Brave New World



Separating real from man-made is no longer a natural

What do these four recent news items have in common? • De Beers announced a rationing plan limiting production to 40 million carats a year, emphasizing that worldwide diamond production would fail to meet rising demand in the coming years. • A new type of high-quality, unseeded cultured pearl hit the market in March. Classified as natural, the pearls’ identification process was difficult, say lab technicians. • The Diamond Dealers Club in New York City is embroiled in a legal brouhaha over voting procedures and defining who is a legitimate member. • And, as we report on page 98, a CVD (chemical vapor deposition) diamond larger than 1.00 ct. was recently graded, a first for a man-made diamond this size.

These four developments point to the complex new reality of our rapidly changing standards. The limitations of “natural” are confronting the tsunami of technology. What does this mean for you? Let’s take a look.

First, De Beers: The diamond titan lost monopolistic dominance a decade ago and is now maximizing value for shareholders, despite the differing interests of its three shareholders. De Beers will probably go public by next year, signaling its transition to a different kind of operation—one, incidentally, intended to cash out the owners while the company’s position in mining and marketing diamonds still remains sizable. Curtailing output acknowledges that its halcyon years of diamond production and market expansion may be ending. Significant new finds will be rare and curbed by environmental restrictions.

Next, techno-pearls: The story about top-quality non-natural pearls points out the inherently disruptive nature of technology, which often makes some lab tests obsolete. The constant development of synthetic products is straining the ability of labs to uncover them. This is something like Tour de France officials’ thankless race to stay ahead of doping tricks. I have even witnessed a discussion by two experts trying to determine if a ruby was treated, and no agreement was reached. Frustrating.

Meanwhile, the DDC: Its disputes signal a political battle over control of the club. Longtime members are resigning—and not because of the recent controversy. They’re leaving because the club no longer serves a purpose. Management has not responded to the new, real “bourse,” the Internet. De Beers is moving, however painfully, to a new diamond world, while the DDC dreams on about the good ol’ days. By now, the organization should have been the Blue Nile of the diamond business.

And then there’s the 1.00 ct.-plus CVD diamond. This development comes as no surprise. The process has been around for some years, and CVD diamonds long have been on the market. Carat-size stones, however, are rare, as the stone-growing process is not quick. What’s important to note is that the technology continues to advance, with complex and serious repercussions for all of us in the industry.

What’s real, what’s man-made, and how do we regulate the difference? Tough questions we have to face.

The public will have little trouble accepting these new stones. Consumers are already buying black diamonds (treated, after all), foggy diamonds (“silver mist”), cheap rough in mountings, irradiated colored diamonds, and old-time rose cuts. The public has already accepted new product categories in the face of shortages and high prices.

Retailers are buying diamonds in quantity off the street, raising profits while meeting demand. These efforts will only grow and become more organized.

What’s ahead? Two questions come to mind: Will we have competition from abroad for these diamonds, especially from the major emerging markets? And will declining productions of natural stones and the growing ability to produce quantities of man-made diamonds create a new and larger diamond business?

My money says the answer is yes to both. Attention must be paid.