Rapaport Magazine

Russia

By Anastasia Serdyukova
ALROSA Head Leaves

ALROSA President Fyodor Andreev unexpectedly resigned from his position at the helm of the country’s largest miner on September 22, citing medical reasons. He will continue to participate in the company’s governance as a member of the miner’s supervisory board. Ilya Ryashchin, a first vice-president, will take over as acting president of ALROSA while a search is conducted for candidates for the post.
   Andreev, 48, has been with the company since 2009. During his presidency, ALROSA made its initial public offering (IPO) and developed its strategy of focusing on its core business of diamond mining and selling off unrelated assets. The company says the departure of Andreev will not affect its operations going forward. Ryashchin, who previously worked at Russian Railways, as did Andreev, has been with the company since 2012 and is in charge of finance and economy.

Colored Diamonds in Demand
   Among colored diamonds found in Russia, yellow and brown occur most frequently. The richest deposit in colored diamonds is considered Nizhne-Lenskoe, which was purchased by the state diamond miner ALROSA in 2013. Several pink diamonds also have been found at the company’s subsidiary Severalmaz in the northwest part of the country. ALROSA said that its output includes vivid yellow, pink, green and violet stones.
   “Colored diamonds enjoy permanent demand at the market,” said the company. “They are sold through long-term contracts and at spot sales.” Small colored diamonds are included in boxes with white stones because sorting them into a separate box would be too costly. Diamonds up to 10 carats are combined in boxes and are sold at a tender. Diamonds over 10 carats are sold at auctions.
   Polished colored diamonds have gained recognition among Russian buyers only recently. “Colored diamonds are usually bought by those who already have items with white stones,” said Svetlana Maksimova, director of jewelry maker Casting House.
   “The buzz surrounding the sale of pink diamonds couldn’t help but reach Russia,” said Alex Popov, the head of the Moscow Diamond Bourse, but he noted that Russians’ attitude to color “is skeptical.” Viktor Tulupov, director of Tulupov Jewelry House, said the demand for high-end jewelry with color is increasing but that the problem is to find good stones. “There are many stones of L color at the market, but it’s a challenge to find diamonds with fancy colors,” he said.

Market Still Slow
   The first week of September continued at the slow pace of August. “The market is very inert; people are waiting for the results of the Hong Kong fair,” said Popov. Nikolay Afanasiev of Kristall Smolensk said that the market was slowing in advance of the Jewish and Indian holidays at the end of September and during October. “A certain price correction for both polished and rough is observed at the market,” he said.
   ALROSA said that it expects rough diamond prices to remain flat over the second half of 2014 after the growth of the previous 12 months. “Year to date, we have observed a price increase of 7 percent to 8 percent,” said Ryashchin, noting that the present price level corresponds to the situation at the market.

Reviving Traditions
   The Moscow International Jewelry Forum held at the end of September focused on what can be done in the industry to maintain and promote the country’s historic jewelry tradition. “Jewelry companies that are champions of the industry manage to keep the authentic style and technique traditions,” said Galina Ananina, the head of the Russian jewelry art development fund. As examples, she cited firms that are following centuries-old traditions of enameled jewelry or silver cutlery that are unique to Russia. She said that Russian art is gaining more popularity internationally and the existence of divisions at Sotheby’s and Christie’s devoted specifically to Russian art are the proof of that.
   “Unfortunately, it is difficult for the jewelers to get directly to the auctions,” Ananina said. “In order to become an international name, a jeweler needs much support.” She said that the Russian Jewelers Guild is planning to create a jewelry academy to train young jewelers.
   The other challenge is the image of jewelry domestically. Although Russian jewelry brands are becoming more recognizable within the country, Ananina said that the tradition of giving Russian jewelry as gifts is being lost among the country’s rich. “In the nineteenth century, the elite would buy Fabergé eggs to follow the example of the czar’s family. But today, people often look down at what is produced in the country,” she said.
   “An urgent question now is what jewelry will remain as our cultural heritage,” said Ananina. She noted that only recently the Russian Diamond Fund, the state jewelry museum, started accepting jewelry that won prizes at a national competition for a jewelry exhibit it is planning. The goal is to show more domestic jewelry masterpieces to the public.

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

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