By  on March 6, 2017
Pearl prices are on the rise due to lower supply.

SHANGHAI — It’s no secret that pearls have been making a comeback of late, with Dior, Gucci and Chanel featuring the precious orbs on their runways last fall. But the rise in demand is coming at a time when the supply of new, high-quality pearls is falling, leading to an increase in prices.In 2015, a Knight Frank study showed that the value of jewelry had risen by 159 percent over a decade, with pearl value increasing by 369 percent. “Pearls, which until recently were considered rather old-fashioned, are also rising rapidly in value. This trend is being helped by the almost total lack of supply of new natural pearls coupled with strong demand from the Arabian Gulf,” noted Knight Frank’s 2015 Wealth Report.The lack of supply of new natural pearls is put down to two main factors: Rising ocean acidity levels and uncertainty about geopolitical issues surrounding the South China Sea.The Pearl Source, one of the largest online pearl jewelry retailers and distributors in the U.S., has observed an increase in the popularity and price of pearls in recent years. The company sources pearls from around the world, including Japan, China, Tahiti, Australia and the Philippines, with the majority of cultured pearls coming from China and Japan."Environmental issues such as acidic oceans are making it harder to cultivate high-quality pearls, and the supply of pearls through cultivation is slowing annually. Pearl farms are delicate ecosystems. Throw something just a bit off, such as the acidity or the temperature of the water, and production and quality suffer,” said Leon Rbibo, president of The Pearl Source.The company procures many of its pearls from the Asia-Pacific region and is worried that ongoing territorial disputes in the area, coupled with a potential change in foreign policy by the new Trump administration, could impact supply and therefore further drive up prices.“The geopolitical tension in the South China Sea does not look like it will end soon, which is negative for business. I think we're all hopeful that Trump’s ‘America First’ perspective won't affect trade deals in our particular industry. He positions himself as a businessman, after all, so we're thinking that the economy and trade will supersede other issues,” Rbibo said.Not all China analysts agree with the assumption that the South China Sea dispute has impacted the industry in a noticeable way.“I think tensions in the South China Sea do have an effect, but I'm not sure if it's the dominant effect as pearl production and harvesting are fairly diversified by country and location in Southeast Asia. So sourcing is still possible, however, quality control remains an issue,” said Benjamin Cavender, principal at China Market Research Group.“The first issue is mainly related to ocean acidity levels. A lot of pearl farms are struggling to hit yields and maintain quality because as acidity increases the oysters that are typically used to grow pearls struggle to grow and harden the way they need to in order to produce a quality product. This year may be especially bad in that regard. The second is that we've hit a style trend over the last couple of years toward pearls as a result of fashion icons and movies highlighting them,” Cavender said.Hong Kong-based jewelry company Chow Tai Fook primarily sources pearls from farms in Australia, Indonesia, The Philippines and mainland China. The jewelry company targets both the mass luxury and high-end luxury jewelry markets through a retail network in China, Hong Kong Singapore, Malaysia, Korea and the United States, as well as online. A staple brand name on the Chinese high street, the company has seen an uptick in value for certain types of pearls in the China market.“Demand for pearls has been quite stable in mainland China and Hong Kong over the past few years and the trend is expected to continue. In general, the price of lower-quality pearls is quite stable, while that of high-quality pearls has increased thanks to a strong demand in the Chinese market and scarce supply,” said a company spokesperson.Due to poor environmental factors for cultivating pearls, the market has seen a surge in the number of low-quality pearls available, with consumers willing to pay more to ensure the quality of their purchase.“There are more low-quality pearls on the market, yes. Thankfully, though, there are still high-quality, lustrous and round pearls being cultivated. These pearls are more rare but all the more valuable now,” Rbibo said.A hike in the price of pearls won’t necessarily dampen consumer interest in the high-end item, with the fine jewelry industry growing at a relatively stable rate and a trend toward investment buying.“Despite a rise of prices in materials for fine jewelry, such as pearls, the global fine jewelry industry is still growing stronger than the global costume jewelry [sector], at 3 percent compared to the latter’s 2 percent. Given turbulent economic conditions and currency fluctuations, more consumers, especially those in Asia-Pacific and Latin America, are purchasing fine jewelry as a form of investment. Hence, despite the rise in cost of production and subsequently the rise in prices of the jewelry, consumers’ demand has not been fazed,” said Jasmine Seng, personal accessories associate at Euromonitor International.

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