Diamond Foundry Hikes Production, Prices

RAPAPORT... Diamond Foundry is increasing its production more than tenfoldand raising wholesale prices 15%, as it predicts an uptick in demand forlab-grown diamonds. The company believes there is a shortage ofsynthetic-diamond supply while consumer interest in the product is rising. Itplans to raise production to at least 1 million carats of rough per year,boosted by a new factory in Washington state, Diamond Foundry CEO MartinRoscheisen told Rapaport News Tuesday. "After careful monitoring of the market situation over thepast months, we see demand increasingly outpacing supply," the SanFrancisco-based company said in a note on its website December 21. While morepeople want lab-grown diamonds than before, "the corresponding supply is notincreasing at the same rate," it added. Diamond Foundry, which is backed by Leonardo DiCaprio, beganproduction at its new "MegaCarat" factory in the city of Wenatchee in November,and expects to reach its target rate of 1 million carats per year by the end of2019. The company's current annual production capacity is 100,000 rough carats,it said. The company also announced an average 15% increase in thewholesale prices for its rough and polished diamonds, effective January 1,citing the purported supply shortfall. While it is not actively raising its recommendedretail prices, its stones are becoming more expensive at the retail level due to demand, a spokesperson explained. Its assessment of the market contrasts with that ofanalysts, who estimate that prices of lab-grown diamonds fell in 2018. Generic 1-carat lab-growndiamonds were selling at an average discount of 42% relative to natural stonesin late November 2018 compared to 29% in January, driven by improvements in productioncapabilities, analyst Paul Zimnisky said in a report. Retail prices have nearlyhalved in the past two years, while wholesale prices have dropped by two thirds,Bain & Company noted in a December report. Global output of polishedsynthetics is growing by 15% to 20% per year as manufacturing costs fall, Bainadded. De Beers' launch of its Lightbox lab-grown-diamondjewelry brand last year also put pressure on prices, as the jewelry sells at retailfor a standard $800 per carat, regardless of size, well below the prices manysynthetics companies had been offering. Diamond Foundry's suggested retailprices are $250, $750 or $1,000 per carat for lower-end or "program" diamonds,depending on size. Its "certified uniques" - those generally above 0.85 carats- retail at a 55% discount to the Rapaport Price List, it said. Majore-commerce retail sites such as James Allen and Blue Nile list their equivalentnatural diamonds at 30% off the Rapaport sheet, it claimed. Diamond Foundry admitted there had been some price fluctuation this year, but still expects market dynamics to work in its favor. "Prices fell in August, but there is presently a massiveshortage in the supply of lab-grown diamonds, which is causing a priceincrease," Roscheisen said. "We believe this shortage will persist for severalyears."Image: Lab-grown diamonds. (Diamond Foundry)