When Will India Pearl Again?

Pearling has a long history. But when pearl-folk talk pearl, the discussion usually leans toward the world’s major producers of cultured pearls; Japan, China, Australia, the Philippines, Indonesia and French Polynesia. There is no arguing that these are the primary production hubs of the industry. But when one considers the long history of pearling, few of them have much importance as told by Kunz and Stevenson. The most important locations are those many bodies of water that stretch between Saudi Arabia and Thailand; the Persian Gulf, the Arabian Sea, the Bay of Bengal, and all different parts of the Indian Ocean.

So why have none of these historically important natural pearling area become an epicenter of pearl production?

Well India has tried. It has tried over and over again. India is rich with Pinctada fucata in the famous pearl beds of the Gulf of Mannar and Pinctada mararitifera in the Andaman and Nicobar Islands. But the pearling efforts of India have had little success. The Central Marine Fisheries Research Institute of Kerala helped set up an operation in the past 15 years for the locals. They’ve successfully grown akoya. But the production is so small the pearls never hit the market. Ajai Kumar Sonkar is reported to have some success in the Andamans, but who has really heard an update since pearls ’94?

I think India has just not tried hard enough. Plans are made, hopes are high, but the infrastructure and support is just not there. India needs a shot of Dubai’s nationalistic pearl fervor to make this potentially profitable enterprise a reality.

In the Indian municipality of Silchar, a pearl farming plan has been in the works for the last few years. The administration did its research. There is local demand for pearls and pearls are all imported. Pearls are important to the locals for astrological reasons, and many prefer pearls over precious metals. According the a story from Telegraph India, the plan appeared flawless. That is, until it reached Dispur. According to Sudip Dutta, the vice-chairman of Silchar municipality, “the Assam government found no reason to accord any priority to the project.”

India strikes out once again.

Pearls to Production Lines, Japan is in Trouble

Following what seems to be governmental play-of-the-day, the Japanese government has just pushed through an $80-billion stimulus plan, which includes a cash hand-out of $200 to every citizen of Japan.

According to a radio recount from Radio National in Australia, the Japanese pearl business has been one of the first industries to be hit by the financial crisis. Mark Willacy reported from a pearl auction that buyers were sparse and wallets were closed. Dealers are already sitting on large inventories of unsold goods.

But one thing stands out to me in this report. The Japanese are fudging the pearl numbers once again. The report states Japan’s pearl production to be at 70 tons. Where are they getting this number? Someone either pulled it from history, or pulled it out of their ass. That is a number Japan has not seen in more than a decade.

The JPEA claims around 1300 pearl farms in Japan. Not all of them are actively producing. In fact, I’d surmise more than half are not. Most farms are diminutive, producing around 10 kan. The real tonnage of pearls produced currently is almost certainly a third of what is maintained in this report.

One thing is certain. Pearl producers are suffering. Wholesalers are suffering. Luxury dealers are suffering. The luxury goods biz is suffering. The world is suffering. The stimuli is going to be too little and too late for many.

Time for Pearl Lemonade

Submitted by Perlemeister

You know the old saying: When life hands you all lemons, go make lemonade. Meaning: turn negatives into positives when and if you can.

So maybe the terrible times in the pearl world we are going through now– horrific stories for producers and dealers abound in great quantity– presents opportunities for others.

As a well-respected overseas dealer pal of mine told me recently on the dire situations abounding in his field: As for the business, it is terrible, and worse to come. Even many large, well-known, traditional international players will NOT survive this typhoon! I am including farmers. We now have a tremendous imbalance of goods in the pipeline. Sales have almost come to a standstill but by the nature of our business, there are tons and tons of pearls still growing out in the waters of Australia, Indonesia, the Philippines and Tahiti as well... and they will all be reaching the auction blocks pretty damn soon... during a time when the market is totally saturated. And most people don't have much financial fat and are eating it away at an alarming rate. We are definitely on collision course, as the industry has never ever experienced it before.

Prices are not really that important any longer. The problem is the lack of demand. December sales were really bad, but this week I spoke to various really big distributors in both the USA and Europe and all of them said that January was "catastrophic" and practically dead. ... and mind you, this is just the beginning. There is little or no chance for demand to increase in the next two to four years (even optimistically speaking)!

All of us no longer talk about sales that are down 20 or 30 or 40 percent. We talk about sales that are now 20 or 30 percent of the previous year. For the first time in my pearling career, I have stopped making "sales comparisons" with previous years. We are more busy adding up the very few sales, figuring out the little gross profit (if any) and putting that against expenses... and in most cases, the figures are far, far away from tallying up. And the larger the company, the bigger the discrepancy.

So, the question for most is how much oxygen do we have in the system... can we make it till the markets pick up again in a few years? As Warren Buffet recently said: "It is only when the tide goes out that you can see who was swimming naked".

