RAPAPORT... Manufacturers and polished gems dealers say the market has been improving since the middle of summer but admit it is still a far cry from previous years. “The market for polished diamonds has recovered to 50 percent of its precrisis numbers,” said Nikolay Afanasiev, the marketing director of Kristall Smolensk, the country’s largest manufacturer, which sells most of its goods to the international market. He said the company was going to end 2009 with a small profit — thanks to the sales to Gokhran — but that sales to the market are only half the level of precrisis years.
Afanasiev said that gems of all sizes and the full assortment of characteristics were in demand, but that stones larger than 2 carats were less in demand than smaller diamonds. “The dealers are being careful in filling their stock, as no one wants to create large inventories,” he said. According to Afanasiev, the strongest market for polished diamonds currently is Southeast Asia, followed by the U.S.
The domestic Russian market is reportedly slow, although dealers say it has improved since the summer. “There’s a lack of liquidity in the market,” said Rajesh Gandi, director general of Choron Diamond. The best sellers among polished diamonds inside Russia are small and medium-sized gems weighing between 0.2 and 0.7 carats and dealers say the best-selling characteristics for this size range are K-plus, VS1 to VS2. In stones over 2 carats, demand is good for brown color.
Jewelry retailers have added or increased their assortment of certified diamonds. “Selling certified diamonds has been a success since we started it in June,” said Ilya Adamsky, commercial director of Moscow Jewellery Factory, noting that stones from 0.7 to 3 carats were selling well.
Holiday OutlookExpectations are high for Christmas and New Year sales, but they are considered unlikely to reach the levels of 2008. “The market is revived as the New Year approaches. However, it’s still far below precrisis levels,” said Andrey Martsevoy, director of retail sales for Adamas. Jewelry items rank among the top five presents for the New Year, according to various polls in the country, but Russians are buying fewer rings and chains. “Items costing less than $450 have the most demand,” said Gandi. “Jewelry with no stones or semiprecious stones is the best seller.” In 2008, most of the jewelry sold was priced between $500 to $700.
As for diamond jewelry, classic rings with round stones enjoy the most popularity. Adamsky said his company had expanded its assortment of one-stone rings and earrings, offering a variety of sizes and characteristics. Martsevoy said rings with gems of 0.01 to 0.29 carats were most in demand, as well as jewelry with a combination of diamonds and semiprecious stones.
Jewelry manufacturers say they have introduced a number of production changes to adjust to the changed market needs. Surprisingly, despite the downturn, some companies are increasing the number of their stores. Adamas said it was adding 13 stores and Moscow Jewellery Factory is opening ten. “Companies are going out of business, and that is creating opportunities to get good spots,” explained Adamsky.
Paying Down DebtALROSA, Russia’s largest diamond miner, finally sold its gas assets, which had been on the market for a year and a half, for $620 million, and the company is using the money to pay down debt. Company spokesmen said its goal is to reduce its outstanding debt by $1.14 billion in the second half of 2009 to $3.86 billion. The company said it cut its debt by almost $1.04 billion in the third quarter of 2009.
Its statement for July through September of this year showed ALROSA’s net loss was reduced by 40 percent from the results posted for April through June. The company resumed sales to the market in the third quarter of 2009, after seven months of making sales only to Gokhran, Russia’s state repository. In the third quarter of 2009, the company sold $1 billion worth of rough and polished diamonds, twice its sales in the second quarter of the year. However, the company’s revenue for January through September 2009 is 22.5 percent less than the comparable period in 2008. Since October, ALROSA has sold $351 million worth of rough, including $255 million directly to the market.
Smuggling Case Being WatchedJewelers are trying to assess the impact of large-scale criminal smuggling charges brought against the top management of the jewelry company Altyn. The company had a significant share of the market in Moscow and St. Petersburg and was well known for its aggressive advertising campaign. Many jewelers had been complaining that Altyn’s promise of 50-percent-and-higher discounts on jewelry negatively affected their efforts to promote jewelry as a precious item. Although jewelers have refrained from commenting on the criminal charges, many express concern that it has cast a shadow on the whole industry.
The Marketplace- Russian jewelry makers consumed 50 percent less gold and 11 percent less silver in the first nine months of 2009 than during the same period in 2008, according to the Russian Assay Chamber.
- Although jewelry sales have been rising through the fall, they are expected to reach only 60 to 80 percent of 2008’s sales totals.
- Demand is strong for small diamonds of less than 0.29 carats and medium-sized diamonds of 0.3 to 0.7 carats.
- Round shapes are the most popular as customers look for timeless, classic designs.
Article from the Rapaport Magazine - December 2009. To subscribe click here.