Rapaport Magazine


By Svetlana Shelest
ALROSA Signs Client List

As of mid-February, ALROSA has signed long-term contracts with 47 companies. Of the ten first-timers, four are from India, three from Israel and one from China. Russia’s largest miner is now committed to supply rough for 2015 through 2017 to sixteen Belgian, twelve Indian, five Chinese and four Israeli partners, as well as nine Russian companies and one from Belarus. ALROSA is reportedly happy with the client list: It is a well-balanced mix of major industry players who have proven to be reliable partners of Russia’s diamond mining giant in recent years. At the same time, ALROSA is still negotiating the long-term agreement with its traditional domestic partner, Russia’s number-one polisher Kristall Smolensk.
   ALROSA has pursued a policy of selling 70 percent of its production through long-term contracts since 2009, and offers guaranteed monthly deals to its partners in pre-agreed volumes and assortments. In January 2015, in response to a weak diamond market overall, ALROSA’s Market Conjuncture Panel decided to allow long-term clients to refuse up to 30 percent of the goods on offer during the first sight of the year. That sight, held January 19 to 23, was a success and the average turndown rate did not exceed 20 percent.

Strategic Importance
   In February, the Russian Ministry of Economic Development and Trade listed ALROSA among the 199 businesses defined as “strategic” for the nation’s economy. The list includes oil, gas, construction, telecom and other leading corporations that together account for over 70 percent of the country’s gross domestic product (GDP) and 20 percent of all jobs.
   The government said it compiled the list in order to “mitigate adverse effects that may be caused by possible crisis developments.” All companies on the list are entitled to governmental support in case of crisis.

St. Petersburg Show
   The annual JUNWEX Jewelry Show, held in St. Petersburg, opened in its new location at ExpoForum International, the largest exhibition center in Northwest Russia. The new premises provide the show with an extra 160,000 square feet of space and a modern infrastructure. “The show definitely benefited from this move. It has lots of space and accommodates comfortably both sellers and buyers,” said Gagik Gevorkyan, chairman of the Russian Jewelers Guild. “This location brings JUNWEX to a new level where it can grow to be on par with the world’s best shows in Basel, Hong Kong and Las Vegas.”
   The show participants noted an unusually large number of retail customers at the event this year — estimated at more than 25,000 — who, some said, “attacked” the goods on offer, taking advantage of the opportunity to invest in gems and jewelry before prices rise further. Since December 2014, Russian jewelers have raised their prices by 30 percent on average in response to the serious devaluation of the ruble.
   As for future prospects, there is considerable uncertainty. Svetlana Maksimova, director of Casting House, a company specializing in jewelry featuring Yakut diamonds, explained that “it has to be taken into account that the goods at the show were manufactured mostly prior to the currency crisis, and therefore the prices could be kept at competitive levels. All new purchases of gems, which are mainly imported, will be much more expensive, and will force companies to raise the prices further.” Maksimova added that Yakutia-based companies have the advantage of their own stocks of locally mined diamonds. “As long as we have our stocks,” she said, “sales will be fine.”
   A representative of St. Petersburg’s jewelry manufacturer Kast, which won the show’s first prize for the best piece with diamonds, noted that many customers asked specifically for jewelry with .30-carat and .40-carat diamonds because the .50-carat stones were now “too expensive.” Gems and melee smaller than .30 carat and .40 carat were not popular, the representative said, as “they do not fit the desirable image of a diamond as a centerpiece and an eye-catcher.”

New Money-Laundering Law
   As part of the governmental anticorruption campaign, the Russian Parliament recently passed in its first hearing a bill that puts a cap on the jewelry purchases that can be made without mandatory proof of identity. Designed as a deterrent to money laundering, the bill sets the threshold at $230 for cash purchases and approximately $1,500 for bank card buys.
   Flun Gumerov, president of the jewelry-making company Almaz-Holding and member of the Russian Chamber of Commerce and Industry’s Committee on Precious Stones and Metals, said that at a time when the domestic currency is under great pressure and jewelry remains an accessible investment opportunity for citizens, this new measure is a hurdle that is potentially “detrimental for the industry.”

Article from the Rapaport Magazine - March 2015. To subscribe click here.

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