July, 2010
â„–5 5 Magazine of Russian Jewellery Trade Club
Opinion: Jewelers did not come out of a recession
Incautious optimism Russian JewelLEry Trade Club was among the first subscribers to the Jewelers’ Charter
Yakutsk shall become a diamond cutting special economic zone
www.rjexpert.ru
JEWELLERY RUSSIA: Your gateway into russia
SILVER HALL at the Exhibition “JUNWEX PETERSBURG” 2011 It’s not a secret that silver goods are much in demand nowadays. As it was proved at the exhibitions of Jewellery Russia Program, the members of Russian Jewellery Trade Club presently are in extreme need of specialized section that would allow choosing the goods and concluding contracts without losing time.
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Russian JewelLEry Trade Club was among the first subscribers to the Jewelers’ Charter
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NEWS
Exchange of opinions
As participants of the exhibitions said... What have we already done and what we are going to do? To reduce expenses, to continue developing retail chains in spite of the crisis .......................................................................
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A 1000-fold increase in Russian diamonds sales abroad There is more than a 1000-fold increase in rough diamonds sales abroad in the first quarter of 2010. .....................................................................
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Zoloto Yakutii OJSC approached European markets.............................
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Yekaterinburg businessmen offer new services The Central Bank of Russia issued a gold coin with a weight of 5 kg Best cities for business activity Russian jewelry market contracted by 1015% in value terms
Analisys
JEWELLERY RUSSIA
The Market in Terms of Numbers Every exhibition of Jewellery Russia Program includes questioning of visitors, heads of wholesale and retail companies, representatives of manufacturing companies. These regular inquiries allow experts of RusJewellerExpert Consulting Agency composing integral and comprehensive view of jewellery branch taking into consideration opinions of all participants of the market. ........................................
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Published by RusJewellerExpert Russian Consulting Agency www.rjexpert.ru EDITORIAL Editor-in-chief Runova Yulia press@rjexpert.ru Sub-editor Noskova Tatyana magazine@restec.ru
Opinion: Jewelers did not come out of a recession According to estimates by industry enterprises, the demand has decreased by 30-50 %. As analysts acknowledged, the market of costly jewelry proved to be vulnerable, and they expect no quick revival. .............................................................
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Reporters Fedorova Irina Revelisov-Krumer Vadim Advertising and subscription Stromova Ekaterina secur@restec.ru Designer Dobrov Andrey
12 Petrozavodskaya str., St. Petersburg, 197110, Russia Tel: +7 812 303 9860 Fax: +7 812 320 8099 E-mail: press@rjexpert.ru,
DIAMOND MARKET
Incautious optimism One of the most popular stock phrases in the analytical materials concerning the global market of diamonds, gems and jewelry in the period of crisis is “cautious optimism� ........................................................................
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Yakutsk shall become a diamond cutting special economic zone A government meeting took place in Yakutsk in June, dedicated to creation of industrial production special economic zone meant for diamond cutting and manufacture of jewelry. ....................................................................
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COPYRIGHT JEWELLERY RUSSIA International trade magazine distributed to all over the world. Contents of JEWELLERY RUSSIA are copyright. Reproduction of material in part or in whole is not permitted in any form without the written authorization of the publisher. JEWELLERY RUSSIA is published in Russia three times a year and is available on subscription.
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| JEWELLERY RUSSIA: Your gateway into russia |
SILVER HALL at the Exhibition “JUNWEX ST-Petersburg” 2011 It’s not a secret that silver goods are much in demand nowadays. As it was proved at the exhibitions of Jewellery Russia Program, the members of Russian Jewellery Trade Club presently are in extreme need of specialized section that would allow choosing the goods and concluding contracts without losing time.
In this connection, the specialized section of the exhibition “JUNWEX PETERSBURG 2011” was created. The exposition under the name “SILVER PAVILION” will be located in the Pavilion No 5 which is just at the central entrance of LenExpo. It is planned that “SILVER PAVILION” at the exhibition “JUNWEX PETERSBURG 2011” will occupy more than 1500 square meters of exhibition area, where about 50 companies will present their silver jewelry collections. Negotiations on participation and corporate advertising campaign for invitation of experts and retail customers are to continue at the exhibition “JUNWEX MOSCOW” in VVC (AllRussian Exhibition Centre) in September 11-15.
