Un-Natural Threat?

To some extent, the global diamond industry has closed its eyes to the threat of synthetic or man-made diamonds. The industry has, in a sense, hoped that they would almost disappear on their own. But some analysts suggest that hundreds of millions of dollars of polished synthetics are entering the pipeline every year, and that new technology means the threat is growing, not receding. Albert Robinson and Kunjal Karaniya spoke to few industry leaders around the globe to know more in detail about this growing danger for the natural diamond industry.

How big a threat to the 'natural' diamond industry is the manufacture of synthetic diamonds? Until recent years, most industry leaders have been satisfied with a standard reply along the lines that as long as the stones are clearly disclosed there is no problem. But what if the diamonds are not disclosed – as has been the case on several occasions in the past year alone? Meanwhile, other global diamond industry leaders say that it is unlikely that a woman is going to be happy wearing an engagement or wedding ring that she knows is set with a synthetic stone. "Can you imagine a man proposing marriage and offering a ring set with a diamond that is not natural?" asks a former senior Gems and Jewellery Export Promotion Council officer. But if diamond prices rise sharply, as is forecast to be the case according to a range of industry predictions, due to flat or declining supply and rising demand from Asian markets in the coming five years, what effect will that have on consumer choices? "The industry does not really like to look too deeply at this problem," said a former World Federation of Diamond Bourses president. "But if the prices of natural diamonds rise due to strong Asian demand and insufficient supply, will there be an opportunity for synthetics to make a splash? I am afraid that this could, indeed, happen in the not too distant future. "This relates to diamonds that are disclosed and sold as such. But what happens if synthetic diamonds enter the pipeline undisclosed and are set in jewelry and only discovered to be non-natural by consumers who have bought the jewelry? That could be a big blow to consumer confidence. Diamond jewelry sales are already struggling in the battle against consumer goods, from smartphones and tablets to designer label clothes and accessories and luxury holidays. Undisclosed synthetics would be a terrible blow," he added. To this, Varda Shine, Executive Vice-President, De Beers Global Sightholder Sales expressed, “I do not think so that synthetic diamonds are any threat. The diamond is a symbol of love and consumers believe in natural love; thus, they will maintain buying natural diamonds. Second, synthetic diamonds are manufactured based on a technology which gets outdated after a specific period of time. A natural diamond is forever.” DTC does not view the synthetic diamonds as a threat to natural diamonds, but emphasised that the detection and proper disclosure of synthetic diamonds are necessary for these products to become accepted among the gemstones that are for sale on the market. She further added, “If they are correctly positioned in the market for example Swarovski did, they can build their position, but they can never replace real diamonds. But unethical behavior is a problem; hence industry needs to make sure that the purity is maintained.”

Industry leaders spotlight rising dangers of synthetics
The danger posed by synthetic diamonds has come under the spotlight in recent weeks. Tom Moses, senior vice-president of the Gemological Institute of America, says that synthetic diamonds are increasingly penetrating the trade in natural diamonds. "Just a few months ago, we saw an attempted fraud on a large scale using synthetic stones," he said. Synthetic diamonds have been around since the 1950s in different industries as well as for research purposes, he explained. The machinery used to make synthetic stones had not changed a great deal in the past several decades and is based on the same technology that has been in place since the 1970s, he added. "The most worrying aspect is color treatment of synthetics. There is now a separate market dealing in blue synthetic diamonds. Synthetic diamond manufacturers manage to create color diamonds relatively easily and through an extra process after they have been made it create difficulties in identifying them." He said that mixing natural and synthetic diamonds in the same parcels created a challenge for the GIA's labs around the world. Moses explained about the latest ways of identifying synthetics, the type of such stones available on the market, and the cooperation between the GIA and De Beers on the issue. "De Beers is a strong partner of ours and we have been working together for many years. They have built up a huge knowledge base on synthetics that is shared with us." There are three types of synthetics, he explained. There is High Pressure-High Temperature (HPHT) created stones made in a process that replicates the conditions in the ground when natural diamonds are formed. There are Chemical Vapor Deposition (CVD), and the relatively new NPD process which makes synthetics via nanotechnology and has been developed in Japan for industry and research purposes. CVD-created diamonds have been undergoing considerable improvements in recent years, Moses said. However there are problems in the layer process of making them that cannot yet be dealt with by the manufacturers and that provide signs of their origin. "CVD diamonds are identifiable due to their recognizable patterns of growth," he said.

