Conventional wisdom says that an increased rate of diamond recycling results in downward diamond price pressure due to the theoretical increase in supply. However, the contrary may actually be true today in this relatively nuanced market. In fact, a more prevalent diamond recycling market could in fact be the natural diamond industry’s saving grace.
Historically, given that a more active recycled market would inevitably increase the amount of polished in the supply chain, the upstream and midstream diamond industries have understandably lacked incentive to support the secondary market. However, given the current state of the diamond industry there is new incentive.
Given a rising generation of consumers that perceive diamonds as environmentally and socially unscrupulous, not rare, and overpriced, an increased emphasis on diamond recycling could in part address these concerns. The lab-created diamond industry has already strategically positioned itself to attend to these issues, but the natural industry has the potential to provide an even more attractive product in this context.
Addressing the issue of a “green” or “environmentally friendly” diamond, it is difficult to compete with a recycled diamond as any energy, environmental, or social cost of producing the diamond has already been realized. While a lab-created diamond does not involve excavation of earth, the production process still requires a significant amount of energy and there is no guarantee that labor practices are ideal, especially in legacy HPHT factories in the eastern world. A recycled diamond is theoretically free from all of the above production costs on a society.
Acknowledging the concerns of value, a more readily available, competitive and active diamond resale market would increase the secondary market liquidity for previously owned natural diamonds which would in effect support the market price of all natural diamonds, primary and secondary market.
Essentially the only thing that sets a natural diamond apart from its lab-created counterpart is that a natural is a non-renewable resource. This is especially significant given that a diamond is a luxury item. The supply of natural diamonds is limited by nature and there is a value that the theory of economics ascribes to that.