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Russian Jewellery Trade Club was among the first subscribers to the Jewelers’ Charter According to the idea of the Charter, all its participants must guarantee quality of manufactured and sold silver jewelry. Russian Jewellery Trade Club invites everybody who is for fair and clear business to sign the said document. The Charter calls to participate in the work of raising the level of production and trade in Russia to standards of civilized society of ХХI century. In fact, it is a vocational code of honor.
What are you going to do so as to perform your obligations undertaken by signing of the Jewelers’ Charter?
Victoria Dmitrieva, President of the Club, agreed to answer some questions of correspondent of “RJEXPERT”:
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- What is the Charter? To my mind, it is not only a code of honor, but an instrument of selfregulation too. Every subscriber must decide what business development style to choose. We have already answered this question for ourselves. The principles of the Charter are inherent and clear to us. Several years ago Russian Jewelry Trade Club decided to become the greatest vocational business union in the jewelry market of Russia. This is the first and the only branch club in Russia which is aimed at uniting of specialists in the jewelry branch, both trade companies’ representatives and jewelry manufacturers. Fair and civilized business is the goal of the club.
Why have you signed the Charter? - I have signed in full support of the Charter because I share in everything what is in it. Even the fact of creation of the Charter allows all participants of the market thinking over the question what is to be undertaken by the self-regulating association, and what is to be provided further by federal standard acts. Success of civilized jewelry market depends not merely on its participants, but on the state too. Do you really think that signatures under the Charter may change the situation in the jewelry branch? Why? - As you may remember, according to classics of Marxism-Leninism, freedom is understood necessity. Therefore, self-regulation requires the instrument of motivation to be developed. Every participant of the jewelry market must be aware of the new opportunities it may get after signing the Charter, and
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|JEWELLERY RUSSIA: One window to Russia |
consequences of non-performance of undertaken obligations. The state may work out the rules for those participants of the jewelry market who signed the Charter and complied to the said rules to have new opportunities in their business. With the help of ÂŤThe Union of the participants of market of precious metals and gemsÂť, we hope to be heard (Russian Jewellery Trade Club is one of the founders); the said association was established with the purpose of making all troubles and hopes of jewelers familiar to the state
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officials. It is not so easy to come to understanding with them. There are pessimistic opinions in our branch concerning possibility of influence upon the state policy. There is no spirit of changes and no policy of changes. Archaic procedure of taking decisions hampers innovative development. There are many problems in the jewelry branch, but they must be solved. Intricate problems need sophisticated solutions. This is a long and thorough work. Simple solutions do not work in many cases, so
we all must learn how to take in consideration interests of all parties and not merely take plain decisions. It is necessary to start any movement at all so as to keep modernization from its tend of turning into a joke and loss of credit. We are at the beginning of the way now, and will come to its end when all participants of the Russian jewelry market, from the largescale manufacturers and suppliers of jewelry to the smallest jewelry shops, join to the Charter. This is why I have signed the Charter.
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| NEWS |
Zoloto Yakutii OJSC approached European markets According to press-service of the Zoloto Yakutii OJSC, the company has been supplying jewelry items to CIS countries for several years, and has already forged partnerships with many customers. They signed a long-term contract to supply ownproduced jewelry with semi-precious stones, and of course, with Yakut diamonds, to an EU member state. According to sales director of a corporate client, they plan to diversify the delivered products, since Yakut gold is highly prized in their country.
The Central Bank of Russia issued a gold coin with a
weight of 5 kg The Central bank has issued gold investment (commemorative) coins, - each piece with a face value of 50,000 rubles and a weight of 5 kilograms. The coins are made of 24-carat gold, the finest grade possible, and the issuance will mark the 150th anniversary of the Central Bank of Russia. The reverse of the 5kg coin illustrates Tsar Alexander II, who took resolution on establishment of the State bank, and the bank's former head officers - Alexander Stieglitz and Yevgeny Lamansky. It is the first time the Central Bank has issued a coin with such a weight and denomination. The heaviest commemorative coin it had previously issued was 3 kg. A total of 50 coins with a weight of 5 kg would be minted, while only 25 coins are minted at this point.
