The Ministry of Economy of the Republic of Sakha (Yakutia) revealed the cutting and polishing and jewellery industries’ performance data for 2016. The slide in the cutting and polishing industry - in USD terms - was 35%, and in the jewellery industry 30.5% as compared to the performance in 2015. It indicates that this segment in the processing industry is still in a crisis state since 2011. As the polished diamond manufacture and sales are only an intermediate diamond pipeline segment where the end segment is diamond jewellery sales, so here we give the performance data on both the diamond manufacturing and jewellery industries (Table 1).
Table 1
The performance of the cutting and polishing and jewellery industries of the Republic of Sakha (Yakutia) in 2010-2016
In 2016, only six cutting and polishing units were really operating in the Republic of Sakha (Yakutia). Three of them – OAO ‘Nurbinsky Yuvelirny-granilny zavod’ (Nurba Jewellery and Cutting Factory), OOO ‘Pokrovsky granilny zavod’ (Pokrovsky Cutting Factory) and ‘Yakutskaya Almaznaya kompaniya’ (Yakutia diamond company) - went bankrupt and OOO RPC ‘EPL Diamond’ moved its head office to Moscow and re-registered there (Figure 1). In addition to it, AK ALROSA (PJSC) has cutting and polishing units, and taking into account that the Company is registered in Yakutia, we think that in spite of the fact the Group’s diamond cutting and polishing units are located in other regions of Russia, their performance data should be considered in comparison with the Yakutia’s cutting and polishing industry performance (Table 2).
Figure 1. Diamond cutting and polishing companies in the Republic of Sakha (Yakutia) in 2016.
Table 2
The goods output by the major polished diamond manufacturers in the Russian Federation in 2010-2016
The data shows that all the major Russian cutting and polishing industry units decrease their figures starting from 2011. Even such a renowned industry leader like OAO PC ‘Kristall’ was in a deep crisis in 2016.
In 2013, the ALROSA Company renounced the idea of vertical integration and uses the cutting and polishing units for the rough diamond price monitoring.
In spite of having unique rough diamond resources, the cutting and polishing industry of the Republic of Sakha (Yakutia) cannot fully realize its potential due to some objective and subjective reasons.
However, when you look at the diamond cutting and polishing industry of the Republic of Sakha (Yakutia) and the Russian Federation on the whole, you can see a significant potential for its development taking into account that the share of the Russian cutting and polishing sector accounts for under 2% of the global production and the diamond jewellery manufacture accounts for about 1% (Table 3).
Table 3
The position of the rough and polished diamond industry of Russia and the Republic of Sakha (Yakutia) in the global diamond market in 2014-2016
The main reasons of the slowdown in the cutting and polishing industry in Russia on the whole and in Yakutia in particular
First, diamond cutting and polishing and jewellery manufacture relate to the production of the non-essential goods but of the luxury ones and depend on the consumers’ buying capacity, hence, depend on the standard of living of the people in a region and the country that holds back their discretionary spending.
Second, the legislation that regulates the activity of the enterprises and organizations related to the diamond cutting and polishing as well as jewellery manufacture and sales do not facilitate their efficient development. Besides, so far there is no clear long-term strategy and coherent policy of the development of the cutting and polishing and jewellery industries for the future in the Republic of Sakha (Yakutia).
Third, the companies in the cutting and polishing and jewellery industries in the region in spite of their evident interrelation develop separately and do not enjoy the advantages of the co-operation in the diamond jewellery market. The goods sales and the management are the weaknesses of the cutting and polishing units in the Republic.
In my opinion, the products made by the cutting and polishing units in the Republic are not competitive in the international market due to their small volume, and in the domestic market – due to the lower demand, that is why the industry enterprises face challenges that could be overcome with the help of the government support only.
Yuri Danilov, Ph. D., Director of ‘Expert’ Information and Analysis Center at Ammosov North-Eastern Federal University
