coverstory Amaris Regalia Can Coloured Gemstones Successfully Switch Markets? 20 Solitaire INTERNATIONAL l June 2010
coverstory With the sovereign debt crises in the Eurozone threatening today s connected world, Indian gemstone dealers need to develop new markets. But even the most touted emerging markets of today are erratic in terms of gemstone demand. The domestic Indian market, though growing strongly, requires specific products and strategies. Erum Ali Qureshi looks at the Indian gemstone industry s options. The coloured gemstone industry finds itself between a rock and a hard place as it reports that demand from emerging markets is too uncertain to offer them a viable alternative to the traditional consuming markets in the US and Europe Just as the United States is showing small but positive signs of beginning to recover from the worst recession it has suffered since the Great Depression, and Indian coloured gemstone dealers were beginning to think that the drop in their exports had bottomed out, with better days ahead, the sovereign debt crisis in Greece and the same menace looming over other Eurozone nations, has struck an unexpected blow that has set back a fledgling recovery. And unlike the diamond sector, the coloured gemstone industry finds itself between a rock and a hard place as it reports that demand from emerging markets is too uncertain to offer them a viable alternative to the traditional consuming markets in the US and Europe. The core of the problem is the euro, which has weakened considerably against the US dollar and other major currencies. The European single currency continues to be under pressure as concerns grow that the region s sovereign debt problems and slowing growth could actually trigger a second and perhaps more severe recession. Indian gemstone exporters to Europe say demand is already down by a whopping 50- to 75 per cent even though it is early in the season. Narendra Tikkiwal from Om Sea Gems, Jaipur, a firm that specializes in beads, says, Payments from our European clients are now being delayed. We have seen a reduction in demand by as much as 75 per cent. Cut and polished gem exports too have suffered. Rajesh Toshniwal, owner of Ritu Gems in Jaipur says his cut and polished exports to Europe are down by 50 per cent. Greece and Spain have both been very good markets for Indian silver jewellery. Silver jewellery exports, however, have fallen by 75 per cent ever since the crisis started in these two countries. Normally, exports to Europe kick into high gear around the middle of August, but gemstone dealers are pessimistic about that happening this year given the economic situation. And the weather has made things worse. A lingering cold spell has indicated that the onset of summer, the period during which fashion and styling changes drive gemstone and jewellery consumption, Solitaire INTERNATIONAL June 2010 21
will be delayed this year and fashiondriven demand if any, is likely to come only around the beginning of September. Meanwhile, the US market hasn t even begun to reflect any of the recovery that is being reported by economists. Nawal Sodhani from Jaipur-based Dhruv Gems and Ornaments observes, Exports to the US have been suffering for the past two years. Even now, though orders are coming through, business has not really picked up despite the reported economic recovery. Bruner New frontiers While many dealers already have started exploring possibilities of newer markets some feel it s too early to look for alternatives just yet. Besides, the alternatives don t seem to display the same reliability that the US and European markets displayed in better times. Japan, Korea, East European countries, Austria, Russia and Africa are some of the newer avenues open to exporters. Many feel that it would be difficult to replace traditionally strong 22 Solitaire INTERNATIONAL l June 2010 Anthony Nak Tanzanite Cuff coverstory markets like the US and Europe due to several reasons. Whereas Russia and Austria do have potential, these markets are fairly inconsistent and the demand cannot always be relied upon. Moreover, there is no demand for highend goods and it is only the medium- to lower grade material that moves in this region. Ashok Khandelwal, owner of Colorocks in Jaipur, says, As such, there are no new markets that have the potential to take up the slack but if Europe and US continue to perform the way they do now, exporters will simply have to explore alternatives. While noting that Russia and other East European markets hold great potential, gemstone dealers say issues like prohibitively high entry tariff barriers are a major hurdle. As if these and other new market problems
coverstory Manoel Nogueira While the high tariff barriers are a problem right now, most exporters aren t pushing too hard to enter the Russian and East European markets because we also have a problem with erratic rough supply weren t enough, gemstone dealers have to also now cope with uncertain rough supplies. While the high tariff barriers are a problem right now, most exporters aren t pushing too hard to enter the Russian and East European markets because we also have a problem with erratic rough supply, says Kamal Kothari of Supergems. So erratic is rough supply in fact, that some gemstone dealers say their biggest problem today is not sagging demand but uncertain rough supply. Exacerbating this is a shortage of skilled labour to process the stones. The result is a shortage of polished gemstones overall. Gemstone dealers are scrambling to meet orders and becoming increasingly apprehensive about the future. Toshnival says, Labour is scarce and so is rough, particularly emerald rough. As a result, ready stones are also in short supply. The future remains uncertain but since overall demand is low, we don t have a crisis yet. Naturally, the shortages have affected prices as well. The cost of some gemstones such as tourmalines has doubled over the past year. Prices of mid- to low-range gems are up by 20 per cent. Amethyst prices are up by 40 percent and other gemstone prices are already climbing or are expected to climb shortly, cautions Nirmal Bardiya, president of RMC Gems. Production and supply problems aside, many gemstone dealers are pegging their future strategies on the domestic Indian market, which continues to grow and show ever greater promise. While most exporters have simply diverted some of their products to the domestic market as a hedge, some say this market too has its share of problems. Tikkiwal, who has already established a presence in the domestic market, explains that 24 Solitaire INTERNATIONAL June 2010