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Yekaterinburg businessmen offer new
services Two new leasing trends appeared last year in Yekaterinburg. The first is leasing of costly jewelry organised by a major Yekaterinburg company. People may hire some jewelry items priced from 200,000 rubles. The service will cost 7% of the item price, this being said, customers shall deposit a sum equal to the full price of an item. Generally, people hire jewelry to wear them at some special events: festivities and receptions. Chokers, bracelets and exclusive designer’s jewelry are the most popular items. Another new trend is the office premise leasing. It was organized by the owner of a Yekaterinburg copy center willing to make use of an office premise in the city center. The executive’s office with all the necessary equipment and furniture is leased for 250 rubles an hour. This service is usually purchased by private medical practitioners, directors of small firms and traveling executives.
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| NEWS |
Best cities
for business activity
Krasnodar is the best city in Russia for doing business. Such is the opinion of Russian Forbes employees who generated the respective ratings. However, Moscow and St-Petersburg were not included in their research. Apart from Krasnodar, the first ten cities on the list included Khabarovsk, Yekaterinburg, Chelyabinsk, Novosibirsk, Omsk, Rostov-on-Don, Samara, Sochi and Krasnoyarsk. These cities obtained high ratings because of buying activity of the population, good social indicators, comfortable business environment and minimum impact of crisis Rating authors specified that so-called "business climate" played an important role (in rating results). "An attitude of authorities towards outside investors, transparent “rules of the game” for businessmen intending to work in a city, and absence of bias for local players,” explained Cyril Gorsky, deputy chief editor of magazine. “According to results of 3-year studies, any cities where equal rules of the game are observed usually take the best positions.” This being said, Vladivostok demonstrated best purchasing power of population, Chelyabinsk proved to have the highest stability in crisis conditions, while Kazan featured best social parameters. Omsk has most advanced infrastructure. And Krasnodar came out on top only on an aggregated basis.
Russian jewelry market contracted by 10-15% in value terms Big jewelry market players are estimating a turnover of $ 8.65 billion in 2008. This figure also includes an expected turnover of contraband goods and production imported through tolling schemes. In 2009 the market contracted insignificantly in volume terms (marked items volume) – approximately by 2 %. However, contraction of market in value terms shall be more important, considering reorientation of demand towards cheaper silver items and medium-sized precious gemstones. According to estimates by “RusJewellerExpert” the market shrinked by 10-15 % in value terms. At the end of 2009 one may note a decline in production of gold jewelry items and, along with the latter, - an expansion of production of silver items: in 2009 the amount of silver used to manufacture jewelry items increased by 34.8 %, and reached 235.6 t. The output of silver items increased by 32 % in money terms. At the end of 2009 gold jewelry import ratio decreased to 1.08 million pieces (4.02 % versus 6.4 % in 2008). In 2009 the import volume of silver jewelry was reduced by 23 %. People believing that investment in jewelry is an efficient way to save money are growing in number. At the end of 2008 sales by jewelry shops increased by 30%40 % as compared to the same periods in the past years.
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| NEWS |
Opinion:
Jewelers did not come out of a recession According to estimates by industry enterprises, the demand has decreased by 30-50 %. As analysts acknowledged, the market of costly jewelry proved to be vulnerable, and they expect no quick revival. Over the past two years gold prices increased almost twice: in 2007 the price for 1 g of gold was 700 rubles, now it averages 1200 rubles. Jewelers are also raising prices for their products; gold jewelry prices increased by 30 %. However, buyers are unwilling to purchase items even for the former prices. Despite statements made by officials regarding alleged end of crisis and growth of population incomes by 2.3 % (2009), the demand keeps decreasing, as the growth of incomes resulted basically from
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welfare payments. A manager of sales department in “Yuvelirprom” experimental jeweler factory in Moscow believes that in 2009 the demand for gold items decreased by 30 %. “Currently, there are many manufacturers at the market now, big and small businesses. And they are constantly struggling for buyers, who tend to spent less money on jewelry than before. We are trying hard to maintain production at a level of previous periods, but demand keeps falling,” he said. Retail chains are also experiencing reduction in demand. According to Boris Burlachenko, the Sales Director in “Serebryany Mir” retail chain, “the situation with chains is just typical of crisis times”. “Each seller sets
a margin on goods. In the current context it would be appropriate to reduce this margin according to customer’s behaviour. However, the constant growth of prices for precious metals prevents sellers from doing that, and jewelry prices are increasing. Therefore many small players are closing down, while retail chains are in relative safety,” believes Boris Burlachenko. “Generally, one may say that demand has decreased by 50 %,” he said. There are about 4450 companies operating in the jewelry market of Russia. In 2008 the market volume was approximately $ 4 billion, and in 2009 it decreased by 7%. In 2010 sales are still decreasing. About one third of all the jewelry items are manufactured in Moscow, while the Krasnoyarsk Territory, the Kostroma Region and the Vladimirsky Region are among big market players Analysts are expecting a protracted crisis in jewelry industry. “The market of precious metal goods may experience a very long crisis. People in Russia perceive jewelry as luxury goods, rather than as consumer goods. In hard times buyers tend to economize on costly jewelry first of all. In contrast to less expensive goods, it shall take more time to revive demand for jewelry,” predicted Natalia Smirnova.
