Getting the whole story on the world gem market means looking beyond the obvious.

by Morgan Beard, Editor-In-Chief

The informal way gems are bought and sold makes it hard to get accurate trade figures. Here, a buyer inspects goods for sale in Teofilo Otoni, Brazil. Photo by Elana Verbin.

Unlike most source countries, Colombia exports a large percentage of its gems directly to consuming nations. Miner photo by Mark Lurie.

Some mysteries are perpetual. Just as we will never know what Mona Lisa was smiling about, or how Baywatch became an international hit, we may never know exactly how big the market for colored gemstones is.

Anyone who sits down to try to come up with a realistic figure immediately runs into problems. First of all, unlike diamonds, colored gems aren't a single commodity - there are dozens of different types of gems, with different sources and different values. Mining tends to be done on a small scale in remote areas, and the people who buy the gems don't even want their customers to know how much they paid, let alone customs officials. It's enough to make even the most analytical of government agencies throw up their hands and say, “We just don't know.”

There are clues to this mystery, however, in the form of international trade data and anecdotal evidence from people in the trade. Using the information at hand, we can at least begin to form a picture of the value of the world gem business and what the major trends are.

How much is the global colored stone market worth? Let's start with what we know: The three largest markets for loose colored gemstones are the United States, Japan, and Europe. The United States is the world leader, bringing in more than $609 million in 1998. Europe trailed a close second that year with $573 million in imports, while Japan came in a distant third at more than $159 million.

Based on world gemstone import data from the United Nations' International Trade Centre (ITC), all other countries accounted for approximately $487 million in loose gems. That makes the global total for 1998 $1.83 billion. In 1999, there was more buying in all three of the major markets: the United States imported more than $661 million, Europe brought in approximately $587 million, and Japan improved but was still trailing at $209 million.

ITC world figures for 1999 were not yet available at presstime. However, countries outside the United States, Japan, and Europe accounted for 27 percent of the world total in 1998. Assuming the same ratio in 1999, they would have imported approximately $538 million, for a global total of $2 billion.

Thailand’s cutting industry helped it to become the world’s number-one gemstone exporter. Photo by Morgan Beard.

On paper, then, the world gem trade is worth about $2 billion a year. But that number only tells part of the story - and that's where the math gets fuzzy.

Off the record, some gem wholesalers will admit that it's common practice to undervalue gemstones for customs, and a look at U.S. import figures reveals the scope of the problem.

In 1999, for example, the United States imported 5 million carats of cut emerald at a reported value of $183 million, for an average value of $36 per carat - the price one would expect to pay for small, commercial-quality stones. Calculating the values for ruby and sapphire produces similar results. Either the United States has completely ceased all imports of fine-quality gems, or the gems being imported are seriously undervalued.

How far are importers understating the cost of their gems? Obviously, there's no concrete number, but working from the above figures can give us an idea.

As with any gemstone, there is far more low-quality emerald available than there is fine quality, and there is a vast price difference between the different qualities. Assuming that each end of the spectrum balances the other out, let's take as our average a good-quality gem of one carat or less.

According to the gemstone pricing publication The Guide, such a gem goes for a middle-range price of $325 per carat. Dealers' wholesale markups can vary widely, but at that price point a safe estimate is two to three times the cost of the gem. That would make the average cost of an imported emerald $108 to $163 per carat, or three to four-and-a-half times the average price being reported to customs.

Doing the same calculations for sapphire and ruby yields similar results - the “actual” cost comes out to between three and four times the customs average. As a conservative estimate, let's assume that the value reported to customs is a third of the amount actually paid.

While the above is certainly an oversimplification of a very complex system, it brings us closer to the truth than government statistics alone. If we extend the one-third principle internationally, that puts the value of the global gem market at around $6 billion.

A Decade of Change

Many dealers prefer to buy African gems through international buying centers rather than at the source. Pictured is a closed gem selling office in southern Tanzania. Photo by Hamza Konda/Sena News Ltd.

One of the most dramatic shifts in gemstone buying over the course of the '90s has been the fall of Japan as a consumer market.

In 1990, Japan imported $601 million in colored stones, putting it well above the United States' $460 million and making Japan the world's biggest market for color. By 1995, the gap had narrowed: Japan imported $517 million worth of gemstones versus the United States' $500 million.

Then, in April 1997, Japan's government imposed a 3 to 5 percent consumption tax on an already depressed market, and jewelry purchases evaporated. The value of Japanese gemstone imports shrank to $276 million in 1997 and further to $159 million in 1998.

Meanwhile, the United States recovered from a recession in the early '90s and, fueled by the new Internet economy, experienced a boom that continued through 1999. That steady growth, combined with shaky economies in other parts of the world - the Southeast Asian currency crisis and European countries struggling to deal with the economics of unification - made the United States the world market leader going into the new millennium. Whether it can maintain that position remains to be seen.

One clear trend from the imports statistics is that the United States and Japan both showed strong growth in gems other than ruby, emerald, and sapphire, especially in the latter half of the 1990s.

Japan imported $414 million in ruby, emerald, and sapphire in 1990 versus $187 million in “other” gems, a difference of $227 million. By 1995, the gap had narrowed to $104 million - mostly due to a drop in demand for the Big Three.

