Dealers at the Tucson gem shows did unexpected business even as issues of consumer confidence gathered steam

Downtown Tucson

The economy dominated the talk at the Tucson gem shows in early February, but not in the way you might expect. “We had a successful surge this morning,” said Rich Barker of Barker Gems, a Phoenix-based gem dealer, on day two of the American Gem Trade Association GemFair, held at the Tucson Convention Center from Feb. 6 to 11. “If we’re in a recession, this is the first industry that gets hit. I don’t see it.”

If Barker’s remarks sound counterintuitive, they are. But believe them. Despite the flagging dollar (which figured so prominently in conversation at the shows, you’d think its decline was the sole factor behind global economic uncertainty), the mood during the colored stone industry’s largest buying week was upbeat. “There’s been a fair amount of business at the show,” said Stuart Robertson, research director for Gemworld International, a publisher of pricing guides for the gem trade. “A lot of buyers appear to be from overseas. We’re not seeing a lot of Americans. We have also seen dealer-to-dealer trading.”

By sacrificing higher margins for cash flow, dealers are bracing themselves for what looks like a bumpy ride ahead. Such hope-forthe- best, prepare-for-the-worst thinking is indicative of the overall mindset. “The market seems to be in a period where it’s not going to encourage anything new,” Robertson said. That statement was borne out on the show floor, where only one new gem find warranted attention. A fall 2007 discovery of red spinel in the Mahenge district of Tanzania has yielded a selection of faceted stones, some of which made their way to showcases in Tucson. According to gemstone supplier Pala International, “the color seems to dance between a peachy orange and a pinkish red, and almost has a neon-type quality.”

The catch? Expect to pay a premium. “Prices are strong,” said Niveet Nagpal of Omi Gems, noting that a 3-carat Tanzanian spinel could fetch $1,200 per carat while a 5-carater might go for as much as $3,000 per carat. “It’s a new find of spinel, but you’d expect better prices.” Firm pricing was true in categories across the board, but especially in untreated rubies and sapphires, as dealers reckoned with twoincontrovertible truths about the market: Stone supplies remain constant, while demand, in the form of millions of new consumers in China and India, is on the brink of exploding.

The prospect of scores of new consumers entering the market prompted some people to question whether the trade was finally ready to unite on standards of disclosure. “We have a big crisis in language,” said David Federman, editor of Colored Stone magazine, during a seminar on issues affecting the gemstone supply chain. “The terms we use are contaminated and corroded.”

Federman singled out treaters in Thailand, who he railed against for obscuring the nature of their work. But the language impasse is best summarized by the enduring debate over whether copper-bearing, or “cuprian,” blue tourmalines from Mozambique can be labeled Paraiba, after the state in Brazil where the rare neon-blue tourmalines were discovered in the 1980s. The labs have settled the issue— they say yes, with some caveats—but years after the African look-alikes surfaced, the market is still divided.

“Our feeling is that Paraiba reflects a location,” Laurie Watt of gem dealer Mayer & Watt said. Ah yes, location: the gem industry’s great divide. It’s common knowledge that certain origins are considered sacred (not the least because they carry huge premiums in the marketplace): Colombia for emeralds, Kashmir for blue sapphires and Burma for rubies. But just as origins warrant premiums, they occasionally bring liabilities. Take Burmese gems, for example. The talk in Tucson centered on the growing movement to boycott gems from Burma, or Myanmar, whose military government has long been accused of human rights violations.

In 2003, the U.S. government enacted the Burmese Freedom and Democracy Act, which banned the importation of products from Burma. A loophole, however, allowed products that had been “substantially transformed” elsewhere (gems being cut, polished and treated, for example, in Thailand) to legally enter the country. Now, prompted by images of Burmese soldiers firing on pro-democracy demonstrators this past September, activists have seized upon the issue. In an effort to distance themselves from the potential PR crisis—symbolized by a CNN report last fall about “blood rubies”—both Tiffany & Co. and Cartier have sworn off Burmese rubies, in effect, swearing off all rubies since 90 percent of the world’s supply comes from that country (notwithstanding a new ruby find in Greenland, where Vancouver-based True North Gems is mining bright, clean stones).

In October, Jewelers of America appealed to Congress to sew up the loophole, so that the act includes gemstones mined in Burma. Assuming the appeal succeeds, fans of the stones will soon have to choose between market forces and social consciousness. It’s no exaggeration to suggest the future of the business rides on their decision