The Lab-grown Diamonds (LGDs) are anticipated to see a revival in FY25, with exports expected to grow by 7-9% to reach a value of approximately $1500-1530 million, according to CareEdge Advisory.
LGD exports have experienced a recent decline, with a year-on-year decrease of approximately 16.5% in FY24. Despite an increase in sales volume, decreasing prices have adversely affected exports. However, CareEdge Advisory suggests that the depreciating rupee may provide some support to the industry.
Moving forward, the demand for LGD exports is projected to rebound in FY25, as demand for naturally mined diamonds may continue to be sluggish. This trend is linked to factors such as price competitiveness, environmental sustainability, and increased competition from India compared to other prominent LGD-producing countries.
Colin Shah, managing director of Kama Jewelry, remarked on the report, stating, “LGDs have been capturing attention due to their cost-effectiveness and environmentally friendly characteristics. The demand for LGDs in both domestic and international markets had been steadily increasing until FY23. However, the subdued sentiment in FY24 was influenced by various global economic factors such as ongoing geopolitical tensions and price volatility, resulting in an overall decline in exports. Interestingly, countries like Germany, the UK, Italy, and China experienced an export surge during FY24, possibly due to the G7 ban on Russian-origin diamonds.”
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Shah mentioned, “Although the downward trend has significantly impacted the general appeal for LGDs, there’s promise for demand revival ahead. This optimism is fueled by a decrease in natural diamond prices driven by weakened purchasing power, laying a favorable foundation for LGD demand to thrive.”
India currently produces over three million lab-grown diamonds annually, contributing to 15% of the global production. It holds the position of the second-largest producer globally, after China. Alongside China and India, other key players in lab-grown diamond production include the U.S., Singapore, and Russia. The Indian market for lab-grown diamond jewellery was valued at US$ 264.5 million in 2022, with an anticipated rise to $300 million in 2023. Despite its growth, the lab-grown diamond industry has encountered challenges, notably a surge in supply leading to a substantial decrease in prices.
However, the India-UAE Comprehensive Economic Partnership Agreement (CEPA) is poised to enhance the growth of the lab-grown diamond industry. For instance, Finance Minister Nirmala Sitharaman, in the Budget 2023-24, announced a reduction in basic customs duty on seeds used in LGD manufacturing from 5% to NIL. This strategic move aims to bolster LGD exports from India amidst dwindling natural diamond reserves. Additionally, the depreciating rupee is expected to provide some support to this export-oriented sector.
High-quality lab-grown diamonds with certified authenticity, manufactured using advanced equipment and precise process parameters, will attract more international consumers, thus revitalizing the export business. Similar to Cut and Polished Diamonds (CPD), the recent decline in LGD prices has resulted in a decrease in India’s LGD exports to key destinations. LGD exports experienced a decline of 16.5%, dropping from US$ 1680.22 million in FY23 to US$ 1402.30 million in FY24.
In FY24, the USA, Hong Kong, and UAE collectively dominated India’s lab-grown diamond exports, representing 90% of the total. From FY16 to FY23, LGD exports witnessed a remarkable ~60% Compound Annual Growth Rate (CAGR). However, in the transition from FY23 to FY24, there was a significant decline of 16.5% year-on-year.
While exports to most countries experienced a downturn, notable exceptions include Germany, the UK, Italy, and China, which displayed substantial export growth during FY24. This surge in certain markets could be attributed, at least in part, to the G7 ban on Russian-origin diamonds.
The primary factors contributing to the export decline are linked to the reduced prices of lab-grown diamonds, indicating stable volumes but resulting in diminished export value. The average price per carat for LGD stood at US$198.22 for the first ten months of FY24, whereas natural diamonds commanded a significantly higher price of US$4357 per carat during the same period.
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