A rising tide shrinks the jewel business

[starryeyed]

Date: 1/29/2007 11:58:08 PM
Author: Garry H (Cut Nut)
Starreyeyed if you look here you will see the world still runs on rd and pr
http://idexonline.com/Diamond_Index_Drivers.asp
Emerald (inc asschers) make a very small showing.
Of course the answer relies on 2 things:
1. better fancy shapes - even better than rounds for some uses and viewing conditions would help a lot - and we dont have then just yet
2. democratic grading systems - eg a princess that is ideal should be ideal in comparison to a round that is ideal - and we dont have that yet
Our little Cut Group hopes to change that within a few years. We are playing with the first stones from our small Master Stone Study - the first 2 are in my pocket.
The first step will be Sergey's new DiamCalc 3.0 with a professional package option for new cut design.

Quite the pioneer there Garry! Will you tell us a little more about what's in your pocket?

Or at least the Master Stone Study?

Thanks for the IDEX link - fascinating! The methodology indicates that this Index reflects the 15 leading diamond categories, and that these 15 comprise about 45% of the market. Perhaps a silly question, but what's in the other 55%?

I understand what you are saying, emerald cuts don't make a signficant showing. Question though, what is the explanation for this huge jump in the Driver Index for 5+ carat emeralds back in July 2006?

 

[CaptAubrey]

Date: 1/29/2007 10:56:10 PM
Author: starryeyed

1. Figure 5, Snapshot of Key Trends, indicates rising prices of rough supply and emergence of new mines. How likely is it that there will be new mine discoveries? I guess rising rough prices is plausible, and that would drive prospecting, but how do we know there will be any more discoveries? If there are, how do we know the yield in advance to say the rough market will suffer from too much supply?

There has been an enormous amount of exploration in recent years, and as strm notes, there are at least half a dozen new mines likely to come on line in the next decade. Others will shut down or reduce production, but it''s a fair projection to say the amount of rough on the market is going to continue to increase. So why the rough price increase? Demand--and a lot of it--from consumers in India and China.

2. How long does it take to learn cutting? Will China be able to achieve excellence in cutting in 8 years?

The schools may last 6 months or so, but the general rule, as I''ve been told, is that it takes 2-3 years to achieve true competency. China got into the business fairly recently, but like so much else, their huge population and very low labor costs are what is really driving this trend. Excellence isn''t the issue; productivity is. Whether a single ideal cut stone comes out of China is likely irrelevant.

3. In terms of the analysis method, where''d they get the ''assigned probabilities'' that seems to drive the predicted outcomes? Maybe from the folks commissioning the study?

No idea, but the assumptions are valid IMO.

4. Why would Turkey take over from Italy in gold? Wages? What about design and craftmanship? Perhaps I''m biased, but the Italians are king when it comes to designing stuff - jewelry, handbags, shoes, clothes, etc.

Gold jewelry is a very important part of Turkish culture and always has been. Note also that there is a difference betwen design and manufacturing. A lot of Italian-designed stuff is manufactured elsewhere.

5. What about the Kimberley Process and Supplier of Choice? I guess I always saw this as a way of controlling trading activity. It''s not working?

The Kimberley Process is a method of controlling illicit diamond trade. So it''s not really an economic issue beyond the costs of compliance. SOC was--ostensibly at least--intended by De Beers to shift the market from supply-driven (they sit on their stockpile and set the prices) to demand-driven (they and their sightholders work to drive up consumer demand for diamonds). That SOC has not grown the diamond jewelry market ahead of world GDP dollar growth is pretty well established, and in that sense it hasn''t worked. De Beers has gone back to the drawing board this year and made some changes in it. Whether this will make a difference remains to be seen.

The most important part of this report is the recommendation for greater openess and transparency--essentially breaking up the old boys club that has characterized the industry for a century. We''re headed in that direction despite a lot of resistance at all levels of the trade, but where it will end up is anyone''s guess.

 

[Garry H (Cut Nut)]

Date: 1/30/2007 11:08:05 AM
Author: starryeyed

Date: 1/29/2007 11:58:08 PM
Author: Garry H (Cut Nut)
Starreyeyed if you look here you will see the world still runs on rd and pr
http://idexonline.com/Diamond_Index_Drivers.asp
Emerald (inc asschers) make a very small showing.
Of course the answer relies on 2 things:
1. better fancy shapes - even better than rounds for some uses and viewing conditions would help a lot - and we dont have then just yet
2. democratic grading systems - eg a princess that is ideal should be ideal in comparison to a round that is ideal - and we dont have that yet
Our little Cut Group hopes to change that within a few years. We are playing with the first stones from our small Master Stone Study - the first 2 are in my pocket.
The first step will be Sergey''s new DiamCalc 3.0 with a professional package option for new cut design.

