Gem Traders Unfazed by Burma Turmoil

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A consortium called the Union of Myanmar Economic Holdings (UMEH) also holds two auctions annually. (The UMEH and the Myanmar Economic Corporation are the two major industrial conglomerates controlled by the armed forces, dominating key economic sectors. Shares of UMEH are reserved for the military establishment.)

Around three thousand buyers attended the July auction, according to Hong Kong Jade Assn. Chairman Chan, with over 70% coming from China. The rest are mainly from Hong Kong, Chan adds.

Trading through unofficial channels has continued. Yau of Kam Wing Cheong says many visiting Burmese traders peddle stones from shop to shop on both sides of Canton Road, the strip in Kowloon's tourist district that is Hong Kong's jadeite trading center.

The postponement of the jadeite auction has not caused any panic in the Hong Kong trade. Since many large jadeite companies in Hong Kong bought large stocks of stones when availability was low, and hung on to them as an investment, they are not concerned about short-term supply fluctuations. "The supply has been so strong that prices of jewelry with medium- and lower-grade jadeite [up to $4,000 per item retail] are flat," says Yau. "Availability of jadeite has increased so much in recent years as mechanized mining methods have become widely used."

Robust Inventories

Traders have other sources of jadeite, too. Samuel Kung, owner of the eponymous Hong Kong trader and retailer, says that although the company purchases jadeite at the MGE's auctions, 90% of its goods come from from private companies in Burma, Hong Kong, and China. That provides them with a cushion even if the auctions don't resume soon. And even if the political situation in Burma worsens so much that Hong Kong traders are unable to purchase rough stones at the auctions, supply won't dry up altogether. "There are many visiting sellers and we have good connections with suppliers with huge stock," says Kung. "Although the political situation is delicate…we have established good relations with the [Burmese] people," he says.

Kwok Man Chan of Shiu Lun, a wholesaler and retailer, thinks that if the military government in Burma continues to postpone the auction for several more months, many traders will benefit as they reduce excess inventory. "This should have positive impact on the market as the demand will outstrip the supply and prices will increase," he says.

However prices are likely to tumble if the government suspends the supply for more than a year. Many miners in Burma are independent companies that have taken out concessions from the government and have to keep producing in order to amortize their investment in mining gear. They "are doing mechanized mining in a systematic manner and some mines are in operation 24 hours a day. Stock builds up very quickly. And if the suspension of jadeite exports continues for an extended period, prices will drop when [the ban is lifted and] the accumulated stock floods the market all at once," Chan says.

Shrugging Off Negative Publicity

Despite the negative publicity Burma is generating in the West, Hong Kong jadeite companies interviewed say they are not worried since the main market for jadeite is in Asia, particularly China and Hong Kong. Chan of Shiu Lun reckons that the U.S. and Europe together account for less than 1% of the global jadeite market. Shiu Lun operates an outlet in an upscale Hong Kong shopping mall which sells to consumers from the U.S. and Europe. "None [of them] has discussed the political situation in Burma," he says.

At Kam Wing Cheong, Yau says the company has held a large stock of jadeite and does not plan to replenish it yet. "However we will buy rare, fine-quality [stones] when we come across them," he says. "We will not stop purchasing stones in Burma because of the political situation. The political chaos did not start with the junta; the country has been plagued by the conflicts with ethnic minorities for years. This is totally out of our control."

Wilson Lau is a freelance writer in Hong Kong .