September 22, 2005

Belarusian Cutter Suffers Faling Profitability

According to Anatoly Chaichuk, Head of the Precious Metals and Gems Department at Belarus? Finance Ministry, the cost of rough diamonds supplied to the country during the first half of this year increased by about a fifth as compared to one year earlier, while the value of the finished diamonds increased by up to 8 percent.

Kristall of Gomel, a diamond cutting company that is controlled by the ministry and cuts the vast majority of diamonds processed in Belarus, has therefore suffered a decline in cutting operations and imports of rough diamonds and less profitability.

Belarus imported 33,800 carats of rough diamonds worth US$4,338,000 in the first half, down by 37.6 percent in terms of carats and 32.8 percent in monetary terms from the first half of 2004. The average price per carat increased by 7.8 percent in the half to US$128.30.

?Alrosa is offering us lots that do not make it possible to have effective production. Despite the intergovernmental agreement that provides for equal conditions in the area of diamond processing for Russian and Belarussian companies, Alrosa treats us like a foreign company,? says Anatoly Golisev, General Director of Kristall, who describes the decrease in supplies as ?catastrophic?.

Under an intergovernmental agreement, Alrosa is supposed to supply 100,000 carats to Belarus annually, but the level of supplies and the quality of diamonds being offered has forced Kristall to investigate alternative sources. Negotiations are being conducted for rough diamond supplies from Russian state repository Gokhran, and Kristall is getting small shipments of diamonds from Belgium and Africa. In addition, Russian cutters can export some of their rough diamonds to Belarus.

The average wage of diamond cutters in Belarus is US$190 per month, compared to US$100-US$120 in India and China, US$120-US$130 in Ukraine and US$140-US$150 in Armenia, says Chaichuk, adding that this effects the industry's competitiveness.