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Hero Image: Mikimoto's 2020 Campaign; Inset: Christie's
Hero Image: Mikimoto's 2020 Campaign; Inset: Christie's

Pearls of Wisdom: tidal shifts in the sector

ARABELLA RODEN examines the tidal shifts in the pearl sector as it confronts the unique challenges of an uncertain future.

As organic gemstones, pearls are uniquely susceptible to variations in the natural environment. At the same time, the pearl trade is as vulnerable as any to disruptions in market conditions; perhaps even more so, given that it operates across international borders, from often-remote oyster farms in the Asia-Pacific region, to its chief trading hubs in Hong Kong and Japan and final consumers in Mainland China, Europe, and the US.

Beset by waves of disease in recent decades, alongside climate change, the international pearl industry was shaken again by the COVID-19 pandemic, which crippled the supply chain.

Dr Laura Otter
Dr Laura Otter
"More research will be critical to understand the fate of all these species and whether or not we will be able to produce pearls [in the future] with the same quality as today.”
Dr Laura Otter, Australian National University

Tim Jones, pearl wholesale manager, Atlas Pearls – which operates South Sea pearl oyster farms throughout Indonesia – said, “As was the case for the rest of the luxury goods sector, the impact of COVID-19 was fairly devastating initially when international borders closed and many countries imposed internal lockdowns.

“To a large extent the South Sea pearl business depends on the Hong Kong jewellery fairs, held in March, June and September, as the principal conduit of goods through to the world’s largest South Sea pearl market in China.

“When all three events were cancelled it made for a difficult year, particularly between April and June.”

James Brown, managing director Pearls of Australia, added that Hong Kong – the largest pearl trading market by volume – was already hampered by geopolitical issues even prior to the pandemic.

“Geopolitics and the COVID-19 pandemic saw traditional markets cease and that would have been an enormous problem for pearl farmers who were entirely reliant on the wholesale market,” he explained.

Lindsay Youd, managing director Allure South Sea Pearls, told Jeweller, “The big issue for the pearling industry has been getting pearls from the farm to the wholesale market.

“International trade fairs and pearl auctions were cancelled, so larger wholesalers and manufacturers, like Allure, have had to purchase pearls through online auctions.

He added, “Buying pearls has always been a very tactile process, where the pearls were examined individually to access the lustre, shape, surface imperfections and colour prior to purchase. With online auction purchasing, we rely on a few photos of the lots and a 10-second video to assess quality and value before committing to purchase. It’s not ideal.”

Similarly, Erica Miller, director Ikecho Australia which supplies loose pearls and finished pearl jewellery, said that in the absence of trade fairs, her business had been relying on “good videos and photos sent via WhatsApp and email”.

James Brown, Pearls of Australia
James Brown, Pearls of Australia
"Pearls were already rare compared to other gemstones – particularly diamonds – and they are getting rarer. That’s a selling point that perhaps hasn’t been emphasised or communicated as much as it could be by the industry.”
James Brown, Pearls of Australia

Other challenges as a direct result of the pandemic have included material cost increases and delivery delays.

“With the limited number of flights into Australia, we experienced delays of FedEx parcels and noticed parcels getting stuck in China for weeks,” she explained.

“There were also delays with factory lead-times and the transit between Mainland China and Hong Kong, as the borders are closed and there are very strict policies in place.”

At O’Neils Affiliated, which stocks a variety of freshwater and Akoya pearls, managing director Brendan McCreesh said “long-established relationships with overseas contacts” were essential to weathering the pandemic.

“They have good insights into the pearls we trade in and can cater to our needs quite effectively without the need to travel.

“Those factors, combined with thorough communication throughout the sourcing process, has resulted in O’Neils being able to maintain a regular supply of pearls,” he explained.

However, McCreesh noted that a lack of travel had in some cases improved the market: “We have noticed that the inability to travel internationally, for the general public, has increased the demand for luxury goods such as jewellery. This has in turn increased gem trading locally.

“Our overseas counterparts, however, have reported a significant decline in trade among the European, Asian, and US markets.”

