RAPAPORT… Russia’s largest diamond miner ALROSA expects its 2011 sales to reach around $4.7 billion if rough prices remain at the current level. The company’s forecast in January set the year-end target figure at $3.5 billion. Since that forecast was released, prices have surged on average by approximately 20 percent, according to various estimates.
ALROSA sold more than $1.83 billion worth of both rough and polished in the first five months of 2011. The company expects its sales to be around $1.24 billion in the second quarter of 2011, while it sold around $953 million worth of gems in the first quarter.
The company plans to use the additional revenue to pay down more debt. At the beginning of 2011, ALROSA reported plans of cutting its $3.22 billion debt to $2.78 billion by the end of the year.
Polished sales positive
Rough prices increased at a smaller rate in May and June than in previous months, according to market insiders. “Although the prices of rough are high, we can deal with that since the polished is selling well,” said Rajesh Gandhi, the head of Choron Diamonds. Yet, Russian companies traditionally are cautious of increasing polished prices over the summer. “We try not to raise the price much because we know that in summer, people are buying less,” said Nikolay Makarov from Zoloto Yakutii.
Manufacturers appear content with how polished sales are going both inside Russia and abroad, where they sell most of their product. “Sales are going pretty well for June,” said Ararat Evoyan, vice president of Russia’s Association of Diamond Manufacturers, noting that there is demand for all types of stones. Gandhi said the robust demand in India, China and Russia was keeping sales unusually high for the beginning of summer. However, companies are getting ready for the seasonal slowdown. “The market is likely to be in a sleeping mode till the end of August,” said Boris Dmitriev, the head of DDK, Yakutia-based manufacturer, which is part of India’s KGK.
Inside Russia, gems smaller than half a carat are selling the best. Vladislav Ilyn from Yakutian Diamond Company said that both jewelers and private buyers who purchase certified stones “prefer medium characteristics.” Round-cut stones remain the favorite, but Makarov said the popularity of radiant-cut diamonds, which make up 15 percent of his company’s sales, has increased.
Certified diamonds were in great demand at the trade shows in Moscow in late May and early June. Stones of less than .70 carats made up the bulk of the assortments at the displays, with gems between .20 carats and .40 carats dominating. The prices varied slightly from booth to booth. For instance, a .30-carat diamond of F to G color, VVS1 to VVS2 clarity cost between $1,000 and $1,100. Buyers also asked for better-than-average characteristics for stones of 1 carat and higher. “The demand is increasing for polished. People hear that the prices are rising and they are thinking of buying diamonds as an investment,” said Makarov. Exhibitors also displayed a variety of uncertified stones — which could be purchased by private buyers only if placed into a mount — because this type of service is gaining popularity.
Jewelers said sales picked up at the end of May and June, with consumers buying jewelry for summer vacations, weddings and graduations, but spending less on average than during the winter holiday season. Most of the summer collections displayed at the three jewelry shows in Moscow consisted of semiprecious stones, usually large and adorned with diamonds. “Since the crisis, people want diamonds included in items with semiprecious stones,” said Veronika Boyarskaya, head of sales at Moscow jewelry factory Elite.
Color Dominates
Violet, green and yellow colors dominated the collections, mostly in tourmaline, chrysolite, aquamarine and citrine gemstones. However, diamond-intensive items were the big sellers. “When people buy wedding or graduation presents, most prefer to have diamonds, even if they are small diamonds,” said Vera Kabarovskaya from jewelry house Kabarovsky.
Many summer collection items also included melee, even melee of colored blue diamonds, which is new to the country’s market. Although Russians are usually cautious of colored stones, jewelry companies said these collections had a positive response, primarily because they are seen as unusual. Many customers are looking for something distinctive in design for their summer purchases and some of their choices were a surprise, even for jewelers.
A Russian Theme
Boyarskaya said her company’s pieces in the form of Russian national scarves and headdresses called “kokoshnik” finally have seen domestic demand, even though the collection has been popular among foreigners and at international shows since it was first introduced five years ago.
Big earrings and bracelets were in demand, as well as pendants, which were often bought as a present for graduation or nuptials. Wedding and engagement rings are bread-and-butter goods for most jewelers in summer. “We sold many bands with one stone, in a style of Western engagement ring, priced up to $2,500,” said Anastasia Karpova from Brillianty Kostromy.
The Marketplace
- Russia exported 9.23 million carats of rough diamonds worth $792.6 million in the first three months of 2011, according to the Ministry of Finance. The total represents a 26 percent drop by volume year on year, but a 3.5 percent rise in value.
- ALROSA’s first-quarter 2011 profit rose 42 percent to $431 million. Its production of 10 million carats of rough during the quarter represented an increase of
16 percent year on year. First-quarter revenues were down by 5 percent and sales volume in carats was down by 28 percent but the price per carat on the 9.1 million carats sold in the quarter rose 34 percent to $102.
