Rapaport Magazine

Russia

By Anastasia Serdyukova
ALROSA Looks to India, Dubai

With the signing of two new memoranda of understanding (MoUs), ALROSA is looking for more penetration of the Indian and United Arab Emirates (UAE) markets and closer cooperation with diamond communities in these countries. The agreements were signed in April with India’s Gem and Jewellery Export Promotion Council (GJEPC) and the Dubai Diamond Exchange (DDE). Both documents include plans for sharing market intelligence and new technologies, as well as closer cooperation in the implementation of the Kimberley Process Certification Scheme (KPCS).
   In the second half of 2014, the Russian miner is planning to resume business in Dubai, which it stopped in 2009 due to the global financial crisis. ALROSA said that conducting auctions and working with its clients in Dubai will allow the company to more closely monitor the price dynamics in the region and make more accurate forecasts for rough prices.
   In 2013, ALROSA sold $116 million worth of rough diamonds to the UAE, which is emerging as a major diamond center, with annual rough and polished diamond turnover of $39 billion. The UAE imported over 3 million carats of rough diamonds from Russia in 2013, up from 2.6 million carats in 2012. India imported approximately $767 million of rough from Russia in 2013. In 2012, India imported 6.9 million carats of rough worth $691.9 million.
   In addition to selling rough to India, ALROSA wants to work with local industry majors to insure the transparency of the market, especially in regard to synthetic diamonds. The Russian miner said it supports GJEPC’s initiatives in this area, particularly its insistence on full disclosures to customers as to whether they are buying natural or synthetic diamonds and the council’s determination to keep synthetics from being mixed in the same lots with natural diamonds.
   Indian companies are not only interested in buying Russian rough, but also in penetrating the Russian market, according to Alex Popov, who heads the Indo-Russian Jewellery Foundation that organized an exhibit of ancient Indian jewelry that is opening in April in Moscow. “India understands that Russia is a huge market in polished and jewelry sales,” Popov said. “The Russian jewelry market is in stagnation now so Indian companies want to get in during the crisis to get a competitive advantage for the future.”

ALROSA’s 2013 Results
   ALROSA’s sales from jewelry-quality rough increased 11 percent to $3.9 billion in 2013 against 2012, according to its financial statement done by international accounting standards. The growth of sales in carats was 20 percent, but it was counterbalanced by the fall of prices. The company’s report says the average price fell from $194 a carat to $176 a carat.
   ALROSA sold 26.7 million carats of jewelry-quality diamonds, up from 22 million carats in 2012. The company’s revenue was $4.6 billion in 2013, which is 15 percent higher than in 2012, while its net profit declined by 5 percent to $885 million due to the fluctuations in currency exchange rates.

Tough Spring
   Sales of polished slowed slightly in April, compared to the first three months of 2014, because dealers already had filled in their inventory and jewelry companies were expecting a slower season. “Banks are very rigid with the terms of loans,” said Rajesh Gandhi, director general of Choron Diamond. The jewelry market also is experiencing a slowdown, with most companies reporting their March and April sales even with 2013 sales, at best.
   “People are very uncertain for their future. We may be in for a new wave of crisis, so they are not willing to spend much,” said Flun Gumerov, director general of Almaz-Holding. He said the other reason for slow sales is that the market is saturated and companies need to identify new markets or present new products. “The strategy of making cheaper jewelry by using less metal and cheaper stones to entice buyers doesn’t work anymore,” he said.

Marketing at the High End
   Russian jewelers have a website through which they can show and sell their items. Called Russian Jewelry Museum, it targets high-end jewelry. “This was done for provincial artists so they would be able to show their works and sell them,” said Elena Kozhevnikova, director general of Russkiye Samotsvety, one the largest jewelry makers in Russia, which designed the project.
   Moscow and St. Petersburg are the main markets for jewelry, but the big opportunity for many artists is at a show, and promoting their items at the shows has been a problem. “This will allow buyers to see the beauty and the whole range of items created,” said Kozhevnikova. The items are bought online and delivered throughout the world.
   Kozhevnikova said that the site also would promote Russian jewelry, which is a rare thing in the global arena. “Russia is associated only with Fabergé. Working together, we can show it is much broader than that,” she said.

Article from the Rapaport Magazine - May 2014. To subscribe click here.

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