 

Left to Right: Mikimoto Necklace and earrings; Wallace Chan Brooch; Paspaley Pendant

Above: Yoko London

Above: Chow Tai Fook

Above: Brent Neale

 


The end of an era
Erica Miller, Ikecho Australia
Erica Miller, Ikecho Australia
"Due to the larger size and lower price, Edison pearls are great for those buyers that can’t afford South Sea pearls. Baroque and nucleated pearls are also still very strong.”
Erica Miller, Ikecho Australia

The supply-demand dynamic will become more extreme in the future, as the world’s premier source of pink diamonds, Rio Tinto’s Argyle Mine in Western Australia, is scheduled to close at the end of 2020.

Argyle opened in the mid-1980s and currently accounts for 90–95 per cent of the global pink diamond supply. It also produces blues, yellows and browns, often sold as ‘cognac’, ‘champagne’, and ‘chocolate’ diamonds.

“Since summer last year, more and more jewellers are reaching out requesting Argyle pinks, trying to get the last piece of the pie,” says Maheshwari.

Leibish Polnauer, director of international fancy colour diamond supplier Leibish & Co., notes: “Rio Tinto closing the Argyle mine will lead to a massive decrease in pink diamonds, meaning that prices will continue to inflate. I don’t advise jewellers to stock up on all colour diamonds, however if they are looking to invest in one, I would recommend stocking up on Argyle [pink] diamonds as these are the most sought after [by consumers].”

Bolton agrees. “As we approach the conclusion of the Argyle Mine – and the reality of this sinks in for consumers – Argyle pinks and Argyle products in general become increasingly rare, valuable, and desirable,” he says.

Pandemic trends

Locally, suppliers observed a decline in demand during the first six months of 2020 when the most intense lockdowns were in place, followed by a steady improvement – a trend mimicked in Mainland China, the world’s largest pearl market.

“By September, demand started to firm again, particularly when retail opened in China and their economy started to move again. Within Australia, demand was similarly stymied in the first half of the year,” said Jones.

Lindsay Youd, Allure South Sea Pearls
Lindsay Youd, Allure South Sea Pearls
“Sustainability is extremely important for the pearl industry as a whole – traceability and provenance are irrelevant if you haven’t got a viable pearling industry.”
Lindsay Youd, Allure South Sea Pearls

“However by the end of the year some of our customers were actually reporting some of their best-ever sales results, particularly those in tourist towns such as Broome – who benefited from the influx of domestic tourists, many of whom would ordinarily have travelled overseas for their holidays.”

McCreesh added that O’Neils had seen “significantly higher trade, particularly in the lead up to Christmas.

We believe the Australian market has been reasonably well protected due to Australia’s response and management of COVID-19.”

All suppliers noted an increased demand for classic white, round pearls alongside continued enthusiasm for baroques.

“Many designers are now requesting the more organic shapes provided by baroque pearls and keshi,” noted Jones.

He added, “Social media is becoming such an important forum for influencing fashion trends now, so it’s particularly pleasing to see a growing array of personalities, from US Vice President Kamala Harris to the Duchess of Cambridge and singer Harry Styles wearing pearls.”

At O’Neills, McCreesh observed, “There has recently been an increased demand for the traditional white coloured pearl and our freshwater white baroque pearls have been in high demand.

“We are currently processing our latest batch after completely selling out of our baroque stock over summer.”

At Allure, “white pearl strand bracelets have become very popular along with the classic designs with larger 12mm-plus pearls, and yellow gold seems to be making a comeback particularly in our High Jewellery collections,” says Youd.

Larger pearls were also in demand at Ikecho Australia, with Miller noting increased sales of Edison pearls – freshwater pearls that can grow to particularly large sizes due to a special nucleation technique, and display an attractive, intense metallic lustre.

“Due to the larger size and lower price, Edison pearls are great for those buyers that can’t afford South Sea pearls. Baroque and nucleated pearls are also still very strong,” Miller told Jeweller.