demand keeps fluctuating and cannot be relied on to take up the slack left by the underperforming European and US markets. Others like Dharmendra Tank of Heeralal Chagganlal Tank, however, think that simply diverting export product lines to the Indian market isn t enough. The Indian market is an old one, with specific tastes and preferences of its own and requires special attention to tackle successfully. Tank has put in a great deal of effort to developing a specialized product line for the domestic market. Alternatives India exports almost 200 different kinds of gemstones and dealers say it is very difficult to pin down exactly which are most in demand. Without doubt the big three ruby, emerald and sapphire have been the all-time favourites in the gem world and continue to be strongly in demand. However, a range of other gemstones like tourmaline, spinel, topaz and quartz varieties that are used extensively in jewellery both in India and abroad are now much sought after. At present tourmaline, blue topaz, amethyst, aquamarine, garnet, black spinel, rose quartz and rutile are moving fast. Light colours and pastel shades do well in summer. In beads, it is the smaller sizes 2.5mm to 3.5 mm that are doing well. The demand for these items is steady and the price fluctuation is just about 5- to 10 per cent, informs Tikkiwal. As gold and silver prices soar, manufacturers are looking to keep fabrication costs down to a minimum for their lower end product ranges. In this endeavour, particularly for the US market, they have turned to synthetic stones and glass imitations. Khandelwal observes, It has been my experience that American consumers do not display as great a preference for natural stones as Europeans do. However the rising cost of precious metals has forced even the most discerning customers in Europe to switch to synthetics and glass imitations in lieu of natural gems. Glass-filled ruby has emerged as a steady alternative to the more expensive untreated ruby as it has been widely accepted. Tourmaline and apatite in the $5 to $20 per carat price bracket are moving
Tanzanite One Current export markets are asking for alternatives not only to the big three, but even to traditionally affordable gemstones like tourmaline and amethyst well. In great demand nowadays are opaque cabochons in all colours in the $0.5 to $1 per carat price range. Current export markets are asking for alternatives not only to the big three, but even to traditionally affordable gemstones like tourmaline and amethyst. According to some dealers, in the lower price points, synthetic stones and glass look cleaner and more attractive than natural gemstones to the average consumer. However, even though there has been a steady demand for these alternatives to expensive gemstones, their prices have not moved up as a result. Demand at the high end, however, continues for the real thing. Kothari points out, There is very good demand for really fine goods from all over Europe and the US. This indicates that the top end of the luxury market has not been impacted as much as one might imagine. However, good- to medium quality goods are not moving well in these markets. The year ahead Looking forward through to the end of the year, the big three of ruby, emerald and sapphire are once again expected to be the main sales drivers. And while at the low end, synthetics seem to have gained on natural gemstones right now, industry watchers think the natural product will stage a comeback by the end of the year. This is because dealers say the allure of the real thing will draw consumers back. It s a cyclic change actually and all we can do is sit back and allow this cycle to take its course, Khandelwal says. Silver jewellery set with gemstones other than ruby, emerald and sapphire can be expected to do well whereas gold jewellery set with diamonds and the big three may further lose market share, predicts Bardiya. The second half of this year is expected to be good particularly for opaque gems such as rose quartz, black onyx and tourmaline all stones that fall in the mid- to low range price brackets. 26 Solitaire INTERNATIONAL June 2010
coverstory Apart from emerald that has enjoyed a good run over the first half of this year, tanzanite in the $50 to $300 price range and rubellite are the natural stones that are most in demand. Emerald is doing quite well at the moment and is expected to continue outperforming ruby and sapphire. These two corundum siblings are expected to be in demand though not as much as emerald, says Toshniwal. Kothari agrees but cautions that tanzanite rough availability may be doubly affected due to new government rules banning the export of certain weights plus the ubiquitous supply problems. Khandelwal though, remains optimistic, The coloured stone industry s future is bright even though the past four years have seen us suffer a set-back. However as long as beauty is appreciated, the jewellery industry will exist. This year has been challenging for the coloured stone industry but hopefully, it s the eve of a better era, he says optimistically. 28 Solitaire INTERNATIONAL l June 2010 Gemfields The coloured stone industry s future is bright even though the past four years have seen us suffer a set-back. However as long as beauty is appreciated, the jewellery industry will exist