02
Business
RUSSIA INDIA REPORT
BOOKMARKS www.rusdiamonds.com Russian Diamonds & Jewellery magazine
jewellernet.com Russian jewellery network
IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA
eng.rjexpert.ru/content/view/165 Russian jewellery trade club
THE ECONOMIC TIMES WEDNESDAY_JULY 08_2009 eng.alrosa.ru ALROSA Company website
Industry Market players are asking the government to support their industry with “gold loans”
A slightly 'rough' patch
The performance of the
Russian jewellery industry is
slipping. According to a report
Main players
by Federal State Statistics
Service, in January–May Before the crisis, the number rubles per year. Krastsvet-
2009, the volume of of jewellery businesses was met was set up as part of a
production under the heading growing by approximately 15 chain of enterprises involved
“jewellery products including pc every year. In 2003, 3,878 in processing raw materials
diamonds” was only 65.8 pc producers of jewellery prod- extracted by the Norilsk min-
of what it was in the same ucts made from precious met- ing and smelting industrial
period of last year. als were registered in Russia, complex.
half of whom were individu- Since 1994 it has been pro-
TATYANA ZYKOVA
al entrepreneurs, but by the ducing jewellery products
RIR end of 2008, more than 7,000 made from 585 and 750 gold
businesses were operating in and 950 platinum.
Retail sales have reduced, al- the market. Gold jewellery without stones
though less signifi cantly. The There is still a firm trend for is supplied to the domestic
Guild of Jewellers reports the producers to fall into three market primarily by the Ko-
that in the first quarter of specialist groups. The first stroma jewellery works. For
2009, 15 pc fewer jewellery consists of organisations that chains and necklaces, there’s
products were sold in Russia work with stones of the first the Bronnitsa works and the
than in the same period of last group (diamonds, rubies, sap- Adamas jewellery factory in
year, and the overall number phires and emeralds), and the the capital, the country’s most
of purchases fell from 20 to 18 second is those that special- famous jewellery brand. As a
mn items. The biggest fall in ise in working with gold, while business that manufactures
demand was in expensive the third is those working with across the board, Adamas
items costing more than silver. produces the full range of jew-
150,000 rubles ($5,000) and Incidentally, in comparison ellery items in mass demand,
also in diamond products. with the results for the last as well as limited edition jew-
three years, the growth in ellery collections. There are
Crisis without discounts sales of silverware at the end currently about 60 Adamas
Russian manufacturers are of 2008 was 300–400 pc, and outlets operating in Russia.
worried that a fall in pur- it will rise in the future. Wholesale supplies are pro-
chasing power will lead to a According to the consulting vided to more than 1,000 jew-
growth in the amount of company AMICO, the main ellery shops in Russia, and
smuggled goods from India, player on the Russian jewel- also to Ukraine, Kazakhstan,
China and Turkey, tradition- lery market is the Krastsvet- Moldova, Belarus, Latvia,
al suppliers of cheap jewel- met non-ferrous metals works Lithuania, Estonia, the UK, Ger-
lery products. In the middle named after V.N. Gulidov, in many and Canada. The fac-
of June, the Guild of Jewel- Krasnoyarsk, which is on the tory’s speciality is patented
lers appealed to the govern- Good Delivery list of precious technology which it uses to
ment to provide state support metal producers on the Lon- produce jewellery using gold
for the industry. According to don, Tokyo, New York and nuggets.
Valeriy Radashevich, Gener- Zurich exchanges. The busi- The market is represented by
al Director of the Guild, the URY NABATOV_ITAR-TASS ness earns more than 3 bn more than 20 players in all.
jewellers are requesting per- The Sakha (Yakutia) Republic . The Mir pipe was the first major diamond mine in Yakutia, which enetered production in 1958
mission for businesses to be
supplied with precious met-
als from the Russian state re- made for the Russian market. every year – 25pc of world
serves on loan for one year Organising production in production.
from 1 July 2009. The idea of this way permits fl exible use But at the same time, the
Expert Comment:
interest-free “gold loans” is of the technological, finan- country’s share of global pro-
that the government’s Piok- cial and tax characteristics of duction of jewellery products
skiy precious metals factory other states. However, the is only 4 pc. Ninety-fi ve pc of
Shining through
should not supply fi ne gold to Guild of Jewellers believes the diamonds used in Rus-
the treasury, as at present, but that the rise in the amount of sian factories come from
instead supply it directly to “processing” of gold outside Yakutia. The ALROSA com- It has become imperative What import problems do Rus-
the jewellers on a deferred the country runs counter to pany accounts for 23 pc of the for Russia & India to sian companies face?
