Gemstones & Pearls:News
GEM FLOW MAY BE THAI'D UP
Last 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
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. Copyright © 1998 by Bond Communications.