~
gem labs scout for business
By Michelle Graff
The precipitous drop in the demand for diamonds earlier this year took a toll on grading laboratories worldwide, including those at the HRD Diamond Lab in Antwerp, Belgium, where a diamond is being examined.
New York--The economic mess that began last September basically strapped the jewelry industry in for a year-long roller coaster ride that seemed, for a while, to be going nowhere but down.
New York--The economic mess that began last September basically strapped the jewelry industry in for a year-long roller coaster ride that seemed, for a while, to be going nowhere but down.
Companies that have been industry institutions for decades--from well-known retail chains to high-end designers--were forced to shut down, consolidate or file for bankruptcy, so it was only logical that the grading labs many of them did business with would be along for the wild ride.
Layoffs at grading institutions, including the American Gem Society Laboratories (AGS Lab) and the Gemological Institute of America (GIA), in late 2008 and early 2009, were the first dips in what would become a year full of twists and turns.
On March 2, publicly traded Collectors Universe, which specializes in the appraising of collectibles and, at the time, owned both the Gem Certification and Assurance Lab (GCAL) and the American Gemological Laboratories (AGL), announced it was washing its hands of the gem-grading business.
Both labs, however, recovered under private ownership: GCAL remained open throughout, while AGL shut its doors and reopened once again after its acquisition was completed in May.
In the midst of all of this, the business slowly but surely began showing signs of life starting in March.
"The end of last year and January and February were horrible," AGS Lab Executive Director Peter Yantzer says. "We can hopefully look back to that [time] and say that was the bottom."
Mitchell Jakubovic, lab director for EGL USA, was also breathing easier."In March, you started to feel that there was a pickup," Jakubovic says.
Despite the apparent spring thaw, the grading world was thrown for another loop in July when the American Gem Trade Association Gemological Testing Center (AGTA GTC) abruptly shuttered operations for good, joining the long list of industry institutions unable to weather the downturn.
Now, with one less player in the game and a holiday season looming just around the corner, the question remains: Is the worst behind us?
"The industry has come back," says International Gemological Institute (IGI) USA Executive Director David Weinstein. "I don't know if it's come back because this is the time of the season when retailers have to make sure their stores have the right product. Whether this Christmas this stuff will actually sell or not I couldn't tell you."
Surprise shutdown
While the year unfolded with more than its share of jarring events, perhaps none was as surprising as the July 29 shuttering of the AGTA GTC.
AGTA Chief Executive Officer Doug Hucker was high on the lab's future earlier in the year, touting in a previous interview with National Jeweler that the lab had budgeted to be able to respond to any "significant slowdowns."
After the lab's closure, however, he explained that AGTA was simply unprepared.
"A number of things happened but, to sum it up, I don't think any of us anticipated how complete and extended the downturn in business was going to be," Hucker says.
This prolonged downturn--coupled with the astronomical operating costs of running a New York-based lab and the planned departure of lab director Lore Kiefert--made the lab a drag on the AGTA's finances, and the organization opted to cut its losses.
"It was just a situation where it was untenable for us," Hucker says. "Business essentially ground to a halt."
As has been the case throughout this recession, however, the loss of one business is another's gain.
Perhaps the most obvious lab poised to benefit from the AGTA GTC's downfall is colored-stone stalwart AGL, which is getting back on its feet after a rocky few months.
After Collectors Universe exited the gem-grading business in early March, AGL closed down for a period of a few months before Christopher Smith, former vice president and chief gemologist, completed acquisition of the lab, which has been around for more than 30 years.
Well-known gemologist and former AGL President C.R. "Cap" Beesley is no longer affiliated with the lab, which became known for its expertise in high-end colored gems during his tenure.
"We've been doing quite well," says Smith, now president of the lab. "We've been getting a lot of support from the industry."
Seizing the color wheel
AGL, though, is not the only lab to spot opportunity in the closure of the AGTA GTC.
In late August, Gubelin Gem Lab, which Kiefert now heads, launched a free New York-to-Switzerland shuttle service and began offering a 50 percent discount on all AGTA GTC-graded gems sent to Gubelin.
The discount was intended to be effective for six months since its late August start date, says Daniel Nyfeler, the lab's managing director.
On top of that, Gubelin also planned to announce the installation this fall of a U.S.-based customer service representative.
At the GIA, Tom Moses, senior vice president of laboratory research, says the lab was concentrating on color even before the closure of the AGTA GTC.
Now he sees potential for the category to equal as much as 10 percent of GIA's total business, up from 2 percent to 4 percent of the business currently.
