Diamonds Lose Their "Magic", No Longer Rare and Special
Diamonds Lose Their “Magic”, No Longer Rare and Special
Jakarta, CNBC Indonesia - The long global diamond business chain is beginning to crack from upstream.
According to an official release from Rio Tinto, the Diavik mine owned by Rio Tinto in Canada has ceased production after 23 years of operation and producing more than 150 million carats. The full closure will continue until 2029, but production has already ended in 2026. This decision comes as the industry faces price pressures, changing consumer behaviour, and the entry of technology-based competitors.
The Diavik mine was once a symbol of the industry’s ability to conquer extreme conditions. Its location is beneath a frozen lake in the Northwest Territories, about 200 kilometres from the Arctic Circle. Production began in 2003 following its discovery in 1991.
The diamonds produced were dominated by high quality, with a small portion of rare yellow stones. After economic reserves dwindled, operations were halted. Rio Tinto had previously closed the Argyle mine in Australia in 2020 after producing more than 865 million carats.
Besides Rio Tinto, a wave of mine closures has also occurred among other major players in the global diamond industry.
De Beers, which for decades has been a symbol of world diamond dominance, has already closed several important mines ahead of others. The Snap Lake mine in Canada was halted in 2015 because it was no longer economical, followed by the Victor Mine in 2019, and Voorspoed in South Africa in 2018 after it failed to be sold.
These steps show that even the biggest players are not immune to industry pressures, from weakening prices to changing demand.
These pressures are also reflected in De Beers’ parent company, Anglo American. The company has not directly closed mines but has begun reducing its exposure to the diamond sector and even considered divesting the De Beers business.
The signal is clear: compared to other commodities like copper needed for the energy transition, diamonds are increasingly seen as less attractive from an investment perspective.
Beyond major players, pressures are also felt by smaller mine operators. Many projects have been halted or entered a care and maintenance phase, in line with a combination of three main factors: continuously weakening diamond prices, increasing competition from synthetic diamonds, and increasingly depleting reserves.
The decline in the diamond business does not stand alone; the natural diamond market has experienced an oversupply in recent years. Prices have weakened since their 2022 peak. In the United States, the price of one-carat natural diamonds has fallen by about a third. On the other hand, sales are no longer growing as before, especially in the middle segment.
Outcompeted by Man-Made
The most noticeable change comes from the demand side. Consumers are starting to switch to synthetic diamonds. Around half of engagement rings in the United States now use lab-produced stones. This shift is changing the market structure that for decades has been built on a narrative of scarcity.
Technically, synthetic diamonds have the same composition as natural diamonds. Their production process uses High Pressure High Temperature (HPHT) or Chemical Vapor Deposition (CVD) methods. Production time is only a few weeks to months. Natural diamonds form over billions of years in the Earth’s mantle and rise to the surface through volcanic activity.
The main differences are in cost and production scale. Synthetic diamonds can be produced in large quantities at much lower prices. For example, a 2.5-carat lab diamond is sold for around £1,880, while a natural diamond of slightly smaller size can reach £26,255. This price difference is changing how consumers value the product.
Price pressures are deepening because the supply of synthetic diamonds continues to increase. Global production is dominated by China, followed by India and the United States.
With production capacity that can be scaled up, there is no supply limit like in natural mines. The price of synthetic diamonds has even fallen by around 75% in the 2020-2025 period.
The impact extends to producer countries. Botswana, which relies on diamonds for about a third of state revenue and foreign exchange, is starting to feel fiscal pressure. The price decline is hitting budgets and triggering policy adjustments. An industry that previously supported development now faces uncertainty.
Why Gold Remains More Resilient
Unlike diamonds, gold shows stronger resilience. Its market structure is different. Gold has a function as a hedge asset and part of central bank reserves.
Demand comes from investors, industry, and the monetary sector. Diamonds do not have a monetary function and are highly dependent on perceived value and jewellery demand. When perceptions change, prices follow suit.
This change places the diamond industry in a transition phase. From a system based on natural scarcity to technology-based production. Mines like Diavik serve as markers that physical supply is no longer the dominant factor. Prices now move according to production efficiency and consumer preferences.
In this new structure, diamonds are losing one of their main foundations - limitation.