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Russia
By Svetlana Shelest
In 2014, Yakutia, which accounts for 25 percent of the polished diamonds on the Russian market, produced 71,300 carats of polished totaling $145 million. Almost 85 percent of the total output — 60,000 carats worth $121.9 million — was produced over the first nine months of the year. Right up until the fall of 2014, the republic was surpassing its results of the same period in 2013 by 18 percent and its forecast for 2014 by 12 percent. Nyurgun Timofeyev, president of the Diamond Council of Yakutia, a consultative body that advises the president of Yakutia on matters of the diamond industry, said the reasons for such a sharp decline are obvious, including “an acute working capital deficiency experienced by many of the republic’s polishing businesses. As of November 1, 2014, the debt of Yakutia’s polishing factories totaled $72.6 million. This amounts to almost 60 percent of the annual production volume and is very difficult to refinance.” “Declining demand is also a serious contributing factor,” continued Timofeyev, “because it takes away from businesses the option to make up for the growing production costs by raising the sale prices. Overall, this negative trend is likely to stay with us for a long time, possibly two to three years. I think Yakutia will have a very difficult time ahead, even harder than during the crisis of 2009.” In 2014, Yakutia’s Ministry for Industry designed a development plan for the republic’s rough and polished industry for 2015 to 2017, which included proposals on federal and local governmental support. But both the government and the Diamond Council recognize that any budget support can only be justified for highly cost-effective projects.
“Developing exports is the key solution for us,” said Timofeyev. “This way, we can turn the devaluation of the ruble to our advantage. We need to look for a strategic partner, possibly in China, that would be ready to provide affordable financial resources and follow the best practices of India, the world’s leader in polishing and jewelry production. “Like India,” Timofeyev concluded, “Yakutia could set up a state company, which would take care of a number of important tasks: ensuring continuous supply of rough to polishing businesses, implementing new technologies in the workflow and providing trained staff. Such a company could also work on promoting Yakutia’s diamonds as a brand on the global market and identifying other strategic partners. On the financial side, channeling all processes through such a company would ensure complete transparency of all import and export operations.”
Having launched a new venue for its annual jewelry show in St. Petersburg in February 2015, Russia’s flagship media event for the jewelry industry, show organizer Restec followed up with yet another exhibition. The show, which ran March 5 to 8 in Moscow, was titled Best Adornments of Russia. Much like St. Petersburg’s, this show also reported an increase in the number of visitors, almost 1,500 wholesale buyers and 41,000 retail customers, and a higher volume of retail sales, partially fueled by the fact that the show was timed to March 8, one of Russia’s most widely celebrated holidays, International Women’s Day.
Current jewelry trends first noted one month earlier in St. Petersburg were also observed at the Moscow show. The greatest demand was for goods in the more affordable categories: all silver jewelry and gold jewelry without stones. Oleg Brovkov, director of Saratov-based retail company Diamonds of Nyurba, said that while stoneless gold was most in demand, “the diamond jewelry purchases stayed within the range of approximately $1,600. This amount buys either a ring with a .25-carat to .30-carat diamond or a pair of earrings featuring a pair of .10-carat diamonds. There were no bigger transactions.” Similar customer preferences were reported by wholesalers. Oleg Ketlerov, diamond sales manager of Vangold, which has operated a wholesale jewelry business since 2000, explained, “Jewelry without stones was the top seller, not the diamonds. Cash sales were slow for everything with a price tag over $600. We anticipate it might stay that way until customers get used to the new prices that have been readjusted in the wake of the dramatic change in the ruble-to-dollar rate.” The general opinion was that it could take up to six months for the new exchange rate situation to stabilize. The decline in demand was confirmed by reports from the Russian Federal Statistics Agency that, in January 2015, Russia produced 29 percent less gold jewelry without stones and 34 percent less gold jewelry with diamonds compared to December 2014.Article from the Rapaport Magazine - April 2015. To subscribe click here.
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