payment basis. Russia’s national interests. world’s diamond extraction unanimously achieve Imports are currently re-
Another idea to combat the Thousands of jobs and mil- and it holds second place in landmarks in the jewellery strained by high import du-
crisis, said Radashevich, is lions of rubles in tax are diamond mining in terms of industry as well. Yulia ties. In addition, legal import
linked to the possibility of re- being lost, and the number of value. Nalivkina, Marketing Director has shrunk substantially due
ducing customs duties on im- high-class craftsmen is fall- Russia is fi fth in the world’s at Adamas shared with RIR to the ban on tolling opera-
ports of small diamonds (up ing. The result is a rather un- 20 countries engaged in dia- her views on the situation tions (a business practice
to 0.10 carats) and support- pleasant paradox for the mond cutting. However, in and prospects of the Russian based on using customer-
ing Russian cutters of these Russian economy – the price the last two years, the amount jewellery market. owned raw materials).
REUTERS
stones. Every year, they pro- of gold is rising across the of raw diamonds used by
duce up to $30 mn worth of world, but in the country that Russian cutting businesses
VLADISLAV KUZMICHEV
What has been the pattern of
diamonds of upto 0.10 carats, produces the world’s biggest has fallen by almost 50pc in RIR growth in the jewellery industry
most of which are destined quantity of gold, the amount weight. Since 2006, there has over the last 5-10 years? What
for sale on the domestic mar- of raw material being proc- been an outflow of Russian SERGEI KARPUKHIN_ What was the impact of the glo- is behind these trends?
ket. Over the last six months, essed into finished items is businesses to Asian coun- An expert inspects the "Gomelauri" diamond, weighing 143 carats, at the Unified Sell- bal downturn on the Russian In recent years, the Russian
stocks of this glittering pro- falling. tries. Processing diamonds ing Organisation, part of Russia's monopoly diamond producer Alrosa, in Moscow jewellery market? market has grown annually
duce have been accumulat- The main countries officially within the country has be- In its fi rst phase, from Sep- by an astounding 25-35 per
ing in large quantities in dia- exporting jewellery products come “uneconomic”. Russia tember through November cent on the back of rising
mond cutting businesses. to Russia are Italy, Germany, has practically no involve-
Platinum and palladium are catching up
2008, the crisis triggered a household incomes.
There are proposals to mar- China, Thailand and India. ment in processing small dia- steep demand for jewellery. The market behaviour is
ket it with fantastic dis- Russian jewellers, however, monds. Everything is moving Russians are not yet comfort- closely linked to consumer
counts. A reduction in cus- even with their impressive to India, China and even Ar- Products made from platinum able with other investment well-being. So, when the eco-
toms duties would cut the rates of growth before the menia, which although not and palladium are becoming instruments related to pre- nomic turmoil was at its
cost of the fi nished product, crisis, are losing out to the having its own diamonds is increasingly popular through- cious metals, such as metals worst, we saw sliding de-
which would stimulate de- rising rates of production for turning into a major supplier out the world. Last year was accounts or bullions offered mand followed by dwindling
mand. imports, the volume of which of diamonds on the world a record year for hallmarking by banks. Therefore, people production.
has recently increased by market. In Russia itself, the items made from palladium: 39 regard jewellery as a safe-
The retail trade 100–200 pc. In this case, it is Kristall factory in Smolensk tonnes of jewellery made from guard for their savings. With what nations does Russia
According to Russia’s assay very difficult for them to is the only one left out of more this metal were produced. Ac- In the second phase, the have the closest trade ties in
office, the jewellery industry compete with India and than ten big diamond pro- cording to the marketing por- growth dropped as sharply as the jewellery business? Is India
has seen rapid growth since China, countries with a cheap ducers that used to operate. tal www.bsmarket.ru, in 2008, it had surged before. Sales among our principal partners?
