The Russian Federation is a major world amber producer. Its share on the market amounts to nearly 90%. The mining is carried out by "Kaliningrad Amber Plant" State Unitary Enterprise. Amber reserves in the Kaliningrad Region amount to more than 1 mln. tons, which is about 60% of world reserves. Price for the best quality Russian amber exceeds $1 thousand per kilogram, price for technical and ornamental quality varies between $30 -$300 per kilogram. Amber goods world market turnover is estimated in $300 millions.
"Kaliningrad Amber Plant" State Unitary Enterprise also has a license for Malyshevskoye emerald field, the only field in Russia and one of the three biggest ones in the world.
Chief Executive Officer of "Kaliningrad Amber Plant" State Unitary Enterprise Konstantin Viktorovich Stefankov answered the questions of Rough&Polished journalist.
How did the crisis influence performance of the Kaliningrad Amber Plant?
Economic crisis has naturally influenced amber sales. But the influence was not fatal. Specific indispensable stone, unique field and skills of the plant’s jewellers – all that combined allows us to survive and even develop. We did not reduce the production capacity, we continue to supply our products, take part in exhibitions, and conclude new agreements. The routine work goes on.
What can you tell about the demand from customary consumers of you goods? Is there perspective on the growing markets of South-East Asia (China, India, in particular)?
Jewellery made of Baltic amber extracted from the mine of the Kaliningrad Amber Plant could be met in any corner of the world: America, Europe or Asia. Traditional processing centres are Poland, Lithuania and of course Russia (the Kaliningrad Region). We have Baltic amber supply contracts with most of the European countries, Canada, USA. I mean not only jewellery, but also raw material. But currently there are no direct contracts with companies of India and China.
Today Russian state enterprises connected with diamond and brilliant business receive substantial support from the state in form of their goods purchase by the State Depository for Precious Metals. Does "Kaliningrad Amber Plant" State Unitary Enterprise receive state support? Is attraction of foreign investment planned?
We cope with our difficulties on our own and don’t receive state support. We can say exactly that we don’t plan to attract foreign investment.
"Kaliningrad Amber Plant" State Unitary Enterprise is a vertically-integrated company: from the mining to production and sale of its own jewellery. How successful did this strategy turn out to be and how will it develop in the long run? Will the share of own jewellery production and retail increase?
I believe that it is this strategy, in which the recipe for success lies. Sale of amber raw material or processed amber sale – it is clear, which is more efficient. The constraining factor was the outdated equipment of the plant, but beginning with 2007 we conduct modernization. We entirely equipped the experimental shop with advanced import machines and our performance significantly increased, labour conditions became considerably better. Nearly non-waste technology under the excellent quality conditions – it is already a fact. The economic benefit is noticeable at first glance.
Our production output of jewellery grows yearly. New production facilities are created, state-of-the-art equipment for amber processing is purchased. After a long break we again started working with precious metals hiving equipped the silver shop almost from scratch. And amber jewellery rimmed with precious metals always finds ready purchasers. And existing over the many decades well-deserved reputation of the plant specialists helps in double measure. Our production is an absolute guarantee of natural stone and high-quality metal.
The share of jewellery semi-finished products increases. Our partners increasingly often buy not the raw amber, but semiproducts for jewellery production, which were already subjected to first operation work.
The plant has four manufacturer's outlet stores in the territory of the Kaliningrad Region. One of them is situated on the Baltic coast in health resort Zelenogradsk, the rest is situated in the regional centre. The own jewellery products bring quarterly on average 4 mln. rubles in money terms. We are not waiting for material sales increase in the territory of the Kaliningrad Region, slow growth is possible due to tourist attractiveness increase of the region. Major customers buying amber are guests of the Kaliningrad Region.
Development of manufacturer's outlet store chain is planned, but in the long term it will be Central and North-West Region of the Russian Federation.
Once a curious idea referred to German Gref was sated in mass media that "Kaliningrad Amber Plant" State Unitary Enterprise being the leading supplier of amber raw material to the world market theoretically can control the world price for amber raw material changing the supply amount, i.e. acting as a kind of "amber De Beers"…
Long before German Gref this idea was stated by politicians of different levels. Monopoly for mining amber and as a consequence possibility to control prices on the world market – many actors in the market would wish to use this instrument. As far as the economic situation is concerned, discussion of Amber Exchange Market, where such idea could partially be realized, arises quite regularly. It is difficult to say how long it will take to realize this idea, here it is important to carefully work out the project. By the way, in summer of 2009 during the meeting with the regional administration proposed to organize an exchange market on the territory of the Kaliningrad Amber Plant. Everybody liked the premises: a large hall with a seascape.
The Kaliningrad Amber Plant sees its major goal today in amber mining plan performance. At the beginning of December by end of the mining season we must reach the level of 350 tons of amber. Today we have 302 tons in today’s report. Hence, for the days left we will have to focus all efforts and obtain 48 tons of amber more. I am sure the goal is reachable.
Before speculating on global monopoly for amber raw material, we need to be able to mine this mineral. Furthermore, it is necessary to identify our own processing facilities.
Head of Federal Tax Service Regional Department has recently stated that illegal amber mining is legalized through the documents of Kaliningrad Amber Plant and supposedly because of this export volume of amber exceeds the official volumes of extraction more than twice. How can you comment on this?
As for mentioning Kaliningrad Amber Plant in mass media in connection with legalization of amber, which was illegally mined on the territory of the region by the so-called black diggers, I consider information of such kind not related to the Kaliningrad Amber Plant. Our plant is the largest enterprise of amber branch in Russia and participates only in civilized creation of the world amber market. We are interested in development of legal access of processers to the raw material, especially regional amber branch representatives. Commissions worked at the plant during several weeks checking activity of the enterprise in various directions. They did not find any substantial violations. The fight against the illegal mining and export of the Baltic amber is out of our competence. Only regulatory bodies at the federal and regional level are obliged to develop and implement measures aimed at creation of conditions for prevention of illegal actions in the field of amber mining and sale.
What can you tell about the emerald project (Malyshevskoye emerald field)? Who invests this project? How do you see the emerald market today and what are the perspectives? Do you plan to produce jewellery collections with emeralds?
Before reasoning upon the possibilities of the existing emerald market and its perspectives, we would like to understand, what kind of emeralds are mined today at the Malyshevskoye emerald field. Soon, in November or at the beginning of December of 2009, the first layer will be open at the mine. Then it will be possible to say what we are dealing with. As a matter of fact, there are jewellery emeralds and other beryllic varieties used in industry. The quality of stones, volumes of extraction – all these questions are early to be asked. Consequently we haven’t planned production of jewellery collections with emeralds yet. What is really important at present is to renew the equipment operation after a long downtime, solve issues of social character, which arose among the employees.
We obtained the production license not long ago, and now we are mostly dealing with technical issues. The mining equipment was in downtime for a long time, and we need time to launch full-rate operation. The investment of the Malyshevskoye emerald field is carried out at the expense of "Kaliningrad Amber Plant" State Unitary Enterprise. Therefore, the better we do at the Baltic’s amber coast, the sooner and more successful will be the operation at the Malyshevskoye emerald field.
Sergei Goryainov, Rough&Polished, Kaliningrad
