Industry Analysis: Protests Halt Thai Gem Trade

The following analysis is published courtesy of GIA’s Gems & Gemology eBrief

Intellectual property and all rights belong to Gemological Institute of America

Author: Russell Shor

Thailand’s gemstone industry has come to a near standstill in Bangkok, as battles between government forces and “Red Shirt” protestors shut down much of the city. More than 40 protestors have died in the violence that has gripped the country for nearly six weeks. The protestors, many demanding the resignation of Prime Minister Abhisit Vejjajiva, periodically blocked major arteries in a series of skirmishes with troops, until the government’s full-force response began late last week. The clashes began to subside yesterday. While the violence did not spill over to Chanthaburi, the city where most of the country’s colored stone industry is headquartered, it has badly damaged several major shopping malls and forced the closure of many sales offices in Bangkok’s business district . The GIA Laboratory Bangkok and the GIA Thailand campus also closed for most of this week. The airport remains open, but passenger count is down by two-thirds, according to press reports. Some of the country’s industry leaders have issued dire warnings about the state of Thai business if an agreement is not reached soon. Dusit Nontanakorn, chairman of the Thai Chamber of Commerce, said prolonged demonstrations, particularly in Bangkok’s main shopping and business area, could bring about a collapse of the overall economy. Even if the protests end now, he said, the government still has a lot of hard work ahead, including stimulus efforts and reducing income disparity. “Everybody in the entire social structure must team up together to get out of this trouble, before the destruction of the entire country.” Thailand’s colored stone exports totaled $139 million for the first quarter of 2010. Exports of diamonds for the same period totaled $297 million, with finished jewelry at $742 million. In neighboring Myanmar, the government reported earnings of $504 million from its March sale of jade, gems and pearls. It plans another sale next month. The Myanmar Central Statistics Agency also reported official sales of 32,921 tons of jadeite, plus 18.7 million carats of colored gemstones and 201,081 momme (754 kg) of cultured pearls. AUCTIONS: Demand and prices for top diamonds (which all carried GIA reports) remained strong at the major auction houses. At Sotheby’s May 11 Geneva sale, a 7.64 ct Fancy Intense blue diamond drew a winning bid of $8 million, just under $1.1 million per carat, nearly 50% above the pre-sale estimate. At the same sale, a 52.82 ct D-Flawless type IIa square-cut diamond brought $7.93 million, more than $150,000 per carat. A ring containing two pear-shaped diamonds — a 5.02 ct Fancy Vivid blue and a 5.42 ct D-Flawless — brought $6.3 million. The following day at Christie’s Geneva, a private buyer paid $127,000 per carat for a 40.21 ct D-Flawless diamond, while a Swiss retailer paid $162,000 per carat for a 16.92 ct D-Flawless round brilliant. MACRO: The U.S. retail sector continues its slow recovery from last year’s depths. The U.S. Department of Commerce reported that April sales increased 4.6% over the previous year and 0.5% over the previous month. Meanwhile, the National Retail Federation reported that retail sales were up 5.6% for March and April, compared to the same period last year. In Japan, sales of diamonds and jewelry continued their three-year slide, declining 1.8% in April against the same month in 2009, according to the nation’s Department Stores Association. The group noted, however, that demand for high-ticket items began to pick up during the month as wealthy consumers ventured back into the market.

Russell Shor

Senior Industry Analyst

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