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| ANALYSIS |
The Market
in Terms of Numbers
Every exhibition of Jewellery Russia Program includes questioning of visitors, heads of wholesale and retail companies, representatives of manufacturing companies. These regular inquiries allow experts of RusJewellerExpert Consulting Agency composing integral and comprehensive view of jewellery branch taking into consideration opinions of all participants of the market.
Customers This questioning showed that men’s interest in buying jewelry is much weaker than women’s as before: 28% and 72%, accordingly. The tendency to younger age of the principal target group also persists: 53% of the visitors are between 20 and 40 years old, 39% — between 41 and 60. As for social status of the visitors, as the diagram shows, the
greater part of them are office workers – 53% (chart 1). Most of the questioned, or 33%, were going to buy a jewel at a price not exceeding RUR 10 000, while other intended to buy expensive jewels at the exhibition with one-time payment: 24% up to RUR 30 000 and 10% at a price of RUR 50 000 and above (chart 2). Along with it, the greater part of the
visitors when answering the question: “How much money are you ready to spend on jewellery in 2010?” informed of the same amount of RUR 10 000; that is an evidence of popularity of the exhibition “JUNWEX PETERSBURG” and the buyers’ loyalty to it. By the way, men have proved to be more lavish in respect of buying jewellery: 20% of them are ready to spend more than RUR 30 000. It is probably due to the fact that the men like to make
Chart 1
Men Women
42%
3%
1%
Executives
1% 11% Office workers
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9% 12% 4% Workers
7% 1% Students
9%
Other
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| ANALYSIS | presents to their sweethearts, and prefer jewellery as the safest variant. As for preferences of the presentday buyers, jewelry with diamonds and precious stones are on top of demand as always: 22% and 20% of respondents, accordingly, were going to buy them. The following in the list is jewelry with semiprecious stones (17%), and jewelry with no insertions 10% (chart 4). The weakest demand, according to the questioning, is for silverware and watches (3% and 2%, accordingly). Invariably favorite precious metal is gold: 65% of the questioned preferred it (chart 3).
Chart 2 What sum of money are the visitors going to spend at the exhibition up to 3000
10%
13%
up to 5000
16% 24%
up to 10000 up to 30000 up to 50000
33%
More
Wholesalers Annual questioning of all participants of the market demonstrates again and again that opinions of buyers and trade specialists on the same matters are quite different. According to the representatives of trade, the most popular goods are chains, jewelry with semiprecious stones and fianites; however, as it was mentioned before, the buyers preferred jewelry with diamonds and precious stones of the 1st group first of all). The reason is quite evident: wholesale traders came to the exhibition from different distant places, and preferences vary from one region to another.
4%
Chart 3
4% 1%
Preferences of the metals the jewellery is made of
30%
Gold
65%
Silver Platinum Palladium
The greater part of them are optimistic about the future. So, 32% of respondents supposed that sales of the first half of 2010Â would increase when compared to analogous period of the past year (index of growth varies from answer to answer between 5% and 30%). 26% of the questioned experts believed that the sales volume would be the same as before. And
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| ANALYSIS | Chart 4
Chart 5
What groups of goods are more actual presently than in the last year (in opinion of customers)
What group of goods does presently make for greater sales volume in terms of quantity?
