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Glowing opportunities in the coloured gem sector

1 October 2019

By Bernardette Sto. Domingo   

Business prospects abound in the coloured gemstone industry, thanks to sustained consumer interest in classic favourites such as rubies, sapphires and emeralds, as well as promising new gem choices.







 

With modern business concepts, evolving buyer preferences and a more sophisticated clientele come vast opportunities for coloured gemstone traders.

According to industry players, today's buyers are increasingly investing in top-quality coloured gems and opting for colourful jewellery choices to better express their individuality.

Highly coveted Burmese rubies, Kashmir sapphires or Colombian emeralds – which have enjoyed an illustrious reputation in the trade for centuries – are also commanding record-breaking prices at auctions.

The sector has likewise endured macroeconomic uncertainties and registered significant growth over the last 10 years, according to Clement Sabbagh, president of the International Colored Gemstone Association (ICA).

Data from New York-based Natural Resource Governance Institute said the global gemstone industry, diamonds included, was valued around US$17 billion to US$23 billion in 2015, with estimated sales of rough emeralds, rubies and sapphires at US$1.5 billion to US$2.5 billion. Jade alone accounted for US$3 billion to US$6 billion while other coloured gemstones recorded sales of US$250 million to US$750 million.

“This is a result of a number of factors: Some new localities are producing good volumes of fine gems; emerging markets particularly China have become more educated about coloured gems and spurred a deluge of new consumers; and major fashion houses are using more colour in their designs,” revealed Sabbagh.

Apart from the glowing triumvirate of rubies, sapphires and emeralds, other gems have likewise risen in significance and popularity among consumers.

Colour revolution

Spinels in various colours continue to gather steam in the coloured gemstone world, with the red, pink and blue variants moving the fastest during trade shows. Cobalt-blue spinels are especially favoured, according to Sabbagh.

Green gems such as Russian and Namibian demantoid garnets, and Kenyan and Tanzanian tsavorites are high on the shopping lists of buyers, too.

Mesmerising blues and purples likewise have a strong following, proven by solid sales of Paraiba tourmalines and deeply saturated purple garnets from eastern Africa and India. Another star in the coloured gemstone community are opals, specifically blacks and boulders from Australia. Numerous varieties of Mexican, Brazilian and Ethiopian opals in huge quantities are similarly gaining prominence in the market.

Josh Saltzman, manager at US-based Nomad’s Lapidary Co Inc, said his clients are particularly drawn to red spinels. Aquamarines in vivid colours as well as lagoon tourmalines and tsavorites are likewise main movers.

“These colours are extremely favoured now. Reds and greens are always popular in China. Lagoons, which are a pleasant mix of greens and blues, have a more universal appeal,” remarked Saltzman.

At major jewellery trade shows however, the so-called big three still command the most attention from buyers.

Mehul Patel, managing director of Krish Creations Co Ltd, said no-heat cornflower and royal blue sapphires of 1 to 5 carats were the top drawers at the June Hong Kong Jewellery & Gem Fair. He also noted a shortage in supply of premium Kashmir sapphires, making these prized gems too expensive to buy.

“People are mostly asking for Burmese and Sri Lankan sapphires now. Prices remain steep since these are high-quality materials,” continued Patel.

Rubies were equally highly sought after especially by buyers from China, Hong Kong and other Southeast Asian markets, according to Phuket Khunaprapakorn, CEO of Gemburi Co Ltd.

Both Mozambique and Burmese gems were requested at the June Fair, with buyers placing orders for smaller stones or 3 carats and below, as well as high-quality stones of 5 to 10 carats.

“Burmese rubies are preferred for their historical significance and reputation, but supply is tight. Buyers instead go for Mozambique rubies, which are readily available in the market,” noted Khunaprapakorn.

Prices have been on the upswing. For top-quality stones, prices have gone up by around 20 percent since last year while those for nice-quality stones are 5 to 10 percent higher. Smaller sizes or 3 carats and below saw a 10 to 20 percent price hike.

State of the trade

Uncertainties arising from the US-China trade dispute as well as the political unrest in Hong Kong are adversely affecting consumer sentiment, but traders are banking on the industry's proven resilience, according to Sabbagh.

