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Cultural and tourism tropical animals cultivate diamonds to "go out of the circle"

March 27,2024

As one of Henan's "native products", lab-grown diamonds have recently exploded "out of the circle". The Luoyang Municipal Bureau of Culture and Tourism distributed lab-grown diamonds to tourists at Longmen High-speed Railway Station and Longmen Grottoes, which made lab-grown diamonds highly concerned by the market. However, the reporter's multi-party investigation found that affected by factors such as insufficient downstream demand, the price of lab-grown diamonds has fallen significantly recently, the terminal promotion efforts are generally large, and the performance of relevant listed companies is poor.

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The terminal promotion is strong

Recently, the reporter visited a number of lab-grown diamond sales stores and found that near the Spring Festival, merchants increased their promotional efforts, and the prices of some brand products were discounted by 5%, and some ring products were bought one and given one free.

"At present, the price of a one-carat finished lab-grown diamond ring is about 12,000 yuan. Even if the price reduction promotion, there is still a certain profit margin, and the biggest problem in the industry at present is the lack of demand. Taking a 1-carat lab-grown diamond as an example, the wholesale price is currently around 2,000 yuan, the wholesale price of a white gold ring setting is about 1,800 yuan, and the cost of manual setting is about 4,000 yuan. A dealer told a reporter from the China Securities Journal.
The price of natural diamonds has also fallen significantly. First-tier brands such as Chow Tai Fook and China Gold have launched discounts ranging from 5 to 6 percent off diamond products.

As for the reason for the price drop, Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International Business School, told reporters that the value of diamonds largely lies in their scarcity. The barrier to entry for lab-grown diamonds is not high, upstream supply is increasing, and demand is not keeping up. From the downstream side, lab-grown diamonds have not formed a good brand.

Zhongyuan Securities believes that due to the expansion of production capacity and weakening demand, the sales price of lab-grown diamonds has fallen one after another. The price of domestic lab-grown diamonds and loose diamonds has touched the cost line. Lab-grown diamond prices are likely to continue to fall as production capacity increases against the backdrop of a lack of significant improvement in demand.

Zhongbing Red Arrow, a lab-grown diamond manufacturer, said that some small manufacturers continue to enter and compete at low prices, but the quality will also decline. The company is not afraid of price wars, and the company has an overall cost advantage.

Performance was generally poor

According to public information, Henan Province accounts for 80% of the domestic lab-grown diamond production capacity. Zhongbing Red Arrow, Yellow River Whirlwind, and Power Diamond, the three leading listed companies, accounted for 9% of the production of lab-grown rough diamonds.

In terms of performance, the Yellow River Cyclone expects that the net profit attributable to shareholders of listed companies in 2023 will be -645.02 million yuan, and the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses will be -651.85 million yuan. During the reporting period, the price of the company's lab-grown diamond products dropped significantly, resulting in poor performance of the main business.

Although Zhongbing Red Arrow and Power Diamond did not disclose their 2023 performance forecasts, the performance of the two listed companies in the first three quarters declined to varying degrees.

In the first three quarters of 2023, Zhongbing Red Arrow achieved a total operating income of about 3.008 billion yuan, a year-on-year decrease of 37.85%, and a net profit attributable to shareholders of listed companies of 205 million yuan, a year-on-year decrease of 76.69%. The company said that terminal demand weakened and lab-grown diamond sales declined.

In the first three quarters, Power Diamond achieved a total operating income of 561 million yuan, a year-on-year decrease of 16.73%, and a net profit attributable to shareholders of listed companies of 263 million yuan, a year-on-year decrease of 24.86%.

Industry standards need to be introduced urgently

The reporter learned from multiple interviews that at present, the industry standard for lab-grown diamonds refers to natural diamonds.

Liu Chunsheng, an associate professor at the Central University of Finance and Economics, told reporters that the decline in lab-grown diamond prices is mainly due to the increase in supply, the continuous improvement of production capacity, and even the emergence of overcapacity. In the past, diamonds were a luxury item purchased by young people when they got married, a store of value. With the advent of lab-grown diamonds, the positioning of diamonds has been greatly reduced. At the same time of overcapacity, lab-grown diamonds lack well-designed high-end brands, and there are no explosive products and Internet celebrity products. In addition, it is necessary for relevant departments to formulate industry standards in a timely manner.

From the perspective of technical means, the production of lab-grown diamonds is mainly divided into high temperature and high pressure method and CVD chemical vapor deposition method. The production capacity layout of lab-grown diamonds in China mainly adopts the high-temperature and high-pressure method, and the lab-grown diamonds produced in this way are generally drop-shaped, with better quality and easy to produce large carat diamonds. The disadvantage is that the high cost of the high-temperature and high-pressure method is high. In addition, industry experts believe that cutting and other technical means need to be further strengthened.