The Chanthaburi Connection:
The Case of the Mysterious
"The degree to which gems are treated has spun out of control…. (Some new procedures) don't just enhance the stone, they design it beyond what nature intended." — a U.S. gem trade professional
About 250 kilometers southeast of Bangkok, not far from the Cambodian border, lies the town of Chanthaburi. Chanthaburi is a center of world trade in colored gems, primarily rubies and sapphires. (Both ruby and sapphire are of the gem species corundum. Red corundum is classified as ruby, all other colors are called sapphire.) It is estimated that 50% to 80% of the world's rubies and sapphires pass through Chanthaburi to be sorted and treated. There they are sold to wholesalers who polish the gems and sell them to retailers and jewelry manufacturers around the world. Thus, whatever happens in Chanthaburi affects the world gem market.
In late 2001, the gem markets of Chanthaburi were suddenly flooded with a very rare orange-pink sapphire called a Padparadsha. Wholesalers immediately began buying the Padparadshas at prices as much as ten times the going rate for regular pink or yellow sapphire.
With the sapphire market thrown into turmoil by the unexpected influx of Padparadshas, a suspicious gem industry wondered, "Were the Padparadshas natural, or were these low-quality sapphires that had been treated to look like the rare and expensive ones?"
In the gem industry it is acceptable industry practice to heat imperfect gems to enhance their color and appearance. These treatments began in Chanthaburi more than 30 years ago, when technology allowed stoves to burn at temperatures as high as 3,200 degrees Fahrenheit. Today, at least 90% of the rubies and sapphires sold worldwide are heat-treated.
Contemporary treatments involve not only heating but also using additives. For example, processors add titanium to colorless sapphires to create rich blue hues. They also conceal fractures and cavities by filling them with baser materials. Such treatments are controversial because they can be used to mislead the customer about the quality of the gem. Ethical dealers will disclose such treatments each time the gem material is sold (trader to wholesaler, wholesaler to jewelry manufacturer, manufacturer to retailer, retailer to consumer).
When the "Padparadshas" of Chanthaburi hit the wholesale market, no such disclosure was made. Indeed, many international laboratories subsequently appraised them as genuine. However, the Gemological Testing Center of American Gem Trade Association (AGTA) was suspicious because all the stones they examined had uniform color penetration. Most natural stones have uneven color zones. Gemologists there also noted that the color did not penetrate to the core, suggesting that color had been applied. It turned out low-quality stones had been diffusion treated with beryllium to mimic the rare Padparadshas.
Wholesalers who bought the fake Padparadshas paid about $4,000 a carat, 10 times what the stones were worth. Retailers could wind up paying $15,000 to $20,000 per carat, because the markup for color stones is much higher than for diamonds. The high prices are passed on to the consumer.
New technologies and the expanding gem market encourage more and more processing of gems to imitate rarity and high quality. Gem treatments have, as one industry expert put it, "spun out of control," and so has the variety of scams. A consumer buying high-priced, purportedly rare, gems should always have the quality verified by an experienced gemologist.
FOR AGENTS & UNDERWRITING
Natural Padparadshas are very rare in nature and are priced accordingly. Such high-priced jewelry should have two appraisals describing the jewelry and verifying its quality. At least one should be from a graduate gemologist who is also a Certified Insurance Appraiser (CIA)™.
For colored stones, it is essential that the appraisal be written by a gemologist experienced with colored stones. Most jewelers deal primarily with diamonds, and even a trained gemologist may have little experience with colored stones. Note that several labs passed on the bogus Padparadshas before one lab discovered the fraud.
All treatments not part of the usual processing of the gem should be disclosed on the appraisal. A trained gemologist will be able to identify treatments that should be disclosed.
If a gem is not treated, that should be specifically stated on the appraisal. A treated stone has only a fraction of the value of an untreated gem of similar appearance.
A reminder: As discussed in the May 2002 issue, the value of a colored stone Certificate varies according to the lab that issues it. If you are insuring a colored stone accompanied by a certificate, it would be worthwhile to review the May 2002 issue. In any case, a certificate is not a substitute for an appraisal. Certificates describe only the gem, not the jewelry, and they do not give valuation.
While there are fewer claims on colored stones than on diamonds, colored stones usually have much higher markups and generally have inflated valuations. A typical one-carat sapphire, for example, has a replacement cost of about $174.
Natural Padparadshas are very rare in nature. In settling a claim on such a high-value sapphire, be sure the appraisal states that the gem is natural and untreated. Do not assume that if the appraisal doesn't mention treatments, the gem must be untreated; most likely, if treatment (or lack of it) is not mentioned, other information is incomplete as well.
For claims on damaged stones, always have high-priced jewelry inspected by an appraiser to determine whether the gems have been treated. Treatments such as fracture filling may break down, causing changes in the stone that are not damage for which the insurer is liable.
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