Synthetic diamonds could be threat to natural gems, writes The Gazette. According to an article in the Botswana newspaper, 70% of women would buy synthetic if its cheaper.

Although there is a significant uncertainty as to how consumers will react to synthetic diamonds because of the current low volumes of production, market research studies suggest that up to 70% of women would accept or buy a synthetic diamond if prices were lower than those of natural diamonds, the report said.

The Gazette said it had learnt that synthetics are likely to be a bigger risk to the fashion segment than the bridal segment.

Experts have warned that the diamond industry would require coordinated action so as to engage in some marketing project geared towards differentiating natural diamonds from synthetics, the report said.

As for Botswana, the biggest producer of natural diamonds both by quality and volume, can only hope that De Beers, through its Element Six arm is not encouraged to enter the synthetic diamonds market, it said.

Element Six is the world’s leading supplier of high quality superbrasives and industrial diamond materials, including both synthetic and natural diamonds. Its manufacturing capabilities include chemical vapour deposition synthetic diamonds.

Although Element Six does not currently manufacture gem-quality synthetic diamonds, its ability to do so on a large scale poses a threat to the market for natural diamonds, said the report.

De Beers Managing Director, Gareth Penny in February 2009 said “we have got 43 synthetic diamonds machines down the road that are capable of producing the equivalent of Jwaneng’s entire annual output of 1 carat diamonds at a fraction of the cost. If consumers just wanted crystallised carbon then you wouldn’t bother mining it, you would manufacture it...”

The master agreement between the government of Botswana and De Beers provides Botswana with some protection against De Beers manufacturing gem-quality synthetic diamonds. De Beers warranted that it was not contemplating having any involvement with the commercial developing or marketing of synthetic gem-quality diamonds and warranted that it would give Botswana 90 days notice if this position were to change, the report said.

If this happens, then Botswana has the option to acquire at a fair valuation a 12% stake in the relevant entity, thereby giving it a 25.2% effective stake (taking into account its 15% stake in the De Beers holding company). In addition Botswana has the right to appoint a director to the board of Element Six, although it has not taken up this right, it said.

De Beers believes that its long term involvement with synthetics provides it with a strong position of cost leadership in the market for gem quality synthetics. This is believed to provide the company with the ability to respond to any threat from competitors who seek to market gem-quality synthetics, said The Gazette.

Analysts point out that there are two serious threats facing the diamond market as far as synthetics are concerned, if differentiation is not successful or if De Beers enters the market at a lager scale then the natural diamond market could be severely impacted, it said.

The World Federation of Diamond Bourses, the International Diamond Council and the International Diamond Manufactures Association have agreed on standardised terminology to describe synthetic diamonds. They have agreed that any laboratory created gem-quality diamonds can be described as synthetic, laboratory grown, laboratory created or man-made, the words diamond, or diamonds must always follow these descriptors.