In 1997, as overall imports dwindled, the gap between the the Big Three and other gems narrowed to $10 million. Cost was certainly a factor: The Japanese prefer to buy high quality, and the best ruby, emerald, and sapphire are much more expensive than the best amethyst or tourmaline.

There were other forces at work, though. According to a 1998 study of the Japanese jewelry market conducted by the U.S. Department of Commerce, “Domestic production of precious metal jewelry has been decreasing by approximately 8 percent annually . . . the main reason was that Japanese consumers' taste are [sic] gradually shifting to the items of more individualized, differentiated, and more fashionable design which are mostly seen in imported items.” Use of the nontraditional colored gemstones on the market would also feed Japanese customers' desire for an individualized look.

In 1998, the low point of Japanese gem consumption, imports of “other” colored stones surpassed ruby, emerald, and sapphire imports by $10 million. The same thing happened in 1999, only by a smaller margin: Japan brought in $108 million in “other” gems compared to $102 million of the Big Three. In the United States there was a similar desire for more custom-made, individualized jewelry, and there, too, “other” gems grew in popularity. From 1990 to 1995, the value of nontraditional gems imported fell by 18 percent, but from 1995 on they grew by between 14 and 40 percent per year, the value more than doubling in that time span to $197 million. The Big Three, meanwhile, remained more or less steady, going between a low of $423 million in 1996 and a high of $512 million in 1997, ending at $465 million in 1999.

Color Centers

Most gemstone mining is done in small-scale, low-tech operations, but stones are quickly whisked off to industrialized trading centers. Workers grade gems at a factory in Thailand; photo by Morgan Beard.

Colored gemstones are found, to a certain extent, in virtually every country in the world. Once they enter the international marketplace, however, the majority of the trade is concentrated in a small number of countries.

Although Thailand has lost ground in the gem trade since its golden years in the mid-1990s, it's still the world's biggest colored stone trading center by a comfortable margin. Overall gemstone exports in 1999 were an estimated $367 million, with $286 million of that going to the United States, the European Union, and Japan.

India edged in at number two with $205 million in colored stone exports in 1999, a 55 percent increase over 1997. The increase in the value of India's colored stone exports may be due to the diversification of the country's cutting industry. Traditionally, India has been known for cutting diamond and emerald, but after controversy over emerald treatments erupted in late 1997, Indian cutters began working with other gems, particularly tanzanite.

The third-largest exporter of colored gemstones is Hong Kong, with $199 million in 1999. While Hong Kong's loose gem industry is on the decline - its colored stone exports were $297 million in 1994 and had fallen to $226 million by 1997 - it's still a major player, especially given its links to China's inexpensive and increasingly skilled labor pool.

A mining area in Colombia; photo by Mark Lurie.

Another major trading center is Switzerland, which exported more than $150 million in colored gemstones in 1999. Switzerland has an active trading community and one very large player, the Golay Group, which contributes a sizable percentage of the total. Switzerland is also the site of several high-end gem and jewelry auctions, which affect the total figures. Together, these four countries supply 46 percent of the world gem market. Other leading trading centers are Germany, with a gem cutting tradition that stretches back 500 years, and Israel, a major cutting center with close trading ties to gem-rich Africa.

There is also a large amount of business done directly between source countries and consuming countries. For example, Colombia exported more than $96 million in emeralds directly to the European Union, Japan, and the United States in 1999; Brazil, likewise, exported $67 million in gems to those areas.

In contrast, Africa - which many industry observers consider to be the most prolific source of gemstones in the world right now - exported just under $27 million to the United States, the European Union, and Japan in 1999. The nature of doing business in Africa makes it less likely for dealers to go there: It is difficult and expensive to get to the mines, and the prices there can be the same as a dealer would pay elsewhere. Also, dealers from trading centers like Thailand and India have carefully built up and maintained a presence in gem-rich African countries, and they buy up much of the rough.

Then the bubble burst: Japan’s colored gem imports are now about a third of what they were in 1990. Above is the Ginza shopping district in Tokyo; photo courtesy of the Japan National Tourist Organization.

Although some countries have better import and export records than others, overall the world gem trade remains difficult to track. While that can be frustrating for financiers looking for hard numbers, for many in the industry that's part of the charm: The freewheeling nature of colored stone trading adds to the overall romance.

The numbers that are available indicate that more and more consumers around the world are getting into colored gemstones, especially gems other than ruby, emerald, and sapphire. As awareness of color increases, there is a huge potential for growth, especially in developing markets. The next decade promises to be an interesting time for the colored stone industry.

About the numbers:
1. The world gemstone market figures calculated in this article are not the same as mining production figures. The market numbers are cumulative: For example, if a gem was bought in Africa and exported to Germany at a cost of $50, then cut and exported to the United States for $200, the total contributed to the market would be $250, while the production value would be a fraction of that.
2. For the purposes of this article, “Europe” is the 15 European Union countries plus Switzerland, which is politically neutral. Where the name European Union is used, Switzerland's figures are not included.
3. ITC world figures cannot be used alone because their compilations are missing information from a number of key countries. For 1998 the ITC data was supplemented with figures from Eurostat/Haver Analytics and the Jewelry Trade Center, Japan. Some information was extrapolated from other countries' imports - i.e., if India did not report its import figures, that number can be calculated from its exports to other reporting countries.
4. The world gem market figure does not include the Asian jade trade, which is substantial, but for which there are no exact numbers available.