|
|
Russia
By Anastasia Serdyukova
Prices in the diamond market have risen steadily during the first six months of the year, but over the past two months, many began to fear the trend is turning south, especially for polished diamonds. The imbalance between a strong rough market and a softer polished segment continues. Russia’s largest miner ALROSA estimates that the market grew by 2.5 percent to 3 percent in the first three months of 2014 and has continued growing since then at the same rate. “From April to June, we observed increased demand from our clients for all types of rough,” the company said in a statement. During 2014, the miner increased prices on average by 2.5 percent in February, 1 percent to 1.5 percent in June and 1.5 percent in July. ALROSA said that it expects a positive trend in the second half of the year due to increasing demand for polished diamonds in the U.S. and India.
However, on the manufacturing side, the picture looks less optimistic. “In the first quarter, the rough and polished markets were moving similarly, with the prices growing by 3 percent to 4 percent for both,” said Nikolay Afanasiev, the head of sales at Kristall Smolensk. He explained that in the second quarter, the polished market was saturated, and while the rough prices grew by 3 percent to 4 percent on average, there was not sufficient underlying demand for polished prices to advance at the same rate. Afanasiev reported that polished prices grew by 1 percent to 1.5 percent over the second quarter. “In the short term, this strategy of rough companies is good; in the long term, it will undermine manufacturing companies even more,” he said. Rajesh Gandhi, director general of Choron Diamond, said manufacturers are experiencing pressure not only from the high rough prices and stagnant polished prices, but also from banks that are tightening their regulations on lending money to the industry. “Of course, such a situation diminishes the amount of speculation at the market, but in the long run, it will hurt it,” Gandhi said. In Russia, a number of small companies are cutting back or even closing their manufacturing due to tight credit conditions. “So what happens is that miners and dealers are getting their money,” said Gandhi, “but manufacturers aren’t because there is less demand at the market.”
The production of jewelry with diamonds increased by 25.7 percent in the first six months of 2014, compared to the same period the previous year, reaching 1.2 million items, according to the Russian Statistics Bureau. In June, the production of diamond jewelry grew 7 percent compared to June 2013, but decreased by 20.2 percent compared to May 2014. Although the production of jewelry increased by volume, demand was off. The first seven months of 2014 have been challenging for jewelry makers and retailers because demand has softened due to the slowdown in the country’s economy, the fall in the value of the ruble, inflation and, to some extent, the crisis in Ukraine. Yet, most companies said that they managed to meet the challenges by implementing marketing strategies and cultivating their time-tested client base. “We observed the slowdown in sales only in big Moscow retail centers, but the demand for jewelry in general met our expectations,” said Maxim Veinberg, executive director of Adamas, one of the biggest retailers in the country. “We have an established network of retailers and we have our own stores, which helps us keep our finger on the pulse of the market,” said Svetlana Rakhmanina, director of retail for Ekaterinburg-based Rifesta. Although the volume of sales is still larger in low-priced jewelry costing up to $800, companies said that the most profitable jewelry categories are medium-priced — between $1,000 and $4,000 — and medium-plus-priced — between $4,000 and $6,000. Many retailers are targeting this very segment in their marketing. “Sales management contributed a lot to the fact that sales were good in this medium segment,” said Veinberg. “Our company is stimulating the demand for various categories of items and this is a planned and long-term strategy.” Rakhmanina said that Rifesta keeps a constant and close watch on the fluctuations at the market and makes adjustments accordingly. Specifically, she recalled that the company had to make alterations to a collection for a May trade show to meet new market price expectations. The company’s designers introduced some changes to the mounts and metalwork so that the selling price of the items could be cut by 10 percent to 15 percent.
The demand for unusual forms and designs has grown stronger in recent years. Rakhmanina said that Rifesta’s new fancy cut diamond collection became a success this year. “It was a long shot because people in Russia like round diamonds, but the new shapes were so unusual for the Russian eye that they worked. Of course, special marketing helped,” she said. The stones are between .05 carats and .30 carats in size. Ekaterina Blinova from Zvyozdochka manufacturing facility said that the best-selling diamonds for her company were in the range of I to K and VS1 to SI1, although there was slightly increased demand for better jewelry.Article from the Rapaport Magazine - August 2014. To subscribe click here.
|
|
|
|