Quite the pioneer there Garry! Will you tell us a little more about what''s in your pocket?

Or at least the Master Stone Study? I think Sergey would like me to do a pricescope video live communication to announce more details about this some time soon. if you search here for MSS and "Master stone Study" you can get some background.

Thanks for the IDEX link - fascinating! The methodology indicates that this Index reflects the 15 leading diamond categories, and that these 15 comprise about 45% of the market. Perhaps a silly question, but what''s in the other 55%?
smaller sizes of rounds mostly, and smaller sizes of princess, followed by all other shapes in all sizes.

I understand what you are saying, emerald cuts don''t make a signficant showing. Question though, what is the explanation for this huge jump in the Driver Index for 5+ carat emeralds back in July 2006? Rounds +5ct made a big jump just before then. It is possibly the after effect of demand at the big Vegas show- maybe dealers sold a lot and other dealers went and bought all they could from each other, or they were listed as hot by several journo''s in Rap and other trade mag''s. Maybe ther were some great results from international auctions?

Anyone got a link to the Beer Game - a common story in management texts - where a small beer label became wildy popular because of one late night comment on radio or TV. Also the hush puppie story is similar. i am sure it is mostly asscher driven.

 

[Garry H (Cut Nut)]

1. new mines are not coming on fast enough to replace shrinkage of supply from old mines.

Date: 1/28/2007 11:31:05 AM
Author: denverappraiser

Date: 1/28/2007 10:36:49 AM
Author: oldminer
Yes, the failure to deliver the promised benefit of a brand is going to eventually level out or eliminate premiums for brands that do not measure up to what BRANDING means. A Brand has consistency of delivery. In a successful brand you know exactly what to expect when the package in opened. Many diamond brands do not accomplish this consistent delivery of performance and quality. Those will eventually fail in becoming long term brands. Brands which do deliver consistent quality have a good chance to carry the market forward.

I our appraisal offices that I partner in, located in Mumbai, India, we are providing third party ''jewelry certification'' of quality to manufacurers and retailers for the domestic India market and also for some export. Though this domestic market is in its relative infancy, the speed of growth there is going to far exceed the US or European growth pattern. Third party assurance is an element of branding which makes the consistent delivery of jewelry and gems a possibility. In India the cost of these documents is extremely small compared to the rates for similar work done here. Even appraisers will need to greatly adjust their business models to compete with documentation done upstream, at the low cost labor sources. Eventually, these documents will enter the US and European markets with Indian and probably Chinese made jewelry products.

The description of diamonds will get technologically more and more accurate and specific. The cost for the services of grading will come down although the volume growth potential is good enough to plan on having sufficient business even at reduced revenue per stone. All of us will have to get used to a new four letter word which begins with ''W''--work. Just like the rest of the world, we''ll have to adjust and give up some of our free time.

I’m quite surprised that the manufactures aren’t providing better documentation by now. There’s nothing in the inspection by a US based gemologist or appraiser that couldn’t, and shouldn’t be done buy a grader overseas. Much of it, like grading of stones, sarin, quality control, testing of various metals and the like are surely already being done, they just aren’t being transmitted to the consumer. Other items, like plotting, various types of photography, origin and treatment tests and specialty tests like BrillianceScope and Isee2 could easily be arranged if the manufacturer wanted to do it and could get other manufactures and retailers involved with a particular piece to cooperate. Whether this is being done by employees of the manufactures, subcontractors or some combination is not importantly different if it’s part of the sales presentation. Dealer supplied documentation is extremely useful for what it is but one thing it’s not is an appraisal.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

You both know that I agree 100%

What other industry has similar distrust of vendor or manufacturers product assurance? Used cars. Not hard to answer correctly?

There is no reason why India and China will not be the new drivers of manufacturers quality assurance.
People like Storm et al have no way to comprehend that psych. But Dave who has been there a fair bit too now joins me and others in predicting that this will be a reality for some high end companies.

I have suppliers whose grading I trust because I monitor it by sending stones to other labs. I have 7% upgrades and 3% down grades from one supplier, so why would I bother? Who runs a stricter lab?

Answer is I cosnider the client, and my relationship with them - and look at the stones - if there is no issue, then I save us all the cost and time of certification.

I have done this with serious stones and I sleep well. At stake is 30 years of my good will.