Tim Jones, Atlas Pearls
Tim Jones, Atlas Pearls
“For the more traditional pearl markets such as Europe, the US and Australia, there is definitely a growing demand among retail consumers for pearls whose provenance can be traced.”
Tim Jones, Atlas Pearls

Yet while the Australian market remained relatively insulated from the impact of the pandemic, revenue in other pearling regions was decimated as the major consumer market – tourists – dried up.

Professor Paul Southgate, professor of tropical aquaculture at the University of the Sunshine Coast in Queensland, told Jeweller, “COVID-19 has obviously devastated domestic pearl sales in Fiji and the Pacific because this market relies on international travellers.

“Recovery will be a major challenge for the sector, and some of this will be tied to recovery of regional tourism.”

Youd is hopeful that the next 12 months will see both the lifting of travel restrictions and the return of jewellery fairs in order to ease the pressure on the supply chain.

Jones predicts international travel will be “problematic for at least the rest of 2021 and probably well into 2022”; as a result of the pandemic, Atlas Pearls has developed an online platform that has seen “encouraging early results”.

Miller also foresees ongoing challenges, saying, “I think it will remain like this for a while longer – doing business during this time is very different, and it’s something we have to get used to.”


Above: Cygnet Bay Pearl Farm, Western Australia
 

 

CHART 1: AUSTRALIAN PEARL PRODUCTION VALUE

Source: Australian Bureau of Agricultural and Resource Economics and Sciences, Jeweller analysis; Production value is the assessed value at the point of landing for the quantity produced and excludes transport and marketing costs. Values are approximate and at times exclude Northern Terriitory production where data was con dential or unreported. ‘ Chart note: Years with discontinued ines denote that no data was available.

 

Left to Right: A & Z Pearls; Van Cleef & Arpels Brooch; Allure South Pearl Strands; Jewellery Theatre Pendant

Above: Allure South Sea Pearls

Above: Tasaki

Above: Ikecho Pearls

 

Farm impacts

While the supply chain has struggled under the weight of COVID-19, oyster farms have teetered on a knife-edge.

Brendan Mccreesh, O’neils Affiliated
Brendan Mccreesh, O’neils Affiliated
"There has recently been an increased demand for the traditional white coloured pearl and our freshwater white baroque pearls have been in high demand. We are currently processing our latest batch after completely selling out of our baroque stock over summer.”
Brendan McCreesh, O’Neils Affiliated

Brown’s business operates the Cygnet Bay South Sea pearl farm in Western Australia and an Australian Akoya (Pinctada fucata) pearl farm at Broken Bay in NSW. He tells Jeweller that the financial impacts of the pandemic likely tipped the balance for many farmers.

“I suspect a lot of farms have ceased production in the past year, so there would be less pearls coming into the market in the next two to three years because companies have stopped operating due to cashflow,” Brown explains.

“Or, they had a limited production because they couldn’t move their skilled teams – for example, pearl technicians – across country borders due to COVID-19 travel restrictions.

“Pearl farms go economically extinct well and truly before they go ecologically extinct,” he adds.

Youd also pointed to “managing staff movements” and ensuring the workforce stays “COVID-free” as a major challenge for farms in the past 12 months – even if oyster stocks remained healthy.

Even without the pressures of the pandemic on farmers, it is estimated that just 20 per cent of nucleated oysters produce salable material, and 5 per cent produce gemstone-quality pearls.

Disease and disaster

Health is the primary concern for any oyster farm.

Researchers from the University of the Sunshine Coast (USC) and the South China Sea Fisheries Research Institute (SCSFRI), including Prof Southgate, noted in a 2019 report: “Striving for increased production has resulted in over-stocking of pearl farms leading to a shortage of nutrients and ecological deterioration at the farm site that increases the probability of epidemic disease outbreaks.”

In recent decades, disease has ravaged the Australian pearling industry – almost entirely saltwater South Sea pearl farms in Western Australia – reducing it to a fraction of its former size.

According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) – part of the federal Department of Agriculture, Water and the Environment – the export value of Australia’s pearl oyster production was $56 million in the 2018-19 financial year, compared with $241 million in 2010-11.

