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CVD Alert

China
Oct 1, 2012 12:01 AM   By Julius Zheng
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Synthetic alerts were first sounded in mid-February, when the Shenzhen lab of the National Gem Testing Center (NGTC) received a parcel of 18 stones weighing a total of 9.5 carats for certification. They were mostly I to J color and VS clarity with black inclusions, with an average weight of approximately .50 carats. After DiamondSure and DiamondView examinations raised suspicions, NGTC used additional laboratory equipment to confirm all the stones as chemical vapor deposition (CVD) synthetic diamonds.

The parcel of stones was purchased from Hong Kong as natural diamonds without proper disclosure to the wholesale buyer. According to Ke Jie, director of NGTC, although the center has found a small number of treated or synthetic diamonds from time to time in recent years, this was the very first time that a whole batch of stones was detected as synthetic, which raised a “high alert” in the industry. 

SOUNDING THE ALARM
In April, another two CVD synthetic stones were detected by the Beijing lab of NGTC, and two more batches between April and August. In late May, the Shanghai Diamond Exchange (SDE) issued a joint statement with NGTC calling on bourse members to be cautious in their transactions and to disclose information properly. SDE also reminded its members that any intentional nondisclosure of synthetic and treated diamonds would be subject to severe punishment.

As the second-largest diamond market in the world, China’s trade members are naturally concerned about synthetic diamonds, along with the risk of purchasing treated diamonds without proper disclosure or purchasing diamonds with fake or mismatched certificates. In response to the recent incidents, many buyers have reduced their purchase of melee diamonds. More of them are focusing on buying diamonds with certificates from prominent grading laboratories only, and paying more attention to
double-checking and verifying the diamonds after purchasing.

In other cases, buyers have limited their purchases to a few trusted suppliers whom they deal with on a regular basis. Trade members also are worried that the general media and the internet might quickly spread the news about the synthetics’ appearance and damage consumer confidence.

GETTING INFORMED
The National Gems and Jewelry Technology Administrative Center of
the Ministry of Land and Resources of China held a technology seminar on CVD synthetics on September 2 and 3 in Beijing. Sixty-five people participated in the discussion and information exchange, including key personnel and scientists from the major gem laboratories, universities
and government departments. Shen Dongmei, chief engineer of NGTC,
said that CVD synthetic diamonds entering the market without proper disclosure had added uncertainties to the market, but she reassured the public that a well-equipped gem lab with professional staff would be able to identify them.

At some point, a synthetic diamond market will be created and the identification of natural and synthetic diamonds will be a daily task for the gem labs. An alert has been issued to all quality supervision and inspection agencies nationwide, while the Ministry of Land and Resources also intends to work with other government agencies to prevent undisclosed CVD synthetics from damaging the consumer market and the public’s confidence in it.

MARKET SITUATION
According to data released by the Diamond Administration of China (DAC) on September 4, the SDE imported and exported $1.94 billion worth of diamonds intended for consumption during the first six months
of 2012, a 2.1 percent increase year on year. By the end of June, SDE membership totaled 343, an increase of 17 members in the first half of
the year.

DAC data also confirmed that the global economic situation has affected the demand for diamonds worldwide. In the first half of 2012, the U.S., Chinese and Japanese consumer markets imported diamonds worth
$1,487 billion, $904 million and $440 million, respectively, with the
U.S. and China down by 22 percent and 4.6 percent, respectively, and Japan up by 20 percent.

In the second quarter of 2012, the import of diamonds for domestic consumption decreased by 28 percent year on year and by 21 percent
from the first quarter. DAC attributed the slowdown in China’s diamond demand to the macroeconomy of the country. In the first half of the year, the gross domestic product (GDP) was almost $3,600 billion, having grown by a total of 7.8 percent, with respective growth rates of 8.1 percent and 7.6 percent in the first two quarters. It was the smallest growth rate in the past three years.

The weak performance of the real estate market, the continuous decline in the stock market and a higher unemployment rate have affected diamond consumption. By comparison, the total consumption of the first half of 2012 was $1,556 billion, a growth of 14.4 percent year on year, and
11.2 percent after eliminating the price factors — still growing, but at a slightly slower pace than in previous years.

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