Rapaport Magazine


By Anastasia Serdyukova
Lackluster Sales

The holiday season seemed a little less joyful in 2012, with fewer diamond sales being made to buyers, who are taking a wait-and-see position. Still, the situation was better at year-end than it had been a few months earlier.
   ALROSA, Russia’s largest miner, said the demand for rough diamonds increased in December in response to the price correction the company implemented in the fall. The company said in a statement that its December sales both through long-term contracts and at spot market were successful.
   The miner said that rough and polished prices are aligned, but manufacturers and dealers interviewed by Rapaport Magazine disagreed. Polished sales haven’t risen since November and dealers characterize both domestic and international markets as weak.
   “The market is full of rough bought at high prices and polished diamonds made of that rough,” said Anton Schepotiev from Almoss. Most companies said that they prefer not to drop their prices for the possibility of more sales. “Everyone is holding onto the goods because they don’t want to lose money; that’s why the turnover is weak,” said Valery Morozov, director of Ruis Diamond.
   The share of domestic sales, which traditionally has been small because most companies sell their gems abroad, is shrinking even further. “We export large stones from 1 carat and above, and the stones sold in the local market are below .29 carats,” said Ekaterina Blinova, marketing director of Zvyozdochka, a manufacturer in Russia’s Arkhangelsk. She says that all characteristics are in demand, while other companies note that buyers prefer medium characteristics and below. Morozov said that fancy shape diamonds up to 3 carats are in demand.

   ALROSA is expected to renew many of its long-term contracts, which were signed in 2010 and expired at the end of 2012. The miner also has added two prominent jewelry retailers — U.S.-based Tiffany & Co. and Hong Kong-based Chow Tai Fook — to its list of clients and said that in the future it plans to sign similar contracts with other jewelry makers.
“We believe such companies will form the basis of our list of long-term clients,” the company said.

   As of recently, the requirements to become an ALROSA client and company sales procedures can be found on the company website. It is a new legal requirement that such information is readily available and the website information was created after months of negotiations between the miner and Russia’s Federal Antimonopoly Service (FAS).

   Gokhran, the Russian State Treasury, sold 1.3 million carats worth
$39 million to domestic companies in 2012, according to data released December 10. This is a considerable drop in sales from 2011, when Gokhran sold 6.1 million carats worth $114 million. Gokhran’s sales abroad increased slightly year on year: from 220,000 carats worth
$14.3 million to 300,000 carats worth $15 million. The treasury held
one auction for stones larger than 10.8 carats in March 2012, selling
9,800 carats worth $22.7 million. The treasury increased its prices by
6 percent in the spring of 2012 but has made no changes since, partly because it is a lengthy process for a state organization to change prices.

   “The sales were going well until August, but then there was a slump,” said Vyacheslav Ivanov, the head of Gokhran’s precious metals and
stones sales department. “They picked up only in the end of November
and December.” The number of companies buying from the treasury is around 100, according to Ivanov. “Companies come and go every year,
but their number remains approximately the same,” he said. Gokhran sold 2,900 carats of polished diamonds worth $3.2 million in 2012.

   Holiday sales in the first two-thirds of December were a disappointment for many jewelers, with the most positive comment being that they are at the same level as 2011. Companies noted decreased overall sales volume, with buyers preferring less expensive jewelry. “People are buying classic styles with small stones, not with gemstones of 1 carat or more, as they used to during the holiday season,” said Isabella Soltys, director of Yakutia-based Sakha Taas.
   Two jewelry shows in December — one in Moscow and one in
St. Petersburg — didn’t meet expectations of participants, with lower attendance figures than in 2011. “Wholesale was good in Moscow, while retail was a disappointment,” said Viktor Tulupov, director of jewelry house Tulupov. He said people were buying items with stones of .30 carats and .50 carats and jewelry with big semiprecious stones.

   The lower show traffic and sales occurred even though companies increased their spending on advertising at exhibitions by 14 percent, according to RosJewelerExpert. Many exhibitors also were trying to lure customers with discounts. Companies partially blamed low attendance on extremely cold and snowy weather in early December, which caused traffic jams in those cities where the exhibitions were being held. “In 2011, most sales were done in the last week of December, but 2012’s sales are unlikely to be better,” said Schepotiev.

Article from the Rapaport Magazine - January 2013. To subscribe click here.

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