In addition, the value of Australia’s pearl production – a separate metric from export value – has declined 72 per cent since its peak of $190.5 million in the 1999-00 financial year, according to ABARES figures.

Even in 2005-06, production was valued at $122 million; yet by 2017-18, this had more than halved, to just $52.6 million.

According to research by Queensland’s James Cook University, in 2010, “Pearl farming was one of the major employers and contributors to the social-economic fabric of northern Australia, contributing $189.7 million [at the] farm-gate to the national economy and generating another $200 million in tourism-related activities.

“However, in recent years Australian pearl production has been severely impacted by episodic and large-scale mortality events by an as yet unidentified causative factor.”

This factor impacts juvenile oysters in the first months of growth, with a mortality rate of more than 90 per cent.

“These mortality events, termed juvenile pearl oyster mortality syndrome (JPOMS), have resulted in massive write-downs in production and economic value of the industry and led to uncertainty within the future of the industry.”

The university is currently accepting applicants to study the role of “toxin genes” in JPOMS, testing a hypothesis that normal bacteria could cause these oyster ‘pandemics’ when these genes are activated.

Brown, a qualified marine biologist, explains that oyster farms have attempted to address this challenge by establishing breeding programs that select for health-based traits.

“We operate hatcheries and breed pearl oysters with a team of academics crunching the genetics and heritability.

“Oysters do have an immune system and they evolve over time; there are family lines that are more resilient, grow more vigorously, and aren’t as susceptible to these issues; these oysters are then fed back into the breeding program.

“Over a few generations you can drastically increase the productivity of your pearl oysters,” he says.

Further impacting the pearl oyster industry – not only in Australia, but on a global scale – are environmental factors.

“There is greater variability in production, given climate change issues such as sea surface temperature and subsequent changes in phytoplankton (food) or micro- biome community (health).

“Even introduced pests, or habitat loss are all regular occurrences these days,” explains Brown. “Anything that causes variation away from a very stable environment where pearl oysters thrive makes the economics incredibly difficult for pearl farming.”

Dr Laura Otter is a postdoctoral fellow at the Research School of Earth Sciences at the Australian National University, specialising in bivalve growth and research.

She tells Jeweller, “We have just started to learn how ocean acidification and global warming impacts marine calcifiers like bivalves, pearl-oysters, and gastropods – we glimpsed the tip of the iceberg, so to speak.

“A lot more research is needed to grasp the whole picture and where we stand. Put simply, global warming is caused by an increase in CO2 – and a portion of this greenhouse gas is also taken up by our oceans.

Katherine Kovacs, K&K Export Import
Katherine Kovacs, K&K Export Import
“The [GAA] pearl notes have undergone a major overhaul to reflect current industry conditions and CIBJO nomenclature, though it is a scientific course. We cover every type of pearl, from abalone to South Sea, Akoya, freshwater, keshi, and beyond.”
Katherine Kovacs, Gemmological Association of Australia

“While it might firstly appear like a good thing to have such a powerful greenhouse gas ‘sink’ to help buffer our atmospheric increase, increasing CO2 in the ocean comes at the cost of a lower pH,” she explains.

“This reduction in pH throws all those little organisms of balance that require a normal pH to build their skeletons, shells – and pearls.”

Dr Otter says the pH change has ‘acidified’ from 8.25 to 8.14 – a seemingly small change that nevertheless has a dramatic impact on marine animals, including pearl oysters.

“Nacre-building bivalves [such as pearl oysters] that are exposed to ocean acidification have trouble maintaining crystallographic control during shell formation.

“We know that this leads to differences in shell shape and thickness changes and in consequence to mechanically weaker shells that do not well withstand predation [attacks from predators].

“Of all the different layers in a shell, the one bearing nacre seems to be the most vulnerable.”

She also notes the secondary problem of food sources for the oysters: “Some plankton species may not ‘agree’ to the changes in acidification and temperature and they are important food sources for pearl-oysters.