"GIA has invested heavily in recent years in colored-stone services," Moses says, noting the lab's focus on developing country-of-origin and batch testing services. "For sure, it's an area we have committed a tremendous amount of resources to in the last few years. I think, in some ways, we just felt it was something that the industry and the public needed."
After having to conduct layoffs in the throes of the slowdown earlier this year, Weinstein says the IGI is now aiming to hire additional gemologists, with an eye toward finding one with the ability to do country-of-origin reports for nations such as Madagascar, Tanzania and Vietnam."Rubies and sapphires come from locations other than Kashmir and Burma," Weinstein says.
That is especially true in U.S. labs now, with the U.S. ban on Burmese rubies just renewed in July by President Barack Obama.
Weinstein says the proliferation of treatments is another issue when it comes to color.
This includes cobalt coating on gemstones such as tourmaline and tanzanite, and diffusing materials into blue topaz increase color intensity while skirting the relatively new Nuclear Regulatory Committee rules that were implemented to monitor irradiated gemstones, he says.
"There's a lot of treatments out there on colored stones that the trade needs to be very, very careful about," Weinstein says.
Out of the diamond daze
The economic crisis begot a precipitous global drop in the demand for diamonds, a drop so steep that production ground to a halt in the early months of the year.
Just one example: De Beers, which controls 40 percent of the global supply of diamonds, enacted extended holidays at mines all over the world, with production down a staggering 90 percent in the first quarter of 2009.
But as sure as trucks are rolling around mines in Namibia and Botswana, labs have seen the diamond business slowly come back to life.
In late August, Antwerp World Diamond Centre (AWDC) spokesman Philip Claes, based in Antwerp, Belgium, one of the diamond trading capitals of the world, told National Jeweler that the AWDC's HRD Diamond Lab was picking up after the European summer holiday, but the fall remained a question mark.
In December 2008, AWDC and HRD Antwerp cut 24 jobs, or 7.5 percent of their workforce.
"The job cuts at the lab in late 2008 were necessary to maintain a healthy company," Claes said."The lab is now still operating with this smaller workforce, as the demand still hasn't regained its level before the start of the crisis."
Lab directors, including Jakubovic, also note that the average carat weight of diamonds submitted for grading has been rising, after hovering at below a carat earlier in the year.
Jakubovic says there are now more carat-plus diamonds mixed in with the half- and three-quarter carat stones, though the big-stone business is nowhere near what it was a year and half ago, when speculation fueled a carat craze.
"We haven't seen that phenomenon happen again, but now we're seeing a healthier mix," Jakubovic says.
Moses notes this same trend at the GIA, where diamonds form the core of the business."The larger stone business is still quiet," he says. "Most of the improvement has been in smaller stones."
Last winter, the slowdown forced the Carlsbad, Calif., grading institution to slash salaries, reduce hours and lay off more than 200 workers in California and New York.
Since that time, Moses says the lab has been able to bring back about a dozen staff members and also put those who had been relegated to reduced hours back on a full-time schedule.
A similar scenario unfolded at the AGS Lab in Las Vegas, where Yantzer says management was able to hire back three of the 22 employees who had been laid off earlier in the year.
The lab is hesitant to rehire more though."Will a holiday season develop? I don't know," Yantzer says. "We're being conservative. We'll do a little bit of overtime until we're certain a holiday season develops and then we'll bring more people back."
And at GCAL, where the certification of loose diamonds forms the core of the business, President Don Palmieri says business was down as much as 30 percent between November 2008 and February 2009.
But, along with his colleagues, he says business improved in March, the same month he bought the lab back from Collectors Universe.
Today, the lab has only one floor of office space and functions with a little more than half the staff it had when owned by Collectors Universe, which earned $35.5 million in revenues last year.
But just like anybody fortunate to still be in business today, Palmieri isn't complaining."Everybody's working overtime," he says. "Literally, we're working 10, 11, 12 hours a day. It's a good problem to have and I'm happy to have it."
ALL OUR DIAMONDS ARE IN STOCK
*
Excellent Cut Diamonds
*
*
Excellent Cut Diamonds
*
*
No computer guy turned " Diamond Expert "
*
No claims of “diamonds below wholesale”
*
Top quality loose diamonds and jewellery
*
Comprehensive and detailed diamond reports and information
*
Personalized attention and commitment to customer satisfaction
*
Australia's No.1 Diamond Dealer
*
Genuine Diamond Specialists
*
Genuine Diamond Specialists
*
ALL OUR DIAMONDS ARE IN STOCK
*
Overnight Delivery in Australia
***
Buyer Beware
~~All Diamond Labs Grade Differently~~
~
.jpg)
