“Subdued Jewellery Sales in Russia during Christmas”

Jewellery sales in Russia during the outgoing Christmas season were quite subdued, said Sunil Gandhi, Chairman, Primorsky, Diamonds LLC in an interview during his recent visit to Mumbai in mid-January. Gandhi also spoke about demand for rough and other aspects related to the gem and jewellery business in Russia.

Diamond World: How do jewellery sales in Russia during the recent holiday season compare with the same in the earlier season?
Sunil Gandhi: Jewellery purchases by shoppers during the just concluded season are estimated to be down by at least 25 per cent, compared with sales during the earlier year.

DW: What were the reasons for this decline?
SG: Most people prefer these days to spend on other luxuries (including eating and drinking) or to spend on tours. Also, many people are currently inclined to save more. These factors affect the jewellery business. Many jewellers were therefore left with substantial stocks at the end of the season.

DW: Where do jewellers source their stocks from – local manufacturers or through exports?
SG: Mostly jewellery sold in Russia is locally manufactured. However, there are substantial imports of jewellery as well.

DW: How is the Russian economy doing currently?
SG: Russian economy is doing quite well at present, because of strong prices of oil. The Russian currency is also firming up.

DW: How is the market for rough diamonds there at present?
SG: Over the past five months or so, prices of rough diamonds have fallen by 30-35 per cent, and some further setback is also apprehended by trade circles during the coming months.

DW: What are the reasons for this setback?
SG: The supply of rough diamonds at present is much more than the market can absorb. It is, therefore, feared that rough prices may go down further by 15-20 per cent, unless the market sentiment improves.

During the boom in early 2011, buyers were willing to buy more and more even at rising prices. After the market went into the reverse gear since August 2011, most Antwerp buyers have lost their earlier enthusiasm to buy more diamonds. They have applied brakes on fresh purchases. There can be two reasons for this. Firstly, they might be waiting for further decline in prices. Secondly, many of them seem to be nursing substantial high cost stocks, acquired by them earlier. Naturally they are not inclined to buy more at the moment. Some contract- buyers are said to be requesting Alrosa to hold back for some time.

DW: Has there been any impact of this on the market for polished diamonds?
SG: Polished prices are down by about 15 per cent in the last two months or so. Business remains slow, despite this price reduction.

DW: Has Alrosa not made any effort to push up sales?
SG: Alrosa would certainly like to push up sales, but buyers are not forthcoming. Even those who have long-term purchase contracts are reported to be requesting for reduction in supply.

DW: What other alternatives is Alrosa looking at?
SG: There are reports that Alrosa may enter into long-term contracts with some additional firms. It may not be a surprise if some more Indian companies get such an opportunity. Those who think the present market situation might improve in course of time might perhaps think of seizing such a chance.

DW: Tell us something about the domestic diamond manufacturing industry.
SG: Out of over 50 such units about 10-12 might be operating regularly, while some of these may be doing so partially. Several others may be closed. Alrosa supplies rough diamonds to these factories apparently at its normal prices, and allows some concession to local manufacturers, in order to encourage them to step up production for exports. They can also export some rough stones as well. In order, however, to discourage such exports of rough stones by manufacturing units, some tax is imposed on such exports of rough diamonds by them.

DW: What has been the production of rough diamonds by Alrosa in 2011?
SG: Production figures for full 2011 are yet awaited. Meanwhile, the company maintained production for the first nine months of 2011 around 26.24 million carats whereas their sales in the same period were around US$ 3.56 billion, showing a rise of about 27 per cent over the same period of the earlier year.