Since the pandemic, demand for diamonds around the world has weakened as consumers once again spend money on travel and experiences and economic headwinds reduce spending on luxury goods. However, prices for the stones, which are used in cheap one- or two-carat solitaire wedding rings popular in the U.S., have fallen much more sharply than the rest of the market.

The reason for this, according to industry insiders, is the growing demand for lab-grown stones. The synthetic diamond industry has been focusing on this category, where consumers are particularly price-sensitive, and now those efforts are paying off in the country that is the world’s largest buyer of polished diamonds.

This shift does not mean that engagement rings will be sold at deep discounts – its impact is limited to the rough diamond market, the opaque world of miners, traders and artisans that is a few steps away from the price tags in a jewelry store.

However, the scale and speed of the price collapse of one of the most important products of the diamond industry has confused the market. The question now is whether the decline in demand for natural diamonds in this category is an irreversible change and, crucially, whether the impact of lab-grown stones will eventually spread to the more expensive diamonds that Asians tend to buy.

Industry leader De Beers insists that the current weakness is a natural decline in demand, after sitting-at-home buyers jacked up prices during the pandemic, with cheap engagement rings particularly vulnerable. The company acknowledges that synthetic stones have infiltrated the category, but does not see this as a structural shift.

Lab-grown diamonds – physically identical stones that can be made within weeks in a microwave chamber – have long been seen as a threat to the existence of the natural resource extraction industry, whose proponents argue that they can offer a cheaper alternative without many of the environmental and social drawbacks that are sometimes inherent in mined diamonds.

For much of the last decade, this risk went unrealized, with synthetic diamonds reclaiming the cheaper gift segment but otherwise making little headway. That is now changing, as lab-grown products are beginning to grab a much larger slice of the crucial U.S. bridal market.

Over the past year, De Beers has cut prices in this category by more than 40%, including one cut of more than 15% in July.

In June 2022, De Beers was offering about $1,400 per carat for select diamonds. By July of this year, it had dropped to about $850 per carat. And there may be more room to fall: diamonds are still 10% more expensive than in the “secondary” market, where traders and manufacturers sell them among themselves.