“All these factors influence each other and form new synergies - more research will be critical to understand the fate of all these species and whether or not we will be able to produce pearls with the same quality as today [in the future].”

Dr Otter believes that breeding programs focusing on pearl oysters that can “cope better with the problems of acidification and warming” may offer a partial solution, alongside a global focus on overall atmospheric CO2 mitigation and sequestration – also known as “carbon capture”.

 

Left to Right: Chow Tai Fook Earrings; Mikimoto Brooch; Van Cleef & Arpel Bracelet

Above: Jewellery Theatre

Above:  Soklich & Co

Above: Allure South Sea Pearls

 

Solutions and evolution

CHART 2: AUSTRALIAN PEARL EXPORT VALUE / FORECAST

Source: Australian Bureau of Agricultural and Resource Economics and Sciences, 'Fisheries and aquaculture outlook 2021

According to the USC and SCSFRI’s research, global pearl production has fallen by 60 per cent since 2009, though pearl farms are now present in more than 30 countries.

In Japan, Akoya production peaked in 1966 with 127 tonnes produced, falling “to an average of 20–25 tonnes per year in the mid-2010s. In 2019, a mass die-off of 20 million Akoya pearl oysters around Ehime – the centre of Japanese pearl production – occurred, leaving stocks approximately 70 per cent lower than average.

And while exact figures are difficult to source, freshwater pearl production has reportedly been curtailed in China due to rapid industrialisation, over-farming, and natural disasters.

Says Brown, “Pearls were already rare compared to other gemstones – particularly diamonds – and they are getting rarer. “That’s a selling point that perhaps hasn’t been emphasised or communicated as much as it could be by the industry.”

Brown believes this scarcity – alongside the disruptions to the supply chain and consumer demand for sustainability and traceability – will contribute to an evolution of the pearl trade toward new business models.

For some consumers, sustainability and provenance are becoming more important – though the pearl industry noticeably lags other categories, including diamonds and colour gemstones.

Youd says, “Sustainability is extremely important for the pearl industry as a whole – traceability and provenance are irrelevant if you haven’t got a viable pearling industry.”

He adds, “At Allure we specialise in South Sea pearls and don’t carry Akoya or freshwater pearls. We feel very comfortable in the provenance of the pearls we sell due to our sourcing direct from pearl farms in Australia, the Philippines and Tahiti.

“We do also use a small quantity of Indonesian South Sea pearls in smaller 8 and 9mm sizes which are generally not economical to produce in Australia. The quality of the pearl should be the most important factor when purchasing.”

Atlas Pearls’ Jones notes, “For the more traditional pearl markets such as Europe, the US and Australia, there is definitely a growing demand among retail consumers for pearls whose provenance can be traced and particularly for those that have been cultured in a sustainable and environmentally friendly fashion.

Above: Bulgari

“Atlas Pearls provides certification to this effect and as a guarantee that the pearls have not been treated in any way.”

However, he clarifies, “In China, the world’s largest market for South Sea pearls, traceability and provenance are still relatively unimportant factors compared to the physical attributes of the pearl itself – its size, shape, colour, complexion and lustre.”

Unlike diamonds, pearls are not routinely certified by bodies such as the Gemological Institute of America (GIA) and the category also lacks secure chain-of-custody measures or accessible and affordable technology to ensure traceability.

Instead, trusted suppliers and long-term relationships are critical to directly sourcing high-quality product.

McCreesh observes, “O’Neils predominantly trades in Akoya and freshwater pearls that are sourced from reputable counterparts from well-known growing locations.

“We find that there is less importance placed on provenance of these varieties of pearls and a higher importance placed on the quality of the pearls.”

More than 98 per cent of the world’s freshwater pearls are grown in China, while Japan is the leading supplier of Akoya pearls. Akoya are routinely treated with the maeshori process (“before treatment”) to improve lustre by tightening the spaces between the nacre platelets.

