 350,000 carats, a fraction of the 125 million carats of natural gem-quality rough, according to India’s Natural Diamond Monitoring Committee.

Without disclosure

Synthetic diamonds are legitimate and are increasingly used for industrial purposes, and higher quality lab-produced diamonds are used in jewelry. What worries the industry is their use in natural diamond jewelry without disclosure.

Tiffany says it is confident it is not at risk of inadvertently selling synthetic diamonds. “We do not and will not sell non-mined diamonds. Tiffany’s insistence on only the highest standards produces diamonds that are of the utmost beauty,” the company said.

But the diamond industry is stepping up action and technology to ward against the mixing of synthetics and natural diamonds in the market.

In a corner of the trading floor on the Israel Diamond Exchange, one of the world’s largest diamond markets, in Ramat Gan near Tel Aviv, a worker operates a new machine developed by the Gemological Institute of America (GIA), offering to test any diamond if a buyer is unsure of its origin.

“We have to be very cautious. Very, very cautious, and check. Not go according to our expertise only. We have to use this machinery,” said Shmuel Schnitzer, president of the exchange.

The exchange has banned synthetics from its trading floor since last year and adopted the slogan “Natural is Real” for its advertising and marketing.

If someone is caught peddling undeclared synthetics? “He’s finished. Because the main thing here at our business is trust,” said Schnitzer.

De Beers, owned by Anglo American and the world’s largest supplier of rough diamonds by value, has just developed an Automated Melee Screening instrument that can test large parcels of small diamonds at a rate of 360 stones per hour. “I think we put a good number of measures in place. We’ve been developing a lot of technology in order to assist the marketplace in identifying synthetics,” said Paul Rowley, executive vice president in charge of sales at De Beers.

Depending on who you ask, synthetic diamonds trade at a 20-50 percent discount to the natural stones.

While they are unlikely to ever fetch the same price as natural diamonds, synthetics are here to stay, said diamond consultant Edahn Golan.

“Their introduction into the market in a major way is inevitable. Right now it’s a trickle,” Golan said.

In the past two years, reports have popped up of undisclosed mixing, breeding a level of mistrust within the diamond supply chain.

Chemically, physically and optically the two kinds of diamonds are the same, said Tom Moses, chief laboratory and research officer at the GIA, which grades and evaluates diamonds.

The only thing differentiating them is how they are formed — one underground over a couple billion years, the other in a lab over two to three days.

The GIA has discovered undeclared lab-grown diamonds, Moses said, but “fortunately, it’s a very small number of instances.”

Ultimate gift

The industry has experience of having to protect the market. Conflict diamonds, or “blood diamonds,” whereby production in countries such as Angola or Sierra Leone among others has been used to fund violent conflict or involves human rights abuses, have been a particular problem.

International pressure on governments and the diamond industry to take action to eliminate conflict diamonds from international trade has had some success although the problem has not been wiped out entirely. Tackling the undisclosed mixing of synthetic diamonds may be an even bigger challenge because the product is so sophisticated.

“How can you trust your supplier? What is your supply chain like? The issue isn’t just if the diamonds are involved in human rights abuses anymore,” Rapaport said. “This whole idea of trust within the industry, this is now being raised to a much higher level than it ever was before.”

One case that caused a stir was in 2012 when the lab of the International Gemological Institute — a certifier of diamonds like the GIA — in Antwerp uncovered in a parcel of about 1,000 small diamonds believed to be natural, that more than 600 were man-made.

And they were not “ordinary” synthetics, but included “impurities, which were apparently intentionally introduced in the synthetic production process not to make the stone more beautiful but solely to make the stone look more natural,” the institute said.

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