22%
with diamonds with precious stones
20% 10%
with cubic circonia
7% 5% 4%
with precious stones
27%
with semiprecios stones
witn non-precious stones
5%
6%
with diamonds
without inlays
17% 4%
9%
9%
without inlays
with semiprecios stones
21%
chains
with cubic circonia
4% silver tableware
bracelets necklace
2% watches
3% silver tableware 22%
2% watches
other
1% other 20% of representatives of trade expressed pessimistic opinion that the sales would reduce by 5% at the least (and according to the worst expectations, this number may reach 50%). There were also some respondents who found difficulty in answering this question (22%). The goods that provide for the principal sales volume, according to representatives of trade, are jewels with no stones (27%) and with fianites (21%) (chart 5). And the group of goods which makes for the greater part of sale proceeds in terms of money is jewelry with diamonds (34%), just because of their high price. Specialists in wholesale and retail trade have their own specific opinions of state of the branch and level of demand resulting from their business practice, and they make forecasts of further development of the market. Most of the respondents (65%) agreed that prices of jewellery would undoubtedly increase: experts supposed that the scope of price growth will be between 2% and 50%. J EWELLERY RUSSIA
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| ANALYSIS |
chart
How should the companies promote their products (in customer’s opinion)
5%
21%
Offering of associated goods
17%
17%
Emphasizing of the quolity
20%
21%
Popularizing of jewellery's value and attractiveness
20% 1%
1%
6%
Strengthening of advertising campaign
Other
6% Familiarizing with the pruduct range
Exhibitors Exponents agreed with representatives of trade in their forecasts of the sales volume in the first half of 2010 and were quite optimistic: 40% of respondents supposed that the increase would be between 5% and 60%. Other respondents (28%) thought that the sales volume would be on the same level. The share of exponents who expected turning to the worse was somehow less than among representatives of trade (14%), but their forecasts were much gloomier: some of them supposed that index of
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5%
30%
30%
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Conducting of promoactions
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0% They don't have to do something
recession would be 80%. The share of 18% of participants found difficulty in answering this question. Increase of prices is expected by 45% exponents in this year. 36% of the respondents answered that the prices would be on the same level. Only 3% of participants of the exhibition supposed that the prices would reduce. The representatives of jewellery manufacturing firms were asked in the questionnaire to indicate what kind of cooperation is the most profitable and convenient for them (the respondents were not bound by the only one
variant of answer). Retail shops were preferred by 34% of the respondents, 31% and 29% pointed out chains of jewellery shops and wholesale companies, and the work with dealers was appreciated by 6% only. As for the volume of wholesale purchases, they increased when compared to the past year, according to 40% of the exponents. 27% of the respondents thought that the wholesale purchases reduced and almost the same number of respondents, or 26%, said that the volume of the products bought by wholesale traders was the same.
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| Exchange of opinions |
As participants of the exhibitions said... K.A.Maslov, commercial manager of ZAO “FIT”: We had to reduce expenses in the period of crisis, of course. But we don’t save on people. We suppose that it is necessary to live through the difficult period and move on. Those who continue to work in spite of difficulties will succeed. The more so as silver products, the specialty of our company, is on the top of demand at present. Creative and clever assortment policy allows coming to a real success. Participation in the exhibition is the best advertisement for the companies that are not afraid of competition.
E.K.Shevelev (TD “Zolotaya Rus”, 18 shops in the Far East): There was time when we increased our sales volume by fifty percent almost, but we made no headway in 2009. The demand reduced seriously in autumn, but the situation improved to some extent in December. There are stable sales of diamonds, active sales of silver jewels, while popular gold jewels of medium price range are less demanded. The crisis has especially effected us in March. Our reaction to it was increase of supply, improvement of assortment of goods, concluding contracts with the new partners, optimization of relations with permanent suppliers (preferential terms of supply, deferring of payment, etc.) Furthermore, we continue developing our retail chain in spite of the crisis. For instance, we opened two promising jewelry salons instead of two lowprofit shops in the last year.