Although recognizing the dangers, Moses is nonetheless relatively optimistic on the issue of synthetics: "The GIA was founded in order to ensure consumer confidence since customers spend significant sums on diamonds. Our methods of identifying synthetics are continuously becoming more sophisticated. There are permanent characteristics in all the different kinds of synthetics stones, and our labs do great work to ensure consumer confidence is not affected." He added that the GIA is working on an identification kit for diamond companies regarding synthetics that will be available for diamond firms around the world and available for purchase during the next two years.

$500 million of synthetic polished diamonds in 2012
Meanwhile, Diamond Intelligence Briefs publisher Chaim Even-Zohar estimates that around $500 million of polished synthetic diamonds entered the diamond pipeline in 2012 out of a total of $22 billion of polished goods. Even-Zohar, who also publishes a well-known annual diamond pipeline chart, included synthetics for the first time in his recently published chart for 2012. "You have not heard about this because nobody is telling you about it," he said. "The synthetic diamond manufacturers have substantially increased their production with the use of hundreds of diamond-growing machines.

He said a "perfect" system has been developed where diamonds are produced using the Chemical Vapor Deposition (CVD) and then the color is improved using the High Pressure-High Temperature (HPHT) system. "According to estimates, in Surat, 5-7 percent of diamonds produced that weigh less than one point are synthetics."

Singapore plant making IIa diamonds
And in the latest development, Jatin Mehta, who bought out all the minority shareholders in Gemesis to become the world’s largest producer of gem-quality synthetic diamonds, has set up a large synthetic diamond facility in Singapore based on the Chemical Vapor Deposition (CVD) system. The Singapore-based firm, called IIa Technologies Pte, Ltd., or IIa Tech, is, it claims: “One of the world’s largest producers of Type IIa diamonds, the purest and rarest form of diamond found in less than two percent of the earth derived yield.” The factory has been operating for a while under the Gemesis name, and runs a state-of-the-art diamond growing plant. As IIa Tech says, it was formed with the aim of perfecting the Microwave Plasma Chemical Vapour Deposition (MP-CVD) process to grow colorless Type IIa diamonds, thus recreating a natural process. "Despite existing for several decades, the MP-CVD process had not previously been developed to enable diamond growth in commercially viable quantities or quality,” the company says. It has spent more than eight years on research and development to create an environment for the commercial production of colorless, gem-quality, single crystal Type IIa diamonds. "These high-end diamonds have been confirmed, by all international gemological labs, as having ‘exactly the same chemical composition, crystal structure, optical, and physical properties’ as their mined counterparts, with the only difference being their point of origin,” it says. Furthermore, Managing Director Vishal Mehta is quite clear in his aims and highlights ethical and environmental advantages, saying the firm can provide "a consistent supply, both in terms of quantity and quality, making diamonds available for use in a wide variety of applications where they are needed but are currently not available. "The facility has been commissioned as the traditional diamond mining industry is faced by a prevailing global awareness of conflict-diamonds, and the adverse environmental and social impact of the regular mining process. "The diamonds created by IIa Tech are pure, not only in quality, but also in origin with the assurance that the process is free from potential human rights abuses while eliminating 50 percent of the carbon emissions associated with traditional diamond mining. Through the creation of a cutting-edge growth process of this unique element, IIa Tech is committed to maintaining and supporting the supply chain at every stage, adding value to various industries around the world,” Mehta concludes.

