The demand for rough and polished revived slightly in
September as summer vacations ended and market participants started refilling
their stock in advance of the year-end holidays. Still, most companies
characterized the market as “sluggish.”
“The demand is returning, especially for less-expensive
rough,” said Leonid Tolpezhnikov of ALROSA. He added that the stabilized, but
still-low rupee exchange rate would help Indian companies increase their volume
of imports. Maksim Shkadov, director general of Kristall Smolensk, said the
shortage of Indian money has ended speculation by pegging rough prices to
polished prices. “Finally, rough and polished meet face to face and are trying
to figure out what to do,” he said.
ALROSA reduced its prices by 5 percent on average and
allowed its clients to buy less rough than they were required to based on the
contracts that began in August. “The company controls supply to the market and
this move benefits everybody,” said Shkadov.
However, Shkadov criticized the mining companies’ public
announcements that they were going to cut prices. In August, De Beers announced
it would cut prices by 8 percent. “When companies like De Beers and ALROSA say
they are going to cut prices,” he said, “you buy at one price and count on it,
but then it goes down and the price of polished decreases.”
Rajesh Gandhi, director general of Choron Diamond, agreed.
“Because of the rough prices going down, people are confused,” he said. “Lack
of liquidity at the market adds to the pressure.”
Diamonds of medium size and quality are most in demand in
the market at the moment, although overall demand is characterized as “weak” by
most market participants. “The sale of stones larger than 1 carat has slowed
the most,” said Shkadov, adding that this is a temporary trend and that demand
should recover by the end of 2012. Kristall Smolensk sells most of its product
outside Russia, but domestically, the situation is similar. “Companies purchase
stones, but in small quantities,” said Gandhi, adding that people are looking
for stones of lower quality than usual and the best demand is for G to K color
and VVS2 to SI3.
“The prices for diamonds didn’t fall much because everyone
is sitting on their high-cost inventory so there is strong resistance to
bringing down the prices,” said Anton Schepotiev from Almoss. The expectation
is that the situation will improve by the end of the year.
“All depends on how ALROSA and De Beers act. Their cutting the
supply to the market is good,” said Shkadov, adding that when Indian money
returns to the market, the prices may start riding up again. The fact that
sales of polished diamonds didn’t fall in the U.S. and Asia also gives market
participants hope that the situation will improve.
In September, jewelry sales in Russia were weak, although
they are expected to pick up based on the results of the Junwex Moscow show,
where demand from wholesalers was strong. The demand for jewelry priced between
$3,000 and $10,000 fell the most. The sales of more expensive items remained
unchanged from 2011, although they are still less than they were before 2008,
according to Aleksey Trushin from Diamond Gallery. “Rich people stopped looking
at diamond jewelry as an investment,” he said. “Now, jewelry is in the same
category of luxury merchandise as leather bags.”
Demand for synthetic diamonds for use in industrial,
electronic and other technical or commercial applications is increasing in Russia.
“There’s no point in making synthetic diamonds for jewelry because technical
diamonds are more expensive,” said Vladimir Blank, the director of the Federal
State Institution “Technological Institute for Superhard and Novel Carbon
Materials” (FSBI TISNCM), the country’s biggest manufacturer
of synthetics.
Although Blank said his company is capable of making stones
of any
color and clarity, other companies working in the field focus more on
technical stones.
“Most synthetic orders would be for yellow stones and then
blue, with white having the smallest demand,” said Irakly Aneli from Nevsky
Diamond. Most synthetic stones appearing in Russia were created using high
pressure-high temperature (HPHT) technology, rather than chemical vapor
deposition (CVD).
Maksim Viktorov from Moscow State University’s Gemmological
Center said Russian customers have a very negative view of synthetic gems,
associating them with “fake.” He attributed this to the legacy of synthetic
rubies and emeralds that were abundant in Soviet jewelry stores in the past and
were mistakenly thought by many Russian consumers to be real stones. However,
he said, in recent years, the laboratory saw more synthetics brought in for
certification, although the number of treated diamonds is
still larger.
Article from the Rapaport Magazine - October 2012. To subscribe click here.