Maeshori can vary between soaking in hydrogen peroxide and/or methyl, alcohol mineral salts and ammonia, and heating and chemical treatments. Bleaching is also common, which improves colour by removing unwanted yellow tones. These treatments can impact the longevity of the pearls by making them more brittle.

Akoya pearls are grown in limited numbers in Australia at Pearls of Australia’s Broken Bay farm, where they do not undergo maeshori or bleaching but instead display high-quality lustre and natural colours due to longer growth cycles.

However, Brown says that this type of Akoya farming will likely never be economically viable on a global scale: “I believe it’s a boutique product, but I also believe that in the future there will be a tipping point for international consumers who will
be willing to pay more for Australian Akoya that is as nature intended, with the highest quality and longevity you can get.”

Still, Brown notes that eco-minded consumers should also be made aware of the restorative nature of pearl oyster farming.

Species such as Pinctada maxima – which produce South Sea pearls – and other oysters are “an ultra-sensitive bio indicator of the marine environment”, as well as filtering algae and trace elements.

“As a whole, saltwater pearl farming – by its very nature – creates a field of influence around that marine area or zone that does a range of positive things: keeps the water clean, helps maintain or even improve bio-diversity, and pushes back against any activity which might damage the environment,” Brown says.

While some analysts predict the pearl jewellery market will expand by 13 per cent annually until 2025, it is likely that demand for this unique product will not abate.

Yet with supplies constrained by the factors explored above, there is potential for jewellers to communicate not only the beauty of the pearl to consumers, but also its increasing rarity – perhaps the most important quality of a gemstone.

 

Left to Right: Tasaki Earrings; Mikimoto Necklace and Earrings; Tiffany & Co Brooch

Above: Soklich & Co

Above:  Little H

Above: Autore

 

 

A PERFECT PALETTE OF PEARLS
EXPLORING PEARL TYPES

South Sea

Grown in golden or silver-lipped Pinctada maxima – the largest and rarest of pearl oysters – one South Sea pearl takes two to three years to develop and can range in size 9mm–16mm. They are cultivated in Australia, the Philippines, Myanmar (Burma), Vietnam and Indonesia.

Akoya

Once grown only in Japan – where the Akoya culturing technique was developed in 1906 – Akoya pearls are now also cultivated in China and Vietnam. The pearls grow in the Pinctada fucata or Pinctada fucata martensii and usually measure 2mm–9mm, with a specific lustre.

Tahitian

The world’s most iconic black pearls grow inside black-lipped Pinctada margaritifera cummingi oysters in French Polynesia, and are known as Tahitian pearls. Peacock, cherry, aubergine, and red overtones can be found. The pearls usually measure 4mm–15mm, and rarely up to 20mm.

Freshwater

More than 98 per cent of the world’s freshwater pearls are grown in China. These pearls are cultivated 30–50 per shell inside mussels, rather than oysters, with a wide variety of sizes and shapes. Species include Cristaria plicata, Hyriopsis cummingi and Hyriopsis schlegelii.

Baroque

Irregularly shaped pearls – that is, pearls that have an asymmetric, ‘organic’ shape, rather than a symmetrical round pro le – are known as ‘baroque’. This occurs due to uneven nacre distribution as the pearl grows. Most species of pearl oysters and mussels can produce baroques.

Keshi

Meaning ‘poppy seed’ in Japanese, the term ‘keshi’ was originally applied to the small, irregular seed pearls produced as a byproduct of the Akoya process. Today, the term is used more broadly for ‘unintentionally’ produced pearls. Keshi pearls range from less than 1mm up to 16mm.

Mabé

Also known as ‘blister pearls’, mabe´ are pearls that have perforated the mantle of the mollusc and adhered to the inner wall of the shell. Mabe´ can be cultivated by attaching a mother-of-pearl nucleus to the shell wall and leaving nacre to accumulate for two to three years.

Conch

Pearls harvested from the Queen conch, Strombus gigas, are known as conch pearls. As non-nacreous pearls, conch pearls lack iridescence. Instead, they have a ‘creamy’ or ‘porcelain’-like  nish and display pretty pastel hues. They are rare and almost always natural.

 

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