1998. In 2002, the office “hall- workforce, high labour pro- The situation may be im- about 30 mn jewellery items plummeted by 30-35 pc, and Russia’s ties with India are
marked” 42 tonnes of gold ductivity and low taxes. proved by the open competi- made of palladium were hall- the industry output was next to non-existent. Turkey
items, 50 tonnes of silver India, for example, has de- tion which has been an- marked. During the same period down by 44 pc in the first and Italy historically ac-
items and 109 kg of platinum mocratised diamonds by im- nounced to plan a special in- there was a 28 pc rise in the quarter of 2009 against the counted for the main share of
items (including imports), proving the art of cutting to dustrial economic zone for quantity of assayed items made same period last year. our jewellery import, and re-
but in 2008, the respective the level of jewellery-quality jewellery production in from platinum, and a 35 pc in- cent years have seen a grow-
fi gures were: gold items 127 stones. Moreover qualified Yakutsk. The provisional crease in volume terms. The What is Russia’s share of the glo- ing infl ux from China, where
tonnes, silver items 290 workers in jewellery facto- limit for fi nance is 2.8 mn ru- corresponding growth rates for bal jewellery market? What kind some Russian companies
tonnes, and platinum upto ries in India earn not more bles. Those who submit plans palladium were 9 pc and 23 pc of Russian products are most even started building their
220 tonnes. than $200 per month. must ask: how to attract in- respectively. popular with international cus- production facilities. We ex-
Since 2001, it has been per- After it’s cleared of all the vestment in a diamond Palladium is considered a Rus- ALEXANDR KOLBASOV_ITAR-TASS tomers? port mainly to Germany, the
mitted to ship gold and dia- customs hurdles, the price of processing complex in Rus- sian metal across the world. Palladium bar at the Gulidov Krasnoyarsk Non-Ferrous Metals Plant The Russian share of the glo- United States and Great
monds abroad for processing an imported jewellery item sia in a time of global fi nan- Russia today effectively has a bal jewellery output is not Britain, as well as the CIS
and for the fi nished product increases by 47pc, while the cial crisis? They must also an- monopoly on reserves of plati- more than two per cent. Jew- markets in Lithuania, Latvia,
to be marked as manufac- price in the shop window alyse the limitations in the num and palladium. The first ellery exports are also very Kazakhstan, Ukraine and
tured in Russia. In 2008, as a rises by 200 pc. activity of stone-cutting and people in Russia to produce and displayed it at an exhibi- creative items made from plati- modest. Our best selling Belarus.
whole, permission to export jewellery businesses which jewellery made from palladi- tion in Basel. It is true that the noids, since their production products include red gold, Now, everything will depend
almost 20 tonnes of gold was Precious stones are obstructing the develop- um were the jewellers of the number of companies produc- facilities are geared towards such as simple chains and on the pace of our economic
granted to several thousand Russia possesses rich raw ment of the diamond cutting Krastsvetmet refining and jew- ing items made from platinum producing goods made from unstudded rings, or, con- recovery. Today, most experts
Russian companies which material resources where industry and the production ellery works. It was they who in and palladium is very limited. gold and silver and they lack versely, such luxury items as tend to think that it will take
had set up branches outside mining precious metals is of jewellery products. Plans 2000 created a jewellery col- Up to now, most businesses the necessary smelting and designer pieces with big at least a year for growth to
the country where semi-fi n- concerned. It mines almost have to be submitted by mid- lection made from palladium have not been able to produce foundry equipment. unique gems. get back on track.
-
ished products are specially $2 bn worth of diamonds autumn 2009.
-
Growth in production of gold Jewellery production by re- Growth of production of plat- Main diamonds producers
jewellery items (million) gion (in real prices) in 2008 inum jewellery items (million)
Russia produces diamonds extraction divisions ALROSA-
from its own mines in Yakuti- Nyurba and the Anabara Dia-
ya, in the Urals, in the Arkhan- monds company.
gelsk Region, and also in An- Nizhne-Lenskoye OJSC is en-
gola, and accounts for 26 pc gaged in prospecting for and
of world production in finan- working alluvial deposits of
cial terms. There are three diamonds in four northern ar-
main companies involved in eas of Yakutiya (Anabara, Bu-
production: lun, Zhigan and Olenek). Over-
ASSAY OFFICE, ROSYUVELIREXPERT ASSAY OFFICE, ROSYUVELIREXPERT ASSAY OFFICE, ROSYUVELIREXPERT ALROSA holds a de facto mo- all extraction is approximately
nopoly in Russia, extracting $20 mn per year.
about 95.5 pc of the diamonds Uralalmaz (Ruis group) has
in the country. It is fully state- been engaged in extracting al-
controlled. Its dominant posi- luvial diamonds in the Urals for
tion in extraction is thanks to more than 60 years. The de-
the deposits in Western Yaku- posits are worked by dredg-
SOURCE: RUSSIAN FEDERATION SOURCE: RUSSIAN FEDERATION SOURCE: RUSSIAN FEDERATION tiya, which are mainly worked es and seasonal ore-dressing
by the company’s diamond factories.
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