The diamonds still sparkled at the Geneva watch fair, but the war in Ukraine and the associated sanctions on Russia could herald a return to simple elegance – given that Russia is a major supplier of gold, diamonds and other precious metals.
According to figures from the US Treasury Department, the Russian mining company Alrosa alone accounts for 90 percent of Russia’s rough diamond mining capacity, which is about 28 percent of the world’s capacity. The company was placed on the sanctions list on February 24, the day of the invasion.
Although trade between Switzerland and Russia is small, gold is still the most important product imported from Russia, ahead of precious metals such as platinum and diamonds, which are neither set nor mounted. This emerges from the data that the Swiss customs office has made available to AFP.
Compared to other sectors of the Swiss economy, “the watchmaking industry is one that has been less affected than others by the supply problems in 2021,” Jean-Daniel Pasche, the president of the watchmaking association, told AFP.
“Now the circumstances are different,” he admitted, although he says it’s still difficult to assess the impact on the watchmaking industry at this point Conflict lasts,” he weighed up.
Gold and palladium are recycled
Swiss luxury goods group Richemont, which owns jewelry houses Cartier and Van Cleef & Arpels and eight watch brands including Piaget and IWC, was a pioneer, declaring last week that all of its brands would stop sourcing diamonds from Russia. This decision, made at the beginning of the conflict, means a lot of work – like reorganizing the supply chain and responsibly sourcing quality diamonds from other sources, stressed Jérome Lambert, the company’s general manager, at a press conference.
The gold supply, on the other hand, is less of a concern. For about ten years, Richemont has established a recycling method for gold. The gold used is bought from industry and the electronics sector to be reused in watch production, Lambert explained.
For palladium, a material used in the jewelry industry primarily to make wedding rings and engagement rings, the group decided “before the sanctions” to switch to suppliers who specialize in recycled palladium, according to the Richemont boss.
Use the stocks
At Patek Philippe, one of the most renowned Swiss watch brands, the boss relies on his stock levels. “I’m lucky that I produce in small batches,” said Thierry Stern, who is the fourth generation to run the company. “So today I don’t see any difference,” he told AFP. For 2022, Patek Philippe plans to manufacture 66,000 watches. “And if I can’t find specific stones, I can always engrave,” explained the head of the watchmaker, who draws on a wide range of crafts, from working ceramics to enamel.
The same tone prevails at H. Moser, a niche brand for wealthy collectors that produces 2,000 watches a year. “Purchases are made in advance. For example, for the cases I want to make in 2023, I’ve already bought all the gold I need,” explains the company’s boss, Edouard Meylan. “But maybe in six months some of our suppliers will call to extend the delivery times because they didn’t receive the material,” he admits.
Those tensions in commodities “will obviously push up prices,” says Jon Cox, analyst at Kepler Cheuvreux. But compared to other industries, luxury goods makers have more leeway to pass inflation through to their prices, he points out.
At the Salon de la Haute Horlogerie, which brought together 38 brands in Geneva until April 5, stands were packed with diamonds, reflecting the industry’s “general optimism” after a good year amid the surge in demand for luxury goods in 2021 the analyst notes. “But given the war in Ukraine, I can of course imagine that the product development will go in the direction of simpler luxury products,” he judges. (AFP)
This translated post previously appeared on FashionUnited.fr.