Tanzanite Background Story and Market Report

Published: June 2010
by Carrie Fox, In the Loupe Editor
from In the Loupe Volume III

To understand the tanzanite market, one must consider both the unique characteristics of tanzanite and its history prior to 2010. A combination of four key factors has set the stage for an industry that has experienced, and continues to experience, a great deal of fluctuation.

The four key factors are:

1. Tanzanite is a young gemstone in comparison to others in the market.
2. Tanzanite is found and mined in only one location.
3. Tanzanian government mismanaged the mines in early years, stunting growth.
4. Advanced and ‘westernized’ mining operations have changed the tanzanite business.

A Very Young Gemstone

Many of today’s most popular gemstones were discovered thousands of years ago. Evidence has been uncovered in artifacts and old transcripts such as the Bible. Tanzanite, on the other hand, was only discovered in 1967. Comparatively, its existence to man has been a mere blip on the timeline. In the case of ancient gems, the market has long been established, mines are claimed, popularity already exists, etc. However, the scenario is different for tanzanite, a stone that has seen mainstream awareness for less than 20 years.

Found in Only One Location

The world’s only known source of tanzanite was discovered in the Simanjiro district of Tanzania. Geologists say the chemical environment required to form the beautiful blue gem is so unique, chances of finding the same conditions elsewhere are next to impossible. Therefore, experts estimate the probability of discovering another tanzanite deposit is less than one in a million.

Being found in only one place leads to a couple of problems regarding stability. The quality and quantity of gem deposits will vary as miners slowly dig through the earth’s core. Therefore, the production of sellable rough is not consistent at all depths, and no one can predict this variation. Additionally, a natural resource from a single location cannot last forever. Eventually, if other deposits are not located (and that seems most likely), it will dry up.

Early Mishandling by Government

Tanzania is a third world country that only gained independence in 1964. Since that time, it has experienced agreat deal of hardship. In 1971, a young and inexperienced government began to realize the monetary potential of tanzanite, so it took control and nationalized the mines. However, necessary structure was not in place, and quality of mined material diminished. Around that time, tanzanite had just reached the US, resulting in a large and enthusiastic push by famous jeweler Tiffany’s & Co. The erratic changes in supply caused problems, though, which eventually led Tiffany’s to stop promotion. In 1972, the Tanzanian government formed STAMICO (State Mining Corporation) in an attempt to fix issues and capitalize on tanzanite.

That same year, the country was attacked by Uganda, which led to a two-year war. STAMICO’s efforts to begin full-scale mining did not materialize, and while the tanzanite market remained alive, it was quite volatile. Then in 1990, officials split the area into four sections: Blocks A, B, C and D. Blocks A and C were awarded to large-scale operators, while Blocks B and D were reserved for local independent miners. At that time, some organization entered the industry, and it was able to slowly move back into US markets.

Modern Operations Introduce Global Marketing

Once advanced mining companies began to operate in Blocks A and C, the tanzanite market was forever changed. Their business skills were something small-scale miners and Maasai simply did not have. A level of sophistication was introduced to the industry. These businesses had the resources and tools to make tanzanite an international success.

Review of Tanzanite Supply Chain

efore moving on to our Market Report, the supply chain is another important piece to review. Tanzanite is mined approximately two hours outside of Arusha, the Tanzanian capital. As mentioned before, the area has been segmented into four sections: Blocks A, B, C and D. From the mines, rough material is sold at buying offices in Arusha and in the outer villages of native Maasai. Next, it travels to cutting facilities, almost exclusively located in India. The finished gems are then sold to jewelry manufacturers and other retailers such as JTV. To truly investigate market conditions, JTV started with the first two links of this supply chain. Our team spent time both visiting the mines and meeting with local suppliers.

Today’s Tanzanite: A Market Report

The tanzanite market is currently in a state of change. From 2004 to 2008, the industry experienced a period of consistent growth. Demand was increasing at a healthy rate, and mine owners were finding a surplus of material in all quality grades. Then in 2008, the United States’ economy began to crumble. This had a great impact on the market because, historically, an estimated 70% of tanzanite was consumed by the US alone.What resulted was a dramatic drop in price per carat during 2009. However, as people across America curbed spending on luxury items, the situation was a little different for tanzanite. The lower prices were so appealing, gem enthusiasts took advantage and buying continued at a fairly steady rate.

What is happening to the market in 2010 comes down to a fundamental principle of economics – the law of supply and demand. Tanzanite is still being mined, but prospectors state production rates have declined. This is especially true for top grades and large carat sizes. Reduction percentages varied among the mining operations. Block C recently reported a 14% decrease for FY 20091, while some of the local Maasai in Block D claimed losses above 50%.

At the same time, global demand is increasing. As mentioned earlier, the US has traditionally consumed a majority of tanzanite. However, popularity is quickly growing in the international arena. The European and Caribbean markets have gradually been increasing over several years, but the big change is coming from Asia. Now, China and Hong Kong are buying tanzanite, and it has greatly changed the dynamics.When demand increases as supply decreases, it ultimately has an effect on price. In the last 15 months, JTV has seen the price of top-grade material rise 40%. Additionally, after the 2010 Hong Kong show, an executive from Block C reported a general increase of 16.5% per carat and a top-grade increase of 29% since November 20092.

End Note: While the global supply is in a decline for the time being, it is still strong enough to support the industry. Additionally, JTV is happy to report we have solidified relationships with the top three tanzanite vendors. In totality, this trio controls over 70% of the supply. Therefore, we feel confident we can continuously source tanzanite for the foreseeable future and offer it at the most competitive prices on the market.

1 (AIM: TNZ, 2009 Financial Results, 5/18/10)
2 (CEO Bernard Olivier, AIM: TNZ, Sales Update, 3/10/10).

Related Articles

Tanzanite Gemopedia

Modified June 2011
Read More

JTV on Google+
Checkout
0 Item(s)
My Wish List
Close
Item
Description
Qty.
Price


Estimated Order Total:
0
Total Due Today:
0
Close
Item
Description
Qty.
Price


Page of 1