Rapaport Magazine

Russia Market Report

Colored Diamonds Gain Recognition

By Anastasia Serdyukova
RAPAPORT... Colored diamonds are gaining popularity in Russia, although they still are less common in jewelry shops than in the West. “There is not much pronounced domestic demand for fancy colored diamonds,” said Nikolay Zhuravlev of Kristall Smolensk, the country’s largest diamond manufacturer. However, he said the interest in such stones is growing as Russians learn more about diamonds.

Most of the colored diamonds in Russia are mined at Anabar alluvial deposits and they are usually fancy yellow. The volume mined is not sufficient to meet the demands of the market and Russian manufacturers buy fancy diamonds abroad.

At the retail end, fancy yellow dominates the sales. The items with fancy diamonds are pricier than average and often custom-made, which appeals to wealthier customers. “The clients who already own classic items with diamonds want to have a state-of-the-art piece with expensive stones and they turn to fancy colors,” said Maxim Voznesensky of Jewellery Theatre.

Foreign brands present a wide variety of fancy diamonds. “There are more imported fancy diamonds than domestic ones,” said Yuri Shelementiev of Moscow State University Gemological Center. Imported stones are priced higher than in the West. Importers have to pay 20 percent import tax and 18 percent value-added tax (VAT).

Fancy diamonds started appearing in the Russian market in the 1990s, with the stones imported from abroad. “Many of the stones imported were treated, but jewelers didn’t know that, hence the customers also didn’t know that,” said Shelementiev. Now, Russians have more information about diamonds and they are asking for certificates proving the natural origin of the color.

ALROSA Drops Clients, Expands in Africa
ALROSA has dropped clients who were purchasing less than $1 million a year, according to a March report by the Interfax new agency. The company has been streamlining its supply network for the past nine months and switching to long-term contracts with big clients as part of its new strategy.

In other activity, ALROSA is expanding its presence in Africa. The world’s second-largest miner is doubling its investment in Angola, plans to build two power plants in Namibia and is discussing cooperative diamond and energy exploration projects with the Democratic Republic of Congo (DRC).

The expansion news was released during a road tour by ALROSA President Sergey Vybornov across several African countries. In Angola, Vybornov said that ALROSA is planning to increase its investment in the country to $800 million in the long term, a number of news agencies reported. The company’s current financing in Angola is valued at between $300 million and $400 million. ALROSA has a 32.8 percent stake in Angola’s Catoca kimberlite mine and is also involved in large-scale dam construction and crude oil exploration projects in that country. In Namibia, Vybornov said that the company, in addition to the power plants, would explore for diamonds.

March Jewelry Sales Up

Russian jewelers reported sales increases of between 20 and 30 percent in March. Most of the sales happened in the beginning of the month, due to the Women’s Day holiday on March 8, a popular gift-giving occasion. “Sales drop twofold after March 8,” said Vladimir Stankevich of Adamas.

The holiday is the second-biggest selling time of the year after December for jewelers. In March, the competition is not so much among jewelers as with producers of other female “items.” “Here, we’re in tough competition with the sellers of perfume and cosmetics,” said Sergey Tikhonov, commerce director of Almaz-Holding. He added that March sales are smaller than December’s because a very important part of the jewelry category is missing from customers’ purchase lists: jewelry for men. Sales in the men’s category have been increasing at a rapid pace in recent years.

Jewelers have not only increased the number of jewelry items for men, but they also have changed the assortment. “Pins and cufflinks are making their comeback,” said Voznesensky. In the 1990s, if men wore jewelry, they would choose rings, bracelets and chains, usually big and flashy in a gangster style. Now, the top sellers are understated items, quite often with either colorless or black diamonds or sapphires.

2007 Russian Diamond Statistics
Russia exported 48.2 million carats of unpolished diamonds in 2007 worth $3.5 billion dollars, according to a report by the country’s Ministry of Finance. This is 13 percent less volume than in 2006, when 55.3 million carats were sold for $3.1 billion. Russia exported 19.3 million carats to the countries of the European Union (EU) and 28.9 million to other countries of the world. Belgium was the biggest importer of Russian diamonds, with 13.2 million carats. Russia imported almost 400 thousand carats of unpolished diamonds in 2007 worth $33.3 million, twice as much as in 2006.

The Marketplace
• ALROSA and Diamond Chamber of Russia sold 11.7 thousand carats
  worth $42.6 million at their 27th auction on February 28, 2008.
• Almost all 725 stones offered were sold, including seven stones weighing
  more than 50 carats. The biggest stone auctioned was 88.99 carats and one
  of the lots sold at the record price of $25,000 per carat.
• ALROSA also sold $2.37 million worth of rough diamonds at its second 
  auction at the Hong Kong Jewellery Show and sold 52 polished diamonds 
  for $1.8 million at the same show.

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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