“I’VE seen grown men with tears in their eyes” in front of it, an auctioneer from Sotheby’s said as he opened bidding on June 29th on the 1,109-carat Lesedi La Rona, the biggest diamond to be discovered in over a century. Within minutes the tears were, if anything, of embarrassment. Bidding, which started at $50m, was desultory. A rough stone that Sotheby’s had put in the same league as the 3,107-carat Cullinan diamond, discovered in South Africa in 1905, failed to make its $70m reserve. “I’m a bit disappointed. There were no private buyers and the diamantaires stayed away,” said Lukas Lundin, chairman of Lucara Diamond, a Canadian firm that unearthed the stone in Botswana last year.

It was the latest disappointment to befall an industry that has had little to celebrate. Two days before, William Lamb, Lucara’s chief executive, said he believed the auction would symbolise the allure of diamonds and their promise for African development. He hoped to “dispel the rumour that all diamonds are bad”. That reek of notoriety has clung to the industry in recent years, especially among the millennial generation that came of age as evidence of “blood diamonds” emerged from the war in Sierra Leone in the 1990s.

Since 2003, about 75 countries linked to the diamond supply chain have allied with non-governmental organisations in the Kimberley Process (KP), which aims to ban the export of diamonds to fund conflict. It is still considered a badge of honour within the industry, but this year NGOs have boycotted it, accusing the chair country, the United Arab Emirates, of leniency toward the sale of conflict diamonds from the Central African Republic.

Financial stresses are also mounting, especially on “sightholders”, the family-run middlemen who buy rough diamonds and ship them to places like Antwerp and Mumbai for cutting and polishing. Since the financial crisis, banks have come under pressure to ensure they are not lending to businesses associated with money-laundering, transfer pricing and terrorist financing. The publicity-shy middlemen have been caught out by the pressures to improve transparency. “Their corporate structures look like bowls of spaghetti,” says Faz Chaudhri, a diamond-industry consultant.

In June Standard Chartered shut down its $2 billion diamond-financing business, saying it was beyond the bank’s new “risk tolerance”. De Beers, an industry leader, recently told the 80-odd sightholders authorised to buy its rough diamonds to shed an aura of “secrecy and discretion” and from next year produce consolidated accounts under international standards. It said more than $12 billion of bank credit would be subject to tighter norms.

The reputational headaches have been compounded by a glut of diamonds caused by a slump in consumer demand in China. That has dragged prices of top-quality cut diamonds down from about $12,000 per carat to $7,400 in five years, according to Rapaport-RapNet Diamond Trading Network, a price index.

Against this backdrop, a technological challenge is also emerging that could make it harder for the industry to win over the millennial customers on whom future sales depend. From China to California, boffins are improving their ability to cultivate diamonds in labs. They are looking beyond the billions of carats of synthetic diamonds produced under high temperature and pressure that are used in industries such as oil drilling. Now they are perfecting gem-quality stones for jewellery.

Since last year, California-based Diamond Foundry has been producing lab-grown rough diamonds of a quality almost indistinguishable from those dug up from the ground, produced using chemical-vapour deposition, a technology common in semiconductors. In a plasma reactor as hot as the sun, atomised gases produce carbon atoms that attach to the crystal lattice of a natural diamond seed, or substrate, enabling a new diamond to grow. Martin Roscheisen, the firm’s boss, says productivity is the essence; his firm can grow 150-300 gems in a two-week batch, rather than just a handful previously. They can be cut as exquisitely as any diamond and are only slightly less expensive, he says.

The firm seeks to bolster their appeal by attacking traditional miners at their weakest point—ethical sourcing. The impact is more deeply felt because one of its backers is Leonardo DiCaprio, star of “Blood Diamond”, a film released in 2006. Selling its diamonds as “morally pure” should play on the social conscience of millennials. Diamond miners chuckle at the thought of slipping a lab-grown diamond onto an engagement finger as a symbol of eternal love. But Mr Roscheisen says that buyers will at least know where his stones came from (even if it is California). Buyers of mined diamonds will not.

Sales of such diamonds are still minuscule compared with the $14 billion of rough stones dug up each year. Frost & Sullivan, a consultancy, estimated in 2014 that they could grow strongly, especially as traditional mines are exhausted (see chart). Industry veterans, however, believe that as production soars, values will plummet.