ALROSA, Russia’s largest diamond miner, said the demand for rough has been steady since the beginning of 2011, following good Christmas sales. The company plans to sell more than $880 million worth of diamonds in the first quarter of 2011, less than the $925 million sold in the first quarter of 2010. Its January sales totaled $313 million.
The company also is moving forward with plans to sell 20 percent of its stock in an initial public offering (IPO) to raise an estimated $1.5 billion to $2 billion. Fyodor Andreev, ALROSA’s president, told news agencies at the Troika Dialog Economic Forum that the miner, which could be ready for an IPO as early as the end of 2011, is currently valued by banks at $8 billion to $10 billion.
Polished Up
Polished prices and sales are rising in Russia, in line with the international trend. Small gems of less than 0.3 carats and stones with medium-and-below characteristics are driving the demand. “The prices for small diamonds are growing dramatically,” said Anton Schepotiev from Almoss, a diamond manufacturer and dealer. “There’s good demand for 17-facet stones.”
Manufacturers say that many clients are buying lower characteristics than they did before the crisis. “Those who bought VVS1 to VS1 have turned to VS2 to SI2,” said Dmitry Vinogradskiy, marketing director of Shreya Core. He said that prices in some categories have risen by $100 a carat during the past few months and now are selling above the Rapaport list prices.
On the other hand, demand is steady for 0.7-carat to 1-carat stones because these stones are used in the very popular, classical ring designs featuring one diamond. “Sales of certified stones that customers have placed in mountings are growing,” said Isabella Soltys, the director of Sakha-Taas.
Despite the inherent strength in the Russian market, manufacturers and diamond dealers say the domestic market is very slow compared to other countries. “Sales in the Russian market are less active than export sales,” said Rajesh Gandhi, the director of Choron Diamonds. Schepotiev said jewelers were trying to save on diamonds in their jewelry designs to bring down the overall price of the items and to offset the record-high costs of the gold used in the jewelry.
The other perennial problem for manufacturers is the lack of rough. “It’s very problematic to buy rough to polish small gems,” said Vinogradskiy. Small manufacturers experience the most trouble because they often don’t meet ALROSA’s requirements for long-term contracts and they can’t afford to buy the large lots the miner sells. So they survive on sales from the state treasury, imports and what is sold down to them by the bigger companies who do buy directly from ALROSA.
Junwex Sales
Jewelry sales are growing fast compared to 2010, with companies reporting 10 percent to 20 percent monthly sales growth over the winter months. February kicked off with the traditional, big Junwex St. Petersburg trade show, which attracted more than 600 companies and in excess of 50,000 visitors. “Our sales at Junwex doubled, compared to the show in 2010,” said Svetlana Maksimova, director of Casting House.
Most companies reported good sales and an increased number of future contracts from the show. “We signed contracts for deliveries in April, which is usually a slow month for sales,” said Svetlana Rakhmaninova from Rifesta, a Yekaterinburg-based jewelry maker. Many jewelry dealers were buying because they sold out their stock during the New Year holiday shopping season but the industry has yet to reach its precrisis levels. “We are producing 70 percent of the precrisis level,” Aleksander Ivanyuk, the chairman of the board of the Russian Jewellers Guild, said at the Junwex show.
Gift-Giving Holidays
Hopes were high for good sales before the three gift-giving Russian holidays that occur in February and March, although they were expected to be less than December sales. Vinogradskiy said the most expensive purchases are made for the New Year holiday so companies focus more on cheaper items in February and March.
Soltys said that items with semiprecious stones are enjoying big demand, yet classical jewelry with one diamond is also selling well. “Many people want to have a center stone, even a small one, and not melee,” said Maksimova. Rakhmaninova noted that demand is returning for items with unusual design, whereas “during the economic crisis, 80 percent of the sales were classical jewelry.”
Valentine’s Day, a new holiday in Russia, was promoted more aggressively this year and Russian men traditionally receive gifts on February 23 for Motherland Defender’s Day.
But the biggest of the three holiday sales come before the March 8 holiday — International Women’s Day — which is widely celebrated in Russia. A big trade show entitled “Best Adornments of Russia” is held just days before the holiday in Moscow. Jewelry makers and dealers also vie for invitations from big companies to visit their offices for one-day sales. “We started doing more come-in sales during the crisis and they contribute a lot to the month’s revenue,” said Maksimova.
The Marketplace
• Russian jewelry makers produced 32.09 million gold items weighing 71.6 tons in 2010, up from 26.85 million in 2009, according to the Russian Assay Chamber.
• Production of silver jewelry grew from 41.36 million pieces weighing 177.3 tons to 45.06 million pieces.
• The number of platinum items fell to 10.98 million from 12.3 million in 2009.
• Palladium jewelry production remained on the same level with 23.32 million items in 2010, from 24.33 million in 2009.
Article from the Rapaport Magazine - March 2011. To subscribe click here.