V.B.Tulupov, Director General of company “UD “Tulupov”: Jewelry with large color gems, such as sapphires, emeralds, were the subject of particular demand this year. Of course, interest to luxurious jewelry with exclusive large diamonds is as high as before. Our company is one of the few in the market of author’s jewelry with large gems of this quality level. Culture and intelligence are necessary for work with these gems both for the manufacturer and the seller. The crisis has effected the demand for such products, of course, so now we must be more inventive, and, as it seems to me, the time has come to create intellectual jewels for intellectual people...
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Of course, competition in the jewelry market is severe at present. However, we have succeeded to be leaders in our region. We pay much attention to corporate identity of our shops (with large reproductions of portraits by well-known Russian artists), in the system of discounts and bonuses (the latter is our innovation: we give bonus cards to our customers with accumulated bonus money to pay in every shop of TD “Zolotaya Rus”. We continue working with VIP-customers database. Our shops are located presently in Khabarovsk and district-center towns of Khabarovsk Region; in Vladivostok, Ussuriysk, Spassk, Komsomolsk-naAmure. We are going to open salons in Sakhalin and in some more district-centre towns near Khabarovsk in 2010. I am sure that those who stand still are likely to lose their business…
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| Exchange of opinions | What are the key tendencies of jewelry market you have faced, and what anti-crisis actions did you offer to your partners?
E.D.Gusev, representative of owner of “LUKAS ZOLOTO” (Moscow): The last year was a year of crisis, and there are many of those who are sure that 2010 would be the year of a great relief from the situation. But it seems to me that no active growth of the branch can be expected, but slow and hard recovery of jewelry market and departure of some participants is more likely. Our company deals with wholesale. As we work with retail chains, we have noticed that the greater part of the companies are interested in deferred payments. Our company’s sales volume didn’t reduce, so we have turned to crediting from the last
year. We are planning to reinforce the credit line in 2010: we granted credit for five months initially, and now we are turning to half-a-year financing. We offer a profitable scheme of cooperation with monthly repayment of credit under low interest with right to return twenty percent of goods or change it to some other goods. We understand other companies’ difficulties with lack of turnover means; it is unprofitable for them to borrow money in banks, so we undertake some functions of a bank for their convenience. Of course, it is a brave decision in the situation when some companies are likely to collapse. We were the first in the jewelry market to do it. We hope that this measure will allow us finding the new customers and increase loyalty of our permanent customers.
Supplier and buyer, please come to understanding!
V.V.Batrashina, director of OOO “Solntse Moye” Our company is specialized in effective mediation between manufacturers and retailers. We are a wholesale buyer and a wholesale supplier in one. Therefore our view of the present jewelry industry is twice as detailed and profound as many other participants’ of the market. The results of the former year showed the situation in the branch very clearly. As a rule, the suppliers’ strategy is like this: “Sell some things at a high price first, and we will decide later whether to give you some discount or not to give”. But the suppliers should be interested in my prosperity and profitability, and shall not try to make money on my mistakes and credulity. Why not offering adequate prices at once? We will work
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off this discount: first of all, we pay at once, and when we sell the goods, we make full report on promotion of the goods. In any case, the goods with your company’s name and address on the label will be sold to people from the distant towns you have never even heard of; this is a good advertisement, isn’t it? Along with the matter of prices, there is the matter of sales volume. Sometimes we cannot provide at once for overestimated sales volume required by some of our suppliers. First of all, density of population in the Far East differs from average Russian, and some of my suppliers may require such enormous volume of sales, that I cannot provide even if I sell jewels every day to every citizen of the region, including every fish and bear! Secondly, the people’s mentality differs somehow here from other Russians.
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Incautious optimism One of the most popular stock phrases in the analytical materials concerning the global market of diamonds, gems and jewelry in the period of crisis is “cautious optimism�. It was pronounced by gurus of marketing, by producers of raw materials, manufacturers of gems, representatives of trade.
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| diamond market |
A
s a result of this, the said words ceased to be simple information and became a sort of exorcism, instead.
