Rough and Polished Sales Up
By Anastasia Serdyukova
Russia’s largest diamond miner ALROSA produced 10 million carats of rough in the first quarter of 2011, which is 16 percent more than its output for the same period in 2010, according to the company’s preliminary report. Although the miner’s revenue for the first quarter of this year is expected to be 17 percent less than for the same quarter in 2010 — $811 million — its net profit is 9 percent higher or almost $200 million. The higher profit reflects smaller production costs, higher rough prices and a strengthening of the ruble against the dollar.ALROSA sold $907 million worth of rough and $46 million worth of polished in the first three months of 2011. The company said demand for rough remains high, especially in India and China, and it expects this trend to continue for the midterm, due to the overall shortage of rough in the market.Kristall Smolensk, Russia’s biggest diamond manufacturer, reported the best annual results in its 48-year-long history in 2010. The company’s revenue was $431.6 million, an increase of 56 percent from 2009, and its net profit was $6.6 million. The company sold $340 million worth of polished diamonds. Kristall says it’s currently using 100 percent of its capacity. Maksim Shkadov, the company’s director general, said 2011 revenue is planned to be at least at the same level, but may be higher, depending on the market. “The market is on the rise, and this growth is steady,” he said.New ControllerRussia is creating a new federal body to oversee the turnover of precious stones and metals inside the country, as well as their export and production. The organization may start operating in 2012, according to Alexander Akhpolov, the head of the Finance Ministry department in charge of the industry. He told Russian newspaper Kommersant that contradictions in the country’s legislation prompted the creation of the gems and metals watchdog.According to a 2009 law on protecting the rights of private enterprises, only federal bodies can assert control over how companies operate. That’s why the state treasury and the assay chamber, neither of which is a federal body, could no longer perform the controlling function, although Akhpolov said both bodies did continue checking out companies at the request of police or customs authorities. “The creation of the new body won’t bring significant changes in how the industry operates,” said Ararat Evoyan, vice president of the Russian Diamond Manufacturers Association, noting that it isn’t accompanied by any changes in the law.Rough and Polished DemandThe demand for both rough and polished is very high in Russia, in line with global market trends. Manufacturers said that when rough prices rose by almost 20 percent over the past three months, polished prices were quick to follow with comparable increases. The most recent auction conducted by Gokhran, the state treasury, exemplifies the frenzy for rough: The gems were 100 percent sold, with the selling prices almost double the preauction estimates.Manufacturers said, however, that much of the demand was spurred by the fact that new regulations allow companies to resell rough in quantities larger than 15 percent. “The quota was lifted and many went into buy-and-sell operations, which damaged those who continue production,” said Irakly Aneli, director of St. Petersburg–based manufacturer Nevsky Diamond.Most Russian manufacturers sell diamonds abroad and they also benefited from the increase in polished prices. “All categories went up, but most of all clear items,” said Anton Schepotiev, commercial director of Almoss, Moscow-based manufacturer and diamond dealer.“We started selling polished diamonds in the stores a year and a half ago and have sold millions of rubles of merchandise,” said Ilya Adamsky, marketing director of Moscow Jewellery Factory. Tikhon Strekalovsky, deputy director of Nyurbinsky Jewelry and Polishing, said selling certified stones to the stores is even more profitable than selling them to jewelry-makers. “We plan to offer more certified stones to chain stores,” he said, noting that finding a distribution network is essential for securing sales. “People used to bring fish from Yakutia as a present, now they often take certified stones,” he said. Adamsky said that gems of 0.7 carats to 0.8 carats in good color and lower clarities are most popular.New Collections for SummerApril is traditionally a slow season for jewelry makers and retailers since they are preparing new summer collections for New Russian Style, taking place in Moscow May 25 to 29. The collections are often lighter and made with less expensive semiprecious stones. Such designs have been in great demand recently as people are looking for less costly jewelry. “There is a trend to light items with lower quality characteristics in the stones,” said Vitaly Movchan, marketing director of Adamas. “People want to buy gems, but they can’t afford high-quality characteristics in the stones.” The Marketplace- The Russian state treasury Gokhran sold around 20,000 carats of diamonds larger than 10.8 carats for approximately $58 million.
- All 986 stones presented for auction were sold, with the overall selling price more than double the asking price.
- Gokhran won’t be holding any more auctions in 2011 because all the10.8-carats+ gems allocated for auction have been sold.
- The treasury is also planning to sell slightly more than 6 million carats
- of rough and 4,000 carats of polished in 2011.
Article from the Rapaport Magazine - May 2011. To subscribe click here.
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