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Russia in the global market of coloured gemstones: semi-precious stones and alexandrite

05 september 2022

The issue touched on in this article needs to be explained. In Russia, federal law “On Precious Metals and Precious Stones” No. 41-FZ is in force. The law does not define what “precious stones by law” are, but a list of the stones is given:

“precious stones - natural diamonds, emeralds, rubies, sapphires and alexandrites, as well as natural rough pearls (unworked) and worked pearls. Unique amber pieces are equated to precious stones in the way established by the Government of the Russian Federation. Man-made materials having the characteristics (properties) of precious stones are not precious stones”.

The distinguishing of precious stones among other jewellery stones is not always obvious; while the concept of a natural rough diamond as a mineral and the concept of a pearl as an organic substance really do not require a legal definition, the precious stones like emerald, ruby, sapphire and alexandrite listed in the law are just varieties of minerals called beryl, corundum and chrysoberyl, distinguished rather conditionally and subjectively.

However, in addition to the concept of “precious stones”, the Russian regulatory legal framework in the classifier of the EAEU Commodity Nomenclature of Foreign Economic Activity (EAEU CN of FEA) used for customs operations uses also the concept of “semi-precious stones” (and in the Russian Classification of Economic Activities (RCEA), there are also concepts of “gems”, “ornamental stones”). At the same time, neither “semi-precious stones”, nor “ornamental stones”, nor “gems” are defined or explained in the Russian Federation’s regulatory legal framework. And in the gemological literature, another term is often used, “jewellery stones”, which also does not have any legal status.

It should be noted that although the EAEU CN of FEA is brought in line with the global terminology for the classification of goods, it is mainly up to the first six digits of the code. Since the talk in this article is about worked semi-precious stones (as well as about precious stones as accepted in the world, but except for diamonds, rubies, sapphires and emeralds), the customs code under discussion for them is “7103 99 Stones; precious (other than diamonds) and semi-precious stones (other than rubies, sapphires and emeralds), worked other than simply sawn or roughly shaped, not strung, mounted or set”.

In international practice, this code has the extension:

- 7103 99 10 - Jadeites, otherwise worked;

- 7103 99 90 - Other precious stones & semi-precious stones, otherwise worked.

In the EAEU CN of FEA, the code extension is somewhat different:

- 7103 99 000 1 - Nephrite (jade);

- 7103 99 00 2 - Alexandrites;

- 7103 99 000 8 - Others.

These differences between the customs codes of the EAEU and the world ones are due to low importance of the turnover of jadeite for the Russian Federation, but the greater importance of controlling the export of alexandrites (that are official precious stones in Russia) and nephrite (jade) as its deposits are significant.

For an expert assessment, we will use the data on international trade in precious and semi-precious stones given by the Observatory of Economic Complexity, OEC, (https://oec.world/en/profile/hs/precious-semi-precious-stones-nes-worked-not-set) and publicly available data for 2019-2021 provided by the Federal Customs Service, FCS, (http://stat.customs.gov.ru/analysis).

According to the OEC, the world exports of worked rubies, sapphires and emeralds (code HS6 ID 710399) in 2020 reached $1.13 bn, which accounted for 25.9% of the entire coloured gemstone market*.

* - other market shares of coloured gemstones are grouped under code HS6 ID 710391 “Rubies, sapphires and emeralds, worked” ($2.83 bn, or 64.7% of the entire coloured gemstone market) and under code HS6 ID 710310 “Precious stones, semi-precious, unworked or semi-worked” ($0.41 bn, or 9.39%).

In 2020, the share of Russia in the world turnover of worked coloured gemstones (excluding rubies, sapphires and emeralds) according to the OEC amounted to only $3.16 mn in exports (0.28% of world exports in this subgroup) and $6.36 mn in imports (0.56% of world imports in this subgroup).

The world export leaders in this subgroup are Hong Kong (China) followed by the United States (two times less), India, Israel, the European Union, Germany, and Brazil. As for these commodity items, Russia does not play an important role on the world market...

According to https://oec.world, the exports of worked precious and semi-precious stones (code 710399) have remained insignificant over the past quarter of a century, and the supply volumes have changed many-fold, and the importing countries have also changed:

analyt_05092022_1.png
The dynamics of the Russia’s export of worked precious and semi-precious stones, code 710399 (data from https://oec.world).

