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Supply and Demand Concerns Result in Downbeat Bangkok Jewel Fair

With the global economy still sluggish and consumers reluctant to spend on expensive luxuries, optimism was something of a rarity at the 56th Bangkok Gems and Jewellery Fair, with many exhibitors clearly unsure about the industry's future.

Photo: No gold rush: Industry becalmed by global economic uncertainty.
No gold rush: Industry becalmed by global economic uncertainty.
Photo: No gold rush: Industry becalmed by global economic uncertainty.
No gold rush: Industry becalmed by global economic uncertainty.

Sluggish growth in much of the world has hit the global gems and jewellery market hard, according to many exhibitors at the Bangkok Gems and Jewellery Fair.  Ankit Rathone, Marketing Manager for Bangkok-based Sura Raj Inter Gold said: "Things are less good this year than last. If you look at the past four to five years, consumers' buying power has gone down significantly over that time."

This sentiment was echoed by Ubaid Ilahi, a Partner with Jaipur Gems and Beads. He said: "The economic problems all around the world mean that it is very hard to survive in this market at the moment."

With the tough times across the industry, it is hardly surprising that cash flow problems are starting to emerge. Ankit Shah, a Senior Manager with Thailand's Siam Diamonds, said: "One of the major problems we are having at the moment is getting paid on time."

Most exhibitors agreed that the root cause of their problems were consumers' priorities at a time when the economy was notably tough. Spelling this out, Veeraya Tritotanan, Sales Manager and Co-ordinator for Thailand's Veerasak Gems, said: "Buying gems is not a necessity, so when there are problems in the world's economy, this obviously affects demand for our goods."

In Thailand, this has had a significant impact on its economy. In 2014, gems and precious metals made up 4.4% of the country's exports by total value, recording a value of some US$10 billion.

Not all countries' economies have struggled quite so dramatically, however. Until recently, the high level of demand in China was a significant driver of the market.

Highlighting this, Chanida Chiaranant, President of Bangkok-based Gems Marketing, said: "The Chinese market had been the driver of growth in Asia, especially in terms of unheated stones. However, this is now beginning to change. Sales in China have been slowing recently, as its stock market has tumbled."

Nevertheless, according to Chiaranant, Asia – and China in particular – still remain the key region in terms of growth. She said: "The US market is doing okay, but Europe, in particular, is struggling. Over there, we are only really making many sales in the UK and Switzerland."

Another problem facing many exhibitors is the lack of a reliable supply of gemstones. Sith Jung Sangvansith, a Marketing Executive with the World Sapphires Trading Company, a Thailand-based cutting factory, said: "It is not easy to find the rough stones at the moment, with a lot of mines around the world slowing down output. There are far fewer stones coming out of Nigeria than there used to be for example. Instead, we have been forced to source blue sapphires from Madagascar and Australia where, unfortunately, the quality of stones is less good. On the upside, it is much easier to sell the stones we do have, as there is less competition."

The impact of this lack of availability has also been felt by many of those further down the supply chain. Explaining this knock-on effect, Tirotanan said: "Supply is a big problem for us at the moment. There is a lot of demand for Burmese rubies, but it is very difficult to get hold of them. We have been offering to sell Mozambique rubies instead. So far, our customers seem okay with this."

Katherine Ng, a Senior Manager with Hong Kong's Pearl Collection, was also contending with supply problems. She said: "Due to the lack of supply, the price of gemstones is going up and this is passed onto jewellers like us. We have managed to pass some of the increases onto consumers, but this only affects our sales still further."

Photo: Gems Marketing: Suffering from slow China sales.
Gems Marketing: Suffering from slow China sales.
Photo: Gems Marketing: Suffering from slow China sales.
Gems Marketing: Suffering from slow China sales.
Photo: World Sapphire: Looking to increased automation.
World Sapphire: Looking to increased automation.
Photo: World Sapphire: Looking to increased automation.
World Sapphire: Looking to increased automation.

The problems of lack of supply have been further exacerbated, according to many exhibitors, because wholesalers and dealers were becoming much more specific about what they would buy. Chiaranant said: "Dealers are increasingly looking for things that are not available. This has always been a problem, but it is becoming much more significant now.

"In the past, dealers would see something that was interesting and reasonably priced and buy it, but not any more. Now they will only buy the particular gemstones they are seeking. As many of these stones are not available in sufficient numbers, this only adds to the problems for the suppliers trying to source them."

Despite both supply and demand issue, there are still some in the industry that remain reasonably optimistic. Nopparat Wongsinhirun, a Purchasing Manager with Bangkok-based Universal Chains, said: "Things are going fairly well for us, and we have just launched a new collection."

She did, however, agree that the economic problems were having an effect. As a result, her company has been forced to reduce its prices in line with weakened wholesaler demand.

Unlike most exhibitors at the event, Universal Chains primarily targets the southeast Asian markets. Explaining its current priorities, Wongsinhirun said: "We hope to be largest chain supplier in the region. We are making a big push in Thailand in particular, as there are lots of family businesses there, many of which comprise just the owner and a salesperson. As we have six sales teams going up and down the country, we feel we can reach much more of the market than our local competition."

Human resources are also important at the other end of the supply chain. Sangvansith said: "Most cutters are based in northeast Thailand and they are having trouble with finding good workers. Their employees don't always return from their farms when they go back for a visit. Given the time it takes to train workers, this is a major problem." As a result Sangvansith said that World Sapphires Trading Company was starting to look at increasing the level of automation at its factory.

Despite this, Sangvansith was not wholly optimistic about the future. He said; "All the signs I can see are negative. I have been coming to the Bangkok Gems and Jewellery Fair for many years and this year's show is almost as quiet as those of 2007 and 2008.

"That being said, it is not a huge problem. I don't have many sapphires to sell anyway. I am just here to meet people."

Chiaranat shared this more pessimistic outlook, saying: "I am not optimistic for the future as there so many problems facing the industry at the moment."

Ng also conceded that the show had been quieter than she had hoped, saying "Perhaps the explosion at the Erawan Shrine a few months ago kept some foreign dealers away."

Not all exhibitors were quite as pessimistic, though. Rathone, for one, remained reasonably positive and said that Su Raj Inter Gold was launching a number of new collections. As to the event itself, he said: "This trade show has gone reasonably well. We did not come here with major expectations. The Hong Kong trade show is more important in terms of getting new accounts, while this one is more important for the Middle East market and for servicing existing accounts, both of which have proved reasonably successful for us."

Such upbeat views were the exception, however, with many exhibitors clearly believing that the prospects for the gems and jewellery industry depended on developments well beyond their control. Aptly summing up the situation, Tirotanan said: "Gems can be bought as an investment, so this means that there will always be some demand. Our future, though, really depends on what happens in the global economy."

Photo: Universal Chains: Primarily targetting the southeast Asian markets.
Universal Chains: Primarily targetting the southeast Asian markets.
Photo: Universal Chains: Primarily targetting the southeast Asian markets.
Universal Chains: Primarily targetting the southeast Asian markets.

The 56th Bangkok Gems and Jewellery Fair took place from 11-14 September at the IMPACT Arena in Bangkok. The event attracted 1,800 international exhibitors with more than 3,000 booths filing the 100,000 square metre venue.

Geoff de Freitas, Special Correspondent, Bangkok

Content provided by Picture: HKTDC Research
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