The only thing on the increase is misery, unemployment, soup-kitchens, suicides, crime, and fraud. This is a sink or swim time for us all.

On top of this dire note came notification from a friend of mine who is a well-known dealer here in the U.S. He just returned from overseas and reported that he was the only gunslinger in town. I had my pick of the crop, and prices were extraordinarily cheap. So I bought to my heart’s content: the best situation I have ever encountered in my years of purchasing.

He will be exhibiting in Tucson at February’s show, with a better selection of goods at lower prices. Which leads us back to lemonade. Buyers can take advantage of the current situation, as it is a buyer’s market... not necessarily a seller’s market.

It’s lemon season, so make lemonade.

64,000 Years of Pearl Mussel Growth…Gone

Yeah, yeah, yeah…I know I just posted about the pearl mussel poaching over in Scotland last month, but today I came across this video by the BBC. The video is fascinating and has many superb shots of the natural, freshwater gem.

Scientists in Scotland are doing their best to combat the increased poaching by reintroducing pearl mussels into the wild in secret locations. But the battle is a difficult one to fight. Just a single kill last year left the remains of 800 mussels. The average age of each mussel was 80 years. That is a combined total of 64,000 years of pearl mussel growth.

The fine for poaching a single mussel is £10,000 and mussel collection has been outlawed since 1998 and only two jewelers in Scotland are licensed to sell Scottish pearls. But in more than 10 years, not a single poacher has yet been brought to justice. There are simple too many rivers in Scotland, and collecting and killing the mussels is a quick and dirty job.

Poachers make me sick. You can expect a post featuring a popping bottle of champagne when one of those bastards is finally caught.

Pearl Farmers Get Shelled

Pearl farming is the bedrock of the industry. The pearl industry exists on the passion and commitment to the work by pearl farmers. It is the most precarious, uncertain job of the industry. So why are pearl farmers always the ones to get shelled.

Pearl farmers are hurting. There are whispered stories of suicides in Japan where auction prices have been on continual decline for several years. Pearl farmers are pumping out more and more pearls, trying to make up in volume what they are losing in value, worsening the decline in prices.

China has been hit on two fronts; the akoya industry was nearly decimated two years in a row, and overproduction of freshwater pearls has pushed harvest-material prices to unsustainable lows. Today’s pearl farmer can make more profit farming rice instead of pearls.

In Tahiti, current market values do little to cover the cost of production. Prices have tumbled since 2006, with over-production in small sizes creating a glut of sellers while the economy is driving away the buyers. Desperate farmers are making their way to China, striking deals with pearl processors who’ve capitalized on the elimination of Tahiti’s export tax while capitalizing on farmer desperation. It is every man for himself. They are selling far below market value, worsening the slide. They are desperate and they are dealing with some of the world’s fiercest negotiators.

Well, apparently South Sea pearl farmers are no longer immune to the stomping and lack of appreciation the industry is so keen to show. Pearl farmers in Indonesia are going out of business. Two years ago pearl harvests sold at $20 per gram. Today, many farmers are only getting $5 to $8 per gram. What are they doing wrong? They trust the buyers. Many farmers in remote areas don’t know or completely understand the value of their harvest, and when larger buyers such as the giants from Japan or the Man Sang’s of Hong Kong tell them their pearls are only worth $5 per gram, they believe it. These buyers then turn around and sell the fruits of the farmers’ labor four to five times over cost – the real value.

I guess my biggest question is simply why? Is it just damn greed? When buyers buy below production cost, they set a standard. That standard is then forced on the rest of the producers. The processors in Kobe and Hong Kong get fat while the pearl farmers cannot feed their families nor sustain their dreams. Consideration for others and considerations for tomorrow would seem to go hand-in-hand, but foresight is not always coupled with common sense.

South Sea and Tahitian Pearl Auctions

Someone posed this interesting question to me last week. How do auctions work? I guess I’d taken for granted that the workings of a pearl auction were understood. Well, duh! Of course they aren’t. There are not many pearl lovers who’ve had the opportunity to see a real auction take place.

Auctions are scheduled year round by producers from French Polynesia, Australia, Indonesia and some smaller producing areas (like Fiji). They are either organized by the producers themselves, or organized by an organization with vested interest in the industry.

Most pearl auctions are invitation-only. In other words, the organizers choose participants based on a lot of factors that vary from auction to auction. They are looking for volume-buyers for the most part. Invariably most of the buyers are from Japan, still the wholesale center of pearl processing today.

Auctions are usually broken into several days. This doesn’t mean sales happen on the final day. They happen each day. Winning bids are tallied at the end of each day and the winners are notified.