Nevertheless, we all were aware of their initial sense. Those who pronounced them expressed their hope, wish, interest for the situation to improve, and along with it tried to avoid taking responsibility for the said words. However, the exorcism seems to have worked, and now we can see an active, real spring revival in the branch. The first sign of it was increased sales of raw materials: even the first (January) site DTC 2010 amounted to USD 550 million, and the second amounted to USD 525 million. It is noteworthy that, along with it, DTC prices increased by 15% or so in the period of two sites only.
of diamonds by 15% and import by 22% in February of 2010. Russia is not an exception either, in spite of the fact that the crisis ruined many small-scale and mediumscale manufacturers of diamonds. Thanks to effective cooperation with the state and well-balanced policy of production and sales, Russian lapidary industry, and, first of all, its leader, “Crystal” (a company of Smolensk), has preserved its potential, and even has all reasons to hope for the stable growth. Open Joint Stock Company “Production Association “Crystal” gradually returns to pre-crisis way of business. Assortment returns to what it had once been after its turning to cheaper goods under the effect of demand fluctuations in the period of
crisis; spring migration of customers (permanent and new) has started, the sales volume has increased considerably, and consequently the volume of purchased raw materials increased too. According to Director General of OAO “PO “Crystal” Maxim Shkadov, the global market has started to show clear signs of recovery, it stimulates manufacturers to work hard, gives rise to the new marketing programs. As Mr. Shkadov said, “The very fact of successful getting over the difficulties in the hard year 2009 gives us optimism and self-confidence”. This optimism, based on the facts of reality and on self-confidence, ceases to be “careful” and becomes sound and well-informed. I.e. incautious.
Activity of “ALROSA” also increased both in the home market and in the international market. The company intends to provide equal access to diamond raw materials and work out standard contractual terms both for Russian and foreign customers. Manufacturers of gems also have recovered their spirit after the period which was incredibly hard for the said industry. Indian manufacturers show fantastic raise: it’s the greatest participant in the world diamond industry which had once been close to collapse, but increased export of diamonds in February by 59%! Import of diamonds in the USA, which is the world’s principal market of diamonds, increased by 68%, export by 52%. Even the most conservative European centre, Belgium, showed increase of export
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diamond market
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A 1000-fold
increase in Russian diamonds sales abroad
are still marketed through Belgian dealers. Over 7 million carats of diamonds for the amount of halfbillion dollars were sold to this country. India ranks second, and Israel ranks third (among the largest diamond buying countries).
There is more than a 1000-fold increase in rough diamonds sales abroad in the first quarter of 2010. In the first three months of the year over 12 million carats of diamonds were sold for the average amount of $760 million, which makes one third of annual target production of the Alrosa group. As a result the company saw a 5 times increase of revenue for the first quarter compared with the
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same period of the recession year 2009 and almost 2 times compared with the fat years 2008 and 2007. The jewellery market recovery and Alrosa’s gradual switch to direct supplies to importers also factored into such increase of revenue. While Alrosa gradually switches to single source contracts with major importers, the most of gem stones
Alrosa unveiled in June its presentation of a diamond market outlook through 2018. In the document, Diamond Market Outlook 2010, it is stressed that diamond output will return to its pre-crisis level of 2008 (165 million carats) only in 2015 and will remain flat at 165-167 million carats a year due to absence of newly discovered diamond deposits and depletion of those being developed. ALROSA's experts point to an emerging fundamental disbalance between supply and demand in the diamond market. In their opinion, by 2018 this may cause a hike in rough prices as high as 31% in real terms as compared to pre-crisis 2008 levels (or 55% higher if US dollar inflation is taken into account). According to the research, no new deposits are expected to be commissioned after 2015.
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Yakutsk shall become a
diamond cutting
special economic zone A government meeting took place in Yakutsk in June, dedicated to creation of industrial production special economic zone meant for diamond cutting and manufacture of jewelry. There is good reason to choose such lines of activity. The republic has plentiful resources of raw materials, well-established diamondcutting factories, while the skill of manufacturers of ideal cut diamonds is the trademark of Yakutia. The project goal is to create economic
and legal environment for dynamic development of manufacturing industry in Yakutia. The project is meant to provide for bussiness development, to create jobs, and to increase production of jewelry with diamonds. Establishment of a special economic zone shall reignite production via favourable tax and customs regime. As a result of project execution, manufacturing costs shall be reduced owing to zero rate of
value added tax imposed on raw materials for manufacturers, tax incentives (reduction profit and property tax, & land charges), export and import expenses through establishing a specialpurpose customs station in the territory of special economic zone. The absence of import customs duties imposed on equipment and raw materials shall allow for some new more efficient equipment to outfit the process unit with.
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