As Chinese demand for gems slides, prices on rubies, sapphires, and emeralds are bound for a correction.

Over the course of his nine-year career selling sapphires, Sheahan Stephen had never seen anything like it: At Facets Sri Lanka, the Bangkok Gems & Jewelry Fair, and the Hong Kong Jewellery & Gem Fair, all of which took place in September, Asian buyers refused to spend more than $2,000 per carat for stones.

“The market has taken a drastic turn,” the San Francisco–based importer tells JCK.

The wholesale gem trade, which thrived over the past decade on purchases by Chinese buyers, is anticipating a dramatic price correction. The economic slowdown in China, combined with a weaker yuan and government efforts to curb corruption, has discouraged many of these buyers from spending, forcing the industry to reassess its prospects for growth in 2016.

“Chinese buying is down for the last six months,” says ruby and sapphire dealer Michael Couch of Michael Couch & Associates in Windsor Heights, Iowa. 

Gem dealers who grew accustomed to selling their finest and largest gems to Chinese buyers are feeling the pain. “Instead of a 10 carat stone, the Chinese are now buying a 5 carat stone,” says Afshin Hackman, a partner in New York City’s Intercolor USA, which sells tanzanite, rubies, emeralds, and sapphires.

As the Chinese market continues to adjust to the new economic reality, expect to see a price shift on the “big three”—rubies, emeralds, and sapphires—just in time for the gem shows in Tucson, Ariz., in early February. “The strong U.S. dollar combined with the price corrections that have been forming in the market will make the big three gems more affordable,” says Stuart Robertson, research director at Gemworld International in Glenview, Ill.

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Wild America

Demand in the United States, the globe’s lone bright spot, is robust, thanks to the perennial appeal of rubies, emeralds, and sapphires, but buyers are mostly concentrated around the high end, where supplies remain tight. 

“Fine-quality gemstones have always been difficult to source, but today is more difficult than ever,” says Niveet Nagpal, vice president of Omi Gems in West Covina, Calif.

Designer Michelle Fantaci, who recently collaborated with Gemfields to use its Mozambican rubies and Zambian emeralds in her collection, says that she has struggled to find the quality she needs at the prices she can afford, particularly in larger fancy cuts. “Especially unheated sapphires,” she says.

Additional supplies could help relieve the price pressure. At press time, True North Gems of Vancouver, British Columbia, had just broken ground at a ruby deposit in Greenland. “We can expect a consistent flow over the next nine years at least,” says Hayley Henning, vice president of marketing and development. Still, those gems won’t be in Tucson.

For now, dealers say the American market is facing a glut of high-priced gem-quality rubies and sapphires. “The U.S. market is rebounding but is refusing to pay the high prices,” says Stephen. Robertson has seen this reluctance firsthand among dealers. “It’s more likely a realization that the wild prices just wouldn’t hold,” he says.

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Pricing Paradox

It’s tough to say how much prices could change by the time Tucson begins, given that opinions on the subject vary widely. One thing is certain: Don’t expect price declines of more than 40 percent. “Producers don’t have the margin to absorb that kind of loss,” Robertson says.

In fact, at press time, many dealers were still seeing price hikes. Designer Polly Wales says she’s witnessed “a sharp increase in the price of rubies,” while Aspen Demirdjian, president of Los Angeles–based Aspen Diamond, has seen prices jump by nearly 30 percent in small and large sizes of rubies and sapphires. Emerald dealer Oren Nhaissi, managing director of of Emco Gem in New York City, says the prices of Colombian stones have more than doubled in recent years, while Gemfields reported “record prices” at an emerald auction it conducted in Jaipur, India, in November 2015, according to Gabriella Harvey, the miner’s director of cut and polished sales.

Still, Robertson insists that the trade will see the -beginnings of a price correction in Tucson. The stones to watch include blue and fancy-color sapphires, rubies, rubellite tourmaline, and aquamarine. Nagpal is already seeing prices for fine rubies and sapphires “leveling off for larger stones,” he says.

“The top material is still achieving high and, in some instances, record prices because of its absolute rarity,” Robertson says. “There is nothing to suggest that this trend will change. However, for material in the qualities and sizes that are more typical of those used by the gem and jewelry trade, prices have at the very least stopped climbing, and for an increasing number of stones are actually decreasing.”

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Tricky Treatments

No discussion of pricing trends for the big three is complete without mention of treatments and their effect on quality and affordability. Shane McClure, director of West Coast identification services at the GIA laboratory in Carlsbad, Calif., says that little has changed in the way of gem treatments. Lead-glass–filled rubies are still the biggest concern. 

But buyers should beware of sapphire treatments, too. The gems are commonly heated to improve color, but their fractures do not heal as well as with rubies because of the nature of the material. In the case of some low-quality sapphires, a cobalt-colored lead glass treatment creates what the GIA considers a manufactured sapphire product—not that this should concern shoppers at the AGTA GemFair in Tucson. “I wouldn’t expect to see much there, but maybe outside of that show,” McClure says.

For emerald buyers, the key treatments remain oil and resin; the former is a traditional enhancement technique, well known among jewelers, while the latter is a more recent practice. In a nutshell, oil isn’t as durable as resin, but it can be reapplied, while resin can turn white over time and can be harder to re-treat. “The debate between the two has been going on for 20 years,” McClure says.

Spinning Disc pendant necklace in 18k gold with 3 cts. t.w. rubies; $4,070; Polly Wales, San Francisco; 970-274-2048; pollywales.com

Tips to Keep in Mind

Regardless of pricing patterns, the fundamentals of buying colored stones remain the same. Ask questions—lots of them! Inquire about treatments and the length of time pieces have been in inventory (some dealers bought high and are trying to liquidate), and get lab reports for significant stones. Buy from reputable dealers (AGTA vendors are a safe bet), and consider patronizing dealers who maintain offices in the United States; you want to deal with people who are easy to reach should a problem arise. Use common sense. And expect to pay a bit more for ethically mined stones. 

And don’t forget Economics 101 as seen through a colored stone lens: “The value of colored gems is based on the true supply and demand of the market,” says Shaun Ajodan of Shaun Gems International in New York City, “whereas diamond prices are manipulated.” 

Top: Photograph by Tom Corbett

Market editor: Jennifer Heebner. Makeup by Alexis Williams for The Brooks Agency. Manicure by Angela Marinescu. Ring in platinum with shield-shape diamond and emerald with diamond accents; price on request; Robert Procop, Beverly Hills, Calif.; 310-276-6041; robertprocop.com 

Inset: Ring in platinum with 18.48 ct. Ceylon sapphire and 2 cts. t.w. marquise- and round-shape diamonds; $280,000; Aspen Diamond, Los Angeles; 213-624-2088; aspendiamond.com