World diamond cutting centers
Currently, diamond cutting is performed in different parts of the world. The traditional centers of manufacturing polished diamonds and diamond jewelry, such as Belgium, Israel, India, Russia, the United States and South Africa, are now widely supplemented by new countries, including first of all China, Canada, and a number of diamond producing countries in Africa (Table 1).
Table 1
Diamond production and sales by the world's major diamond centers in 2004-2011, $ M
production
sales
According to H.-E. Zohar, Diamond Pipeline, 2004-2011
* Estimated by the Institute for Regional Economics of the North
Besides, the new regions of cutting industries may included the Republic of Sakha (Yakutia), where a large number of diamond cutting businesses sprang to life in the early 1990s and of which nowadays there remained only nine.
Current status of the diamond cutting industry in Yakutia
In 2011, there were 13 companies in the Republic of Sakha (Yakutia) engaged in diamond cutting, of which 8 were permanently operating using their own rough. Apart from these businesses, there is Brillianty ALROSA, a subsidiary of OAO AK ALROSA, attributed by some researchers to the diamond cutting industry of the republic since its parent company is head-quartered in Yakutia.
Data on production and sales by Yakutia’s diamond cutting companies in 2006-2011 are given in Tables 2 and 3.
Table 2
Production of polished diamonds by diamond cutting factories in the Republic of Sakha (Yakutia) in 2006-2011, $ M
According to the Ministry of Industry of the Republic of Sakha (Yakutia)
Table 3
Polished sales by diamond cutting factories of the Republic of Sakha (Yakutia) in 2006-2011, $ M
According to the Ministry of Industry of the Republic of Sakha (Yakutia)
Until 2004, there was dynamic growth in carat production of polished diamonds, which was due to the support rendered by the State in terms of finance, tax benefits and supply of local rough provided on a give-and-take basis. However, the dramatic changes in the global diamond business, which took place at the turn of the millennium, did not spare the diamond cutting industry of Yakutia, which reached its peak in 2005 due to favorable market prices for rough and polished diamonds, but then came the recession.
If we do not take into account the continuous increase of polished production by ALROSA, it should be said that diamond manufacturing in the Republic of Sakha (Yakutia) started to crumple in 2003. In 2004, most diamond cutting businesses in Yakutia suffered a systemic crisis, as the annual production of polished diamonds by Yakutia’s diamond manufacturing companies (Choron Diamond, Sakha Diamond, Sata, Tunalgy, and DDK) turned unstable in 2005-2008. This situation was aggravated by the extreme global financial crisis that led to a landslide decline in demand for polished diamonds at the beginning of 2009. This was due to the fact that in 2002-2005 rough prices were on the rise going up 39%, while polished prices increased by only 5-10%.
To date, almost all the operating companies – EPL Diamond, DDK, Sata, Choron Diamond, Sakha Diamond, Pokrovski GZ and OOO Kristall - are private enterprises, some of them with foreign capital, and they have insignificant shares of state assets (excluding Pokrovski GZ wholly owned by the State).
They are supplying polished diamonds mainly to the domestic market, as well as to Israel, the United States and China. Since the current intense competition gave a chance to survive only to the most achievement-oriented companies within Yakutia’s diamond cutting industry, this should contribute to their success in the domestic and foreign markets in the future.
Prospects for the diamond cutting industry in the Republic of Sakha (Yakutia)
The following should be done for efficient development of the diamond cutting industry in Yakutia:
1. Yakutia’s diamond cutting businesses should improve their competitiveness by way of modernization and organizational and technological innovations, as well as by adopting a cluster pattern for the whole diamond industry operating in this republic.
2. The industry should reach the world level of competition in diamond cutting and expand the share of diamond jewelry sales in the domestic and foreign diamond markets.
3. The Program for Development of Diamond Cutting and Jewelry Industries in the Republic of Sakha (Yakutia) adopted by the Government of Yakutia for 2009-2016 should be adjusted in line with globalization of the world economy and Russia's entry into the World Trade Organization.
Yuri Danilov, Ph. D., Director of the Department of Regional Subsoil Management Economics, Institute for Regional Economics of the North at Ammosov North-Eastern Federal University