Relative spikes in the exports of stones (code 710399) were observed in 2013 (about $16 mn) and in 2015 (about $7 mn). During these years, China was the main importer of the Russian stones, its imports were for $13.6 mn in 2013 (stones for another $2.01 mn were purchased in the USA) and for $5.57 mn in 2015.

However, the China’s purchases of stones (code 710399) from Russia cannot be called stable because before 2012, the volumes did not rise above $1 mn, and they dropped to almost zero in some years.

Interestingly, the data published by the Federal Customs Service (http://stat.customs.gov.ru/analysis) on the exports of stones (code 710399) differ significantly from the OEC’s data.

So, according to the Federal Customs Service, the Russia’s exports of these items in 2020 were only for $2.48 mn (instead of $3.16 mn according to the OEC’s data). And the importing countries turned out to be different, for example, Armenia was the main importer in 2020 with a volume of $1.377 mn, while China’s imports in 2020 were only about $30 thousand and not $2.07 mn, like the OEC’s data show.

However, thanks to the Cargo Customs Declaration (CCD) data provided by the FCS, it is possible to calculate the approximate cost of the exported stones. In 2020, the maximum average delivery price was $444/ct, which probably means the supply of alexandrites or demantoids to Armenia. Although on average, the price of the most stones supplied hardly reached $35/ct, mainly it was less than $1/ct to $5/ct.

The dynamics of the imports of worked precious and semi-precious stones (code 710399) for 25 years according to https://oec.world is as follows:

analyt_05092022_2.png
The dynamics of the Russia’s imports of worked precious and semi-precious stones, code 710399 (data from https://oec.world).

According to the OEC, the Russia’s imports of stones (code 710399) did not exceed $1 mn before 2002, but by 2004, the imports grew to about $2.3 mn. With this more than a modest amount, the number of supplying countries was impressive, including the supplies from Australia for $171 thousand, from Brazil for $21.6 thousand, Poland - $111 thousand, Italy - $23.5 thousand, Switzerland - $203 thousand, Germany - $535 thousand, Israel - $94 thousand, India - $112 thousand, Hong Kong - $553 thousand, Thailand - $451 thousand, and South Africa - $46.3 thousand. In other words, Russian jewellers have not yet got stable channels for supplying cut and polished semi-precious stones by that year ...

However, by 2008, the list of the main suppliers of semi-precious stones to Russia had been formed. Those were Thailand and Hong Kong, less volumes came from India and China, and since 2014, Armenia also became a supplier. However, stable volumes were provided by Thailand only. The peak of imports of cut and polished semi-precious stones to Russia was in 2013, when the imports made about $9.3 mn.

According to the CCD provided by the FCS, in 2019-2021, one-time purchases did not exceed $750,000, and the maximum price of imported stones was $622/ct (but in the vast majority of the CCDs, it was from $1/ct to $50/ct).

Naturally, geopolitics and the economic crises have a strong impact on the jewellery industry, including the coloured stone sector. The chart shows the decrease in the Russia’s imports in 2008 and 2015…

From 2005 to 2008, the Russian Federal State Statistics Service (Rosstat) published its data on the enterprises that cut and polish precious and semi-precious stones in the country, as well as their wholesale trade (outputs were converted into US dollars at the average annual exchange rate of the Central Bank of the Russian Federation):

analyt_05092022_3_eng.png

We can easily see that there was no place for large and medium-sized enterprises dealing with coloured precious stones in modern Russian reality - they turned out to be unprofitable. And small businesses could not use the simplified taxation system at that time.

In general, it should be noted that the exports and turnover of semi-precious stones in Russia as a whole are quite insignificant in terms of the country’s economy and disproportionately small in relation to the Russia’s share in the jewellery output in the world.

In other words, semi-precious stones are used by Russian jewellers about 7 times less than by other countries in the world (the Russia’s share of world imports is 0.56% against 4% of the domestic jewellery output).

It is worth mentioning that semi-precious stones are used by Russian jewellers more than precious rubies, sapphires and emeralds, which are used 29 times less (the Russia’s share of the world imports is 0.14% against 4% of the domestic jewellery output).

This shows the state of the Russian market of semi-precious stones which is small and underdeveloped...

Vladimir Zboykov for Rough&Polished