May 2015 was a turning point for ivory prices according to an unpublished report commissioned by the China office of a major international wildlife charity. Since that time the price of illegal ivory has more than halved. The study indicate that dumping of ivory by speculators is the cause of the price drop. International efforts to control poaching and – more importantly – the closure of markets means that ivory is no longer attractive to commodity dealers.
The study which indicates that investors and not consumers drove the massive increase in poaching since 2007 does answer a number of questions. Those who have been watching and reporting on the illegal ivory trade over a number of years have been vexed over why there has been such a big boost to prices and demand but the shops and dealers have not seen the increasing demand on the street. Yes there has been some increase in demand as Asia becomes more wealthy but for the increase in poaching to be explained then the ivory shops and dealers would be packed with panic buyers. That is not the case and there had to be another reason for the price trend that did not take into account the supply and demand in the marketplace.
The indication and gut feeling for many was that international speculators – mainly based in Hong Kong – was driving the market and these speculators were hoarding the ivory for profit-taking at a later date. 2015 saw a number of major moves that made ivory a bad buy for speculators and caused them to start dumping their stocks.
Markets are being closed and the opportunity for cashing in the stocks are diminishing. The United States has effectively closed their ivory trade. Chinese government-owned shops in Hong Kong have closed their ivory departments or moved to mammoth ivory, the Chinese clampdown on bribery and ‘gifts’ in government and business has also impacted the luxury market. China’s temporary closure in imports of new ivory and a declaration of their intention to ban the domestic trade has all played a role in making ivory a bad buy for investment. Even the heart of the world’s ivory trade, Hong Kong, has said that it is open to considering restrictions and even a ban on ivory trading.
As the speculators continue to dump their stocks the price of ivory and tusks will probably continue to fall during 2016 and that will eventually play back into the price that poachers are paid for tusks. Currently the full impact of price drops at the end of the trail has not fully fed into the price paid to poachers but that will almost certainly start to happen in 2016.
A combination of cheap plentiful dumped ivory and the removal of major buyers (speculators) of ivory will mean that the price of poached elephant ivory should crash and with higher sentences, better enforcement and investigations there should be fewer people willing to take the risks of poaching for the lower rewards on offer.
While the value of unworked tusks have halved since May 2015 there is probably still room for further falls in price throughout 2016. The surge in poaching and rise in ivory prices began in 2007 following the global financial crash. As shares and other investments began to fall in value, unethical speculators looked for other investments such as ivory in which to place their money. This would suggest that there are about 8 years worth of illegal tusks being hoarded, Some have come onto the market since May 2015 but there is still plenty of stock to be released. If China and Hong Kong begin to firm up their proposal to ban or severely restrict ivory trading then a lot of that remaining stock will almost certainly be dumped on the market as speculators seeks to limit their losses. It would not be a surprise if the price of raw ivory over 2016 dropped by another 40% or 50% as those markets come closer to eventual closure.
Trying to monitor an illegal market such as ivory is, by its very nature, difficult but there are a number of signals that dumping of ivory is happening apart from the obvious fall in price. That fall in price is being caused by an increase in supply but there has been no significant increase in poaching in the last year that could cause a glut of ivory and crash in price. While consumer demand has reduced slightly over the years it has not dropped to such an extent that it would cause a crash in price.
A telling sign that tusks are being released from storage is the size and weight of tusks now coming onto the market. Over recent years the size of tusks gained from killing elephants has decreased as the big tuskers are taken out of the population by being killed. This has been observed over the last few years from the tusks on offer online and through illegal channels and also the size of tusks seized. But many more larger tusks and heavier tusks have come onto the market in recent months. This could suggest that they have been killed in previous years and stored and only now being placed on the market.
If 2016 continues to see speculators pull out of the ivory market and a continued release of the hoarded tusks into the market there is a good chance that the scale of elephant poaching seen in recent years will start to fall. This could give the elephants a breathing space until China and Hong Kong get their domestic ivory market bans in place (and the UK too as promised by the Conservative government).
This year could turn out to be the beginning of the end of the threat to elephants. It should also be seen as a warning for CITES delegates. If South Africa does propose to open up a rhino horn trade and there is a market then international speculators and commodity dealers will move in and that will almost certainly increase rhino poaching as unethical speculators look for rhino horn.
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