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| March 1998
Gemstones & Pearls:News GEM FLOW MAY BE THAI'D UPLast year's economic downturn in Thailand has led to a cut in gemstone supply, sending prices soaring A once-mighty flow of gemstones into Thailand is now barely a trickle, and supplies coming out of the country are dammed up as well. As a result, U.S. retailers are paying more for ruby and other popular high-end gems such as sapphire and tanzanite. You can blame the collapse of the Thai stock market in September 1997 and the ensuing 40% drop of the baht against the dollar. The gem traders and jewelers on Silom Road, who had helped to rank the industry third in Thailand's gross national product in 1993, have dug in their heels for a painful wait. Recovery will be slow because Thailand's markets in Asia, such as Japan, have economic problems of their own, and the U.S. market is soft on color. Observers say almost every other building in the gem district is for rent - and rents have uniformly dropped by almost half. It's all part of the boom-to-bust cycle of real estate investing when loans were easy to get. "There's a serious cash-flow problem. Many dealers have closed for good or disappeared, and a number of important Indian gem dealers have returned to India," says gem expert Ted Themelis of Houston, TX. Themelis, who traveled to Bangkok at the end of '97, says all gem transactions are now in U.S. dollars, from the mine to the factory. Americans buying in Thailand say costs have almost doubled from what they were before the stock market collapse Thais were once able to descend on any new gem locality worldwide, spending millions to corner the markets. That's no longer the case due to their lack of liquidity. The rough gem market is now a "buyer's market." Gem knowledge was also a Thai specialty. They know how to heat-treat sapphires and rubies and are among the most affordable cutters of these gems. As a result, much material from around the world is still expected to go to Thailand - even if the Thais aren't buying and trading goods. "The problems could be seen as an opportunity to wrest some of the market control from the Thais," says Simon Watt of Mayer & Watt, Mays-ville, KY. However, gem-rough buyers in Bangkok aren't panicking and liquidating stock, says Doug Parker of William H. Kuhn Inc., New York City. Major dealers have other business interests and are likely to weather the storm, so market supply is scant. "It's just tough to get good stones in Bangkok - either the merchants have already sold them to pay off debt or they're holding them and not buying any new stock," says John Bachman of John M. Bachman Inc., Boulder, CO. The dramatic fall-off comes despite continued interest internationally for fine qualities. Prices for these goods are soaring. "Rubies in the $2,000-$3,000-per-carat range [wholesale] have almost doubled in price in Bangkok," says Steve Taylor of Taylor Gem Corp., Sacramento, CA. Inexpensive rough has largely been redirected to other emerging cutting centers - including Vietnam, China, Sri Lanka and India - where it is more cost-effective to cut them. These gem prices are expected to remain stable. While they don't have the same infrastructure and market control as the Thais, these areas stand to benefit most from Thailand's woes. - by Robert Weldon, G.G.
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