“A flourishing luxury goods market thrives on happy, confident consumers who feel good about life. Macroeconomic and geopolitical hiccups generally result in sluggish jewellery sales,” the ICA official said. “Hong Kong for instance has survived many difficulties in the past. It will continue to be a very important gemstone and jewellery hub.”

Gemburi's Khunaprapakorn said he expected slower business at the June Fair owing to the political situation, but visitors, mostly from Asia, came and placed orders.

Saltzman, for his part, said the US-China row has had little to insignificant effect on the industry. “It's definitely putting pressure on the Asian market since things have slowed down, but we still see solid demand,” he continued.

AG Color President Hemant Phophaliya, meanwhile, said fewer people came at the June Fair in Hong Kong, which he traced to the local political situation. A generally weaker business sentiment could also be attributed to US-China trade tensions.

China used to be the centre of the gemstone and jewellery business, but the market has since changed, with majority of Chinese traders still unloading excess stock from years of active buying, he noted.

“We focus on a diversified market – Europeans, the US, Middle East and India, not only China. We also offer products other than tanzanite, such as tsavorites. The most promising market for us now is the US,” explained Phophaliya.

Another challenge faced by the coloured gemstone industry is attracting a new generation of consumers and how to effectively sell to them, according to Sabbagh.

Young consumers require full, open and honest disclosure of treatments and enhancements, and want to confidently buy gemstones that were responsibly and sustainably sourced. ICA is also working on a few projects to encourage millennials and Gen Z to work in the industry. “They can sell to young people because they speak the same language,” he noted. “We want to tell stories of movers and shakers in the industry to inspire people. We need new blood in our sector.”

Education is an important aspect of the trade since learned consumers make informed buying decisions. For instance, the trade has become more receptive to stones from non-traditional sources such as Zambia and Brazil for emeralds, or Mozambique for rubies.

In China, buyers are branching out to other gems such as spinels, opals and tsavorites, revealed Sabbagh.

The ICA official also raised the importance of setting harmonised grading standards, practices and nomenclature in the coloured gemstone sector to bolster consumer confidence.

“Industry players should be able to feel confident in securing just one gemmological report. There should be no need for a second or third opinion, which means additional costs,” disclosed Sabbagh. “We need major associations, dealers and gemmological laboratories to agree on this set of standards. It will involve cooperation among industry players.”

Currently, ICA, the American Gem Trade Association and the World Jewellery Confederation (CIBJO) follow a Common Disclosure Code. What's needed now is an industry-wide set of standards accepted by global dealers, gem labs and other stakeholders, he added.

Sparkling future

Krish Creations' Patel sees robust demand for sapphires of 1 to 5 carats, particularly from Europe, the US and other Asian countries since these are the most active in the market. Demand from China may remain subdued, with buyers incessantly asking for more affordable items, he added. The future is equally dazzling for rubies especially at the upcoming September Hong Kong Jewellery & Gem Fair, noted Khunaprapakorn of Gemburi, adding that a bigger show will surely attract a higher number of serious buyers. Rubies and sapphires will likely be bought for inventory due to lack of top-quality stones in the market.

Nomad's Saltzman is upbeat about business prospects as well, saying that consumers are expected to come back from their summer vacation and start replenishing their supplies in September. “Based on the outcome of the June Fair, we are quite positive. For regional customers, we've seen those from Japan, China, Taiwan and Singapore, and they were all actively sourcing stones. It seems promising unless a major development occurs,” he noted.

Santpal Sinchawla of Sant Enterprises is also maintaining a stable outlook despite uncertainties hovering above the market.

“We don't feel the effect of the US-China trade war yet but there will be some impact. The Chinese market is still buying like usual,” he noted. “Business will be steady; it's not going to be a booming period but there won't be huge problems. It's all about stability.”

Sabbagh, for his part, said the top end of the market will continue to experience enthusiastic demand and be less price sensitive. “It is hoped that the middle- and lower-priced end of the market will see some growth as current global economic roadblocks are gradually resolved,” he noted.