Rapaport Magazine
Markets & Pricing

Russia

Manufacturers hope new governmental management will fulfill the needs of a shrinking polishing sector.

By Svetlana Shelest
   Alrosa earned a total of $365 million in June, with $354.4 million coming from rough sales, and the remaining $10.6 million from polished, it reported. The miner, which recently saw its Standard & Poor’s rating upgraded from BB to BB+, also disclosed sales figures of $2.5 billion for the first six months of the year. Rough auctions raised $2.44 billion, while the polished sales generated $54.9 million.
   Commenting on the results, Alrosa vice president Yuri Okoemov described the rough market environment as stable. Thanks to strong demand for rough, the miner reduced its stocks during the first half, selling off cheaper, small stones in the first quarter and adding higher-quality gems to the auction boxes in the second quarter. “The end of June, however, saw a seasonal slowdown,” noted Okoemov.

Changing of the guard
   A recent change in the governmental structure that oversees the country’s cutting and polishing industry is giving Russian manufacturers more hope of getting the federal support they need. The task of supporting the industry, which previously fell to the Ministry of Finance, was reassigned to the Ministry of Industry and Trade.
   Maxim Shkadov, director of diamond-polishing firm Kristall Smolensk and two-time president of the International Diamond Manufacturers Association (IDMA), told Rapaport Magazine that he hoped this would be a positive change, as “the ministry has a set of tools and mechanisms to support domestic industries.”
   Moreover, the recent changes in Alrosa’s senior management staff have provided hope for closer cooperation between the miner and Kristall Smolensk, both in production and business activities in the natural and synthetic diamond markets, according to Shkadov.
   “Since 2007, Russia’s production of polished dropped by 50%, and the number of cutting and polishing businesses shrank by two-thirds, and only Kristall Smolensk and Alrosa are keeping the Russian polishing sector alive,” he said.
   Kristall Smolensk’s production of polished declined from $570 million in 2011 to $102 million in 2016, according to Yakutia-based analytical agency Expert, which cited publicly available reports. Russia’s total output of polished, the agency said, dropped from $800 million to $350 million in the same period.

Archangelsk exploration
   The Russian Academy of Sciences’ Siberian Institute for Geology and Mineralogy announced the start of a full-scale exploration project that will seek out new diamond deposits in the Archangelsk region, home to two commercially developed diamond sites: the Alrosa-operated Lomonosov deposit, and the Grib mine, which Russian investment group Otkritie-Holding recently acquired.
   Archangelsk is Russia’s only territory outside of the Republic of Yakutia — the country’s main rough mining site — known to have diamond deposits. It has also remained one of the world’s least explored diamantiferous areas to date. In mid-July, Dr. Elena Shchukina, who is heading the new exploration project, told the TASS information agency that the preliminary findings were indicative of over 100 potential diamond fields in the Archangelsk region, and that further exploration would focus on the region’s Arctic area.

Article from the Rapaport Magazine - August 2017. To subscribe click here.

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