Indian industry leaders believe chances of significant numbers of synthetics is low
Some Indian diamond industry leaders believe the chances of large numbers of synthetics entering the market are low. They say that synthetics are mostly for industrial needs and made for that sector, and are thus less of a threat to the diamond jewelry industry. Sanghavi Exports Director Aagam Sanghavi said, "Synthetic diamonds no longer pose a challenge to the (Indian) diamond manufacturing centre. They may pose some challenge at the trading level, but can be dealt with (by) disclosure, detection and differentiation. "The production of synthetic diamonds is less than one percent of that of the global production of natural diamonds annually. All the manufacturers of synthetic diamonds are doing legal business. The synthetic or cultured diamonds are 30 percent cheaper than the natural stones," Sanghavi added. Meanwhile, Surat Diamond Association President Dinesh Navadia commented, "I don't think synthetic diamonds are a threat. The diamond companies should join hands in the promotion of natural diamonds in the country, like the 'A diamond is forever' campaign of De Beers." Kartik Bhansali, Director, Cupid Diamonds Pvt. Ltd. said, “I believe synthetic diamonds are just like first copy watches, as original is always original and first copy is always first copy. Hence, I do not perceive it as threat or concern as it is not going to survive for long. I am more concerned about the Zimbavian goods than the synthetic diamonds. But yes, it will surely create confusion in the minds of buyer, but I feel this can be tackled if media and industry takes appropriate measures towards educating the consumers regarding synthetic diamonds.” Rajesh Lakhani, Vice President, Kiran Gems Private Limited said, “Natural diamonds cannot be compared with lab grown or synthetic diamonds. We are marketing and selling its diamonds globally, but, has never come across any customer or industry participant who seems interested in synthetic diamonds. Also, it is not going to be a challenging issue as seekers of natural diamonds are not looking for options. The awareness about it at consumer level will help them decide if they are buying what they wish to. However synthetic diamonds may find good use in industrial sectors. But a seller not disclosing that the goods are synthetic is a real problem. Integrity of natural diamonds cannot be compromised.” Talking about the malpractices by the jewellers, Kartik Bhansali added, “it is also a problem if they would not disclose about the synthetic diamonds and conduct malpractices, but this can be eliminated only if they prefer being transparent on the facts. We are going to take few positive steps on this by issuing brochures regarding the facts about real diamonds and synthetics, in order to educate the consumer about 4 C’s and other aspects related to the diamonds.” To this, Rajesh Lakhani added, “Consumer confidence will not be affected until customer is aware of his/her purchase. As responsible industry member Kiran has established policies of sourcing and establishing trade partners which include all from Customers to brokers and suppliers. We only work with partners with proven track records or necessary referrals. We know where our diamonds come from and where they go ultimately.”

Indian diamantaires receive course on identifying synthetics
The comments by Sanghavi and Navadia, however, followed an intensive course about how to identify synthetic diamonds given to diamantaires in Surat in March. The course came in response to the rising number of synthetic stones being seen at the world's largest diamond centers and submitted within parcels of natural stones for grading. In May last year, the International Gemological Institute (IGI) issued a warning in India about the large volume of synthetic colorless diamonds in the market after it received more than 600 synthetic colorless diamonds for grading at its lab facilities in Antwerp and Mumbai. That was followed by an alert by the Diamond Trading Company (DTC), which noted that undisclosed stones had been submitted to the National Gems & Jewellery Technology Administrative Centre (NGTC) lab in China. The Gems and Jewellery Export Promotion Council (GJEPC), aims to create awareness in the Indian industry about the threat that the synthetic diamonds could pose to it and the importance of disclosure, differentiation and detection. In collaboration with the Indian Diamond Institute (IDI) and the Gemological Institute of India (GII), it held a seminar on identification tips and techniques related to synthetics on March 16. The seminar gave diamond manufacturers detailed information about lab-grown diamonds, and tips and techniques to enable them to differentiate between lab-grown and natural diamonds. "The lab grown diamonds have really become a potential threat to the industry," GJEPC Executive Director Sabhyasachi Ray said. "We are targeting the diamond traders, both rough and polished diamond dealers, so that they can accurately differentiate between the synthetic and natural diamonds."

In Israel, former president of the Israel Diamond Exchange (IDE) and of the World Federation of Diamond Bourses (WFDB), Shmuel Schnitzer, said he was clear regarding diamonds that had not come out of the ground. “I have said in the past, and I still believe this to be the case, that lab-grown stones must be clearly marked as being what they are. I think that if that is the case, then the natural diamond trade has nothing to fear.” Fellow Israeli diamantaire Avi Paz, recently selected to be the new president of the World Diamond Council, says the industry must remain vigilant about the danger from synthetic diamonds. “This is not a new problem, but it is not a problem that is going away, either. We must, as an industry, insist that all members act in the best interests of all of us. If it is a man-made or lab-grown stone, then this must be clearly stated. The consumer must know exactly what he is buying. This could become a big problem if we do not monitor developments very carefully.

And in Antwerp, Raj Mehta, senior vice president of Rosy Blue, was also keen to stress the importance of industry-wide cooperation to ensure that non-natural diamonds, or stones that have not mined out of the ground, are clearly presented as such. “The danger is that if such diamonds get into the supply chain and are set in jewelry and are bought by consumers thinking they are buying natural diamonds and then are discovered to be non-natural then we could have a big problem on our hands. Consumer confidence is critical. Buyers must have complete faith in the diamonds they are purchasing,” he added.