Declining profits for lab-grown diamonds could push retailers into a natural diamond pivot, said Paul Zimnisky, an independent diamond industry analyst.

Last week Zimnisky spoke to Kitco Mining.

The diamond market has been in a tough spot due to declining sales. In September Petra Diamonds reported full-year revenue declined 44%. In February Lucara Diamond announced full-year revenue was down 16%, adding that the diamond market is a "volatile environment with market challenges coming from multiple areas." Storied diamond company De Beers is being sold off by parent Anglo American, which is restructuring after rebuffing a takeover by BHP.

Demographics and growing market share by lab-grown diamonds are part of the challenge, said Zimnisky, but exclusivity and rarity of natural diamonds could end up helping. Innovations in production have resulted in jewelers cutting the costs of lab-grown diamonds. That may lead jewelers to pivot and prioritize selling natural diamonds over lab grown, said Zimnisky.

"The catalyst could be declining profitability of selling lab-grown diamonds, " he said. "[That] could incentivize retailers to really push natural diamonds again. That has the potential to be a very positive development for the natural diamond industry."

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