GemNotes

PEARL PRICES MAY ESCAPE HIGH YEN

The free-falling U.S. dollar is having much less effect on akoya and South Seas pearl prices than originally expected, say pearl dealers.

The Japanese yen, the currency in which virtually all pearls are traded, grew about 35% against the dollar in the first quarter of 1995 (from Y108=$1 to Y80=$1). This currency gap is too great for pearl producers to absorb, say some dealers. Bart D’Elia of B. D’Elia, New York City, believes a price hike is inevitable, especially on pearls over 8mm. (He does think that Japanese producers and the U.S. dealers will absorb some of the increase.)

But some other dealers believe the prospect of a very poor year in Japan has left many producers eager to cut favorable deals for U.S. buyers – their best customers. “Things are dead in Japan, and suppliers need money like crazy because the banks have been pushing some of them to pay back loans,” says Salvadore Assael of Assael International, New York City. “That’s why they are willing to make deals that would allow us to buy at almost the same prices as last year.”

A dealer who asked not to be identified says dealers who made early commitments on pearl supplies probably couldn’t cut any deals. “Those who held out found they could get some pretty good prices,” says the dealer.

Adds another: “Basically, we’ve told them they made good money in past years, now they can have an off year like everyone else.”

Complications: The problems in Japan go well beyond a tenacious recession. An earthquake in Kobe in January and terrorist attacks in Tokyo and other cities throughout the spring have severely compromised consumer confidence, says Rick Reuter of Leys Christie, New York City.

For these reasons, Japanese jewelers are expected to vastly reduce the number of pearls they claim from the annual pearl harvest (they normally take about half). “There’s not much mood in Japan for luxury goods,” says Reuter.

Further complicating the situation is the disruption of the pearl harvest, processing and auctions because of the earthquake. In normal years, pearls are taken out of the water in late winter and early spring, then bleached and tumbled to improve color and form. Next, they are auctioned to large pearl exporters; the prices usually are set by April and then U.S. dealers journey to Japan to buy. This year, however, the entire process has been delayed by some eight weeks.

Most dealers are optimistic that U.S. demand will continue to improve this year, after several years in the doldrums. D’Elia says pearl strands tend to follow cycles as new generations of women come into the market. “Hopefully, it will start this year or next year.”

This demand is one reason dealers are eager to hold the line on prices, says Devin Macnow, spokesman for the Cultured Pearl Association. “There’s a lot of interest growing in pearls and dealers don’t want to kill it with price increases,” he says.

South Seas pearls: South Seas pearl prices are less affected by the exchange rate because, while priced in yen, they are less tied to it by production costs.

Assael believes prices for top-quality white and Tahitian blacks may rise 10%-15% this year because of demand in the U.S. and the Far East. “In some cases, we expect demand for these goods to outstrip supplies this year,” he says.

In addition, prices at producers’ auctions have been strong all year for South Seas pearls.

Lesser quality South Seas pearls, which took a big hit when the Japanese market collapsed several years ago, remain slow to rebound, say dealers.

CSO CUTS BACK DIAMOND ALLOCATIONS

De Beers apparently has pulled back from large diamond allocations following a new upsurge in Russian rough sales.

In January and February, De Beers’ Central Selling Organization sold about $1.2 billion of rough. But the allocations reportedly fell to $400 million for March and averaged $350 million for May and June. (First half CSO sales should total about $2.5 billion, slightly under 1994’s level of $2.58 billion, according to trade estimates.)

Clients welcomed the large allocations in January and February because business was improving and because the CSO had tailored the selection of diamonds more closely to their needs. In other words, De Beers withheld goods that weren’t popular at the moment, relieving clients of the specter of having to sell them at a loss.

The larger allocations were possible in part because Russia had slowed its exports of rough diamonds outside of the De Beers’ network.

In March, however, everything changed. Diamond sales slowed in the U.S. and the Far East. At the same time, Russian rough sales started to increase. Some of the Russian goods reportedly sold in Antwerp for 20% under comparable CSO goods.

“The Russians have again disrupted things and put a negative effect on the market,” says Mark Boston, managing director of H. Goldie & Co., a CSO broker.

Meanwhile, De Beers is forced to walk the thin line between lowering allocations in deference to Russian sales and pulling back so far that the Russians take a greater market share.

YEHUDA OFFERS VIDEO, FLASH CARDS

Yehuda Diamond Co. has prepared a promotional video for jewelers to show prospective customers. The video explains how Yehuda infuses a clear filling to mask inclusions and improve the appearance of diamonds.

The process allows Yehuda’s fracture-filled diamonds to be sold for one-third less than comparable looking untreated diamonds.

The video also explains how to identify a treated diamond and advises jewelers how to sell them to customers.

President Ron Yehuda says the video is available free to jewelers who request one in writing or who stop at his booth at major trade shows.

Yehuda also offers a series of color cards demonstrating the “flash effect” that distinguishes diamonds treated by his company.

Yehuda Diamond Co., 580 Fifth Ave., New York, N.Y. 10036-4701; (800) YEHUDAT.