LGDs: How Come Prices Fall While Demand Rises?
In a recently published article on Edahn Golan Diamond Research & Data, diamond analyst Edahn Golan looks at what he calls the price anomaly of lab-grown diamonds (LGD). According to Golan, when consumer demand was relatively low, “there was a frenzy to join the supply chain.” As consumer demand rose and the supply chain became “crowded in all directions,” wholesale prices went down.
According to Golan, the number of LGD-producing factories is growing, with every one “pushing to increase their production output.” Rough LGD producers are seeing “fierce competition for their product,” and rough prices are firm.
At the other end of the supply pipeline, the number of retailers offering LGD-set jewelry has also sharply increased. In addition, “retailers are firmer on their buying costs, and many insist on getting goods on memo. Wholesalers have almost no choice but to oblige.”
The wholesale section of the LGD market, Golan says, is congested. A massive number of traders, most of them in India, “are stuck with large inventories and a desire, if not a need, to leave the LGD market behind.” as they offload their goods, this further pushes down prices.
So, says Golan, “while rough LG supply is not easy to come by and retailer demand is growing – normally, the makings of a price surge – it is instead resulting in a price decline – very much a price anomaly!”
Golan goes on to talk about the LGD price index in the third quarter of the year (registering a massive drop of 42.7% year-on-year) , the end of the natural diamond price rally and the resulting price gap between natural diamonds and LGD and, finally, his expectation that consumers will pay less for LGDs, in time.
Read the full article here