Lot sizes vary tremendously. A typical lot may have around 1000 pearls. The quality is rarely mixed, color may or may not be mixed, and usually sizes are mixed. Typical Tahitian lots may look like this:

· Lot One: Shape – R/SR, Quality – A/B, Color –Med-Dark, <8 mm – 21, 8 mm – 107, 9 mm – 285, 10 mm – 375, 11 mm – 185

The lot has a total of 788, round to near-round, clean to lightly spotted pearls with medium-dark bodycolor. The lot may have a reserve price, it may not. Well, it always has one, it just isn’t always disclosed.

There may also be some special lots consisting of strands or pairs. Robert Wan is known for selling small lots consisting of only one pair of matched pearls of extraordinary size and color. Paspaley offers small lots of extraordinary baroques. The vast majority of the lots, however, consist of what is known as Commercial Grade. These are the C and D grade lots that are used as Necklace Material. This is why the majority of strands, whether Tahitian or South Sea, have spots. The clean lots are primarily used for earring and individual-pearl pieces, or purchased by large South Sea or Tahitian pearl buyers like Pearl Paradise or Mikimoto, which sell direct to retail and/or wholesale, allowing for more of a margin.

Pearl auctions are a cash and carry business. Organizers expect immediate payment and there is no buyers remorse allowed. A non-paying bidder is sure to be black-pearled for life.

So why do some lots have disclosed reserves and some do not? Those that do not are organized in such a fashion that disclosed reserves do little to illuminate the undisclosed reserves. In other words, there is no disclosed reserve for a like lot. Organizers are hoping for the highest possible bids, and it is up to the individual buyers to determine the overall value of the lot based on current market standards. There is a lot of math involved here, ladies and gentlemen. Newbie buyers are few and far between.

Now, if you’ve made it this far through my post, you are in for a treat. I’ve got a little secret that most outside of the auction circuit are unaware! A large number of auctions today are nothing but a façade. They are a façade to prop up the prices of goods on the market. Auction prices are always high. But they always sell and selling prices are reported on in trade publications and via post-auction announcements. What the hell, right?!

The biggest dealings are done outside of the auctions, either with the organizers or with the producers. It is a “scratch my back and I’ll scratch yours”, sort of thing. Deals are done behind closed doors. Lots are sold pre- and post auction for the real market prices. But the selling numbers are never disclosed – only the volume. Multiply that volume by the average momme selling price at auction and voila! There are your “new” market prices. The auction was an outstanding success and now these are the published numbers processors can show their wholesale customers!

So for all you pearl buyers that have ever wondered why lots going for $20 per gram out of Papeete may have a reserve price of $35 when on auction, now you know why.

Salinity Issues as Far as Fiji

A great threat to akoya pearl farmers has always been the storms. Typhoons wreak havoc on any sea-based operation, but pearl farmers are especially susceptible. Torrential rains add an element of danger particularly nasty. Rain is freshwater. Saltwater pearl oysters live in saltwater. When saltwater turns to freshwater, pearl oysters die – plain and simple.

When Kammuri slammed into China last year, it was a near-repeat of the year before. The salinity of the coastal bays dropped to levels too low to sustain pearl oysters. The oysters died.

This is a problem that pearl farmers face on an ongoing basis. It is a chance they take. A risk of which they are very well-aware. But it is not the kind of threat one would expect from farms built on atolls deep in the Southern Pacific where global-circulating currents are constantly moving water and the absence of a large land mass reduces the threat of freshwater runoff. But the threat does still exist.

Justin Hunter of J. Hunter pearls is worried, and rightfully so. Fiji has been hit with non-stop rainy weather for some time now. Where regular conditions host bay-salinity at 32-35% at a pearl-oyster depth of five meters, the salinity has already dropped to 25-30%.

Justin might be able to lower the shell to a more life-sustaining depth if the rains continue. The Chinese tried, but failed. Mother Nature is one fickle lady. Respecting her is absolute.

Paspaley Auction in Wan Chai

Well, the first two days of Paspaley’s auction in Wan Chai have passed. The news is not much better than what we witnessed at Shima Shokai or Robert Wan. Buyers are wary. Goods are not moving. The big boys are getting scared.

The first day of the auction, about 115 lots were available for purchase. On a good day, 70-80% of the lots would sell. The first day was not a good day for Paspaley. Only a measly 10 lots went to winning bidders.

The second day, however, gave a hint of hope for the third. A whopping 40 of 145 lots went to winning bidders. Now, I don’t know if these were bottom-of-the-barrel lots. They may be all commercial-grade pearls for all I know. But it must be a nice added cushion to the Paspaley coffer. You know, it takes a lot of money to keep that pearling armada afloat!

So you think you’ve got problems?

Submitted by Perlemeister

Take a look at what “the big boys” are going through. The portents for pearldom’s present and future are not especially auspicious.

Augury One: The 41st Shima Shokai Auction in Japan, held in November– once upon a time a well-attended and hot venue for overseas buyers– sold just 14% of the pearls on offer. Sales amounted to a measly ¥236 million/US$2.43 million (compared to ¥1.3 billion/US$13.4 million the year before). Usually 90-100 or more buyers attend; this year there were less than 60-70. And only a few of them (3 or 4 was the report) were from outside Japan. The average price of goods sold was ¥7,468/US$77 per momme, down a whopping 45%.

Augury Two: The 42nd Robert Wan Tahiti Perles Auction, held in Kobe on the heels of the Shima Shokai Auction, suffered similarly dismal results... so much so that the organizers refused to disclose the percentage of pearls sold. There were only 48 buyers, and a miniscule US$2.7 million dollars was garnered from the event. Average price per pearl: US$28.25. Average price per momme: US$47.58. And they thought 2002 was bad....

Augury Three: The 41st Paspaley Auction sold only 83 of 494 lots on offer (16.8%). Only 5.2% of the pearls offered found buyers. The average price per pearl sank to ¥5,597 (US$57.71), and the average price per momme was equally low: ¥7,468 (US$76.99)... an unusual fate for Paspaley goods. As with the other two auctions, all the organizers seemed to have withdrawn many of their goods, and buyers seemed to have shifted to lower-quality goods in response to weakened consumer demand.

Australia, historically one of the most stable of pearl producing areas (buoyed by the clout of the Paspaley organization), is suffering through an unprecedented downturn. Western Australia’s pearling industry — once worth $200 million or more a year — has been kneecapped with the slump in global pearl demand.

Producers say they are unable to get rid of millions of dollars worth of pearls as consumers have almost completely packed up and moved away from purchasing such luxury goods.

Clipper Pearls, one of the few remaining Western Australia-owned pearl producers, has had to lay off over 60% of its workforce since September. One of Clipper’s owners said orders had virtually evaporated overnight when the global financial crisis took hold in September. “This [is] easily the worst conditions we have ever faced,” he said.

Not being able to sell their overstock of pearls is sure to see smaller producers go out of business. A top regional executive phrased it succinctly: “Pearling is in diabolical trouble.”

And this malaise is in only one portion of the pearl world.

Dubai, Dubai, Dubai!

I'm starting to get excited about this Dubai thing. Anyone else feeling it? Does someone want to front an aging pearl lover a ticket to the sandy Las Vegas in exchange for a couple of pearls?

As Dubai looms closer and all the big dogs of the industry are getting ready to make their way to Atlantis, one has to wonder… is the timing really right?

While the current recession continues its stranglehold on the world, few feel it more than the sellers of luxury goods. Jewelry stores are going out of business, the much-anticipated (and needed) holiday showed a 34% drop in luxury sales at brick and mortar outlets, and a 24% drop online.

But it appears that the Dubai pearl party is going to proceed ahead as planned.

I think it we should all worry about those pearl mongers getting ready to hop on their private jets for some fun in the sun. Be careful! It is Dubai. With this cadre mix descending upon the little oasis, there are bound to be some problems.

1. Wan may be hip in French Polynesia, but in Dubai he's Asian!
2. I’ve heard Paspaley likes his juice in the morning, but it could land him in Jail!
3. Branellec is always surrounded by the most beautiful models. He better not get carried away! He should also remind the ladies to cover up on the beach!
4. Mr. Kelly, if you are going to be joining Nick on this trip, I'd advise you to trim those curly locks before leaving Australia.

Damn! Good luck guys (no, I really mean it). Have fun and try not to make headlines!

Black-lip Pearls and Africa

Over the last few years, I’ve lost count how many emails I’ve received from Africa. That continent has more princes and generals with boxes of loot willing to share for a 30% cut than Zhejiang has freshwater pearls. The Yahoo Millionaires of Nigeria (AKA yahoo-yahoo boys who run the 419 scam operations) have bilked millions from unsuspecting, greedy and naïve, normal and not-so-normal folk around the world. But if I receive an email from Zanzibar, offering some black South Sea pearls for sale, I may have to take notice.

Apparently there is a group in the Zanzibar Archipelago culturing pearls! With help from the Institute of Marine Sciences of the University of Dar es Salaam, pearl culture technology is starting to take hold of this impoverished part of the world.

Starting with a small group of only 5 youths, 30 pearls were harvested last year, or which 28 were of good, salable quality. These pearls were sold for about $3600 in all, but the group may have harvested another 35 just last month.

So what effect will a whopping 65 pearls have on the pearl industry? Nothing, of course. But Africa is a big continent. Labor is cheap. Profits can be made. Just ask DeBeers. Drop a Branellec-esque entrepreneur into that operation and watch a new center of production grow.