As we approach the holiday season, Jewelers of America reminds jewelers to be aware of key issues affecting jewelry supply chains.

The Jewelers of America Ethical Initiatives Committee met on Wednesday, October 19 to discuss some of the challenges currently facing the industry. Jewelers of America’s Risk Report provides Jewelers of America Members with an overview of the latest reputational risk analysis prepared for the Committee by Sustainable & Responsible Solutions (SRS), a UK-based consultancy that specializes in risk assessment and strategy.

For information on how your business can address these challenges, please access JA’s Member Guidance.

Key Areas of Concern for the Jewelry Industry

Russia’s War on Ukraine

The ongoing crisis stemming from Russia’s invasion of Ukraine, continues to have a major impact on the jewelry industry. Following the attack in late February, the U.S. and other governments implemented a series of sanctions that target entities, individuals and products that support the Russian government. Diamonds from Russia and Belarus were among the first hit and Russian diamond producer Alrosa was sanctioned in March. Since early in the crisis, Jewelers of America has advised members to cease the purchase of goods used in jewelry that have emanated from Russia and benefit the Russian government, regardless of where they are cut and/or manufactured.

Are the Sanctions Working?
There have been challenges, including that in many countries it is still legal to buy and sell Russian goods like diamonds, gold and other precious metals or gemstones. SRS reported in its update that China has been buying Russian gold at a 10 to 15 percent price discount creating two tiers of gold: Russian gold and everything else. The same could be true for diamonds. At least some companies from India (where it remains legal) are buying Russian diamonds, cutting and polishing them and sending to the U.S. through substantial transformation.

That said, the sanctions are hurting Russia in less expected ways. For instance, most of the large mining supply companies have cut Russia off from receiving needed equipment like spare parts. Given the age and extreme cold weather location of many Russian mines, this has made it difficult for mines to get serviced and even temporary shutdowns can become permanent if the mines are flooded and it is too costly to reopen. It is estimated that Alrosa sales are down by about 25 percent this year.

Overall, the message to jewelers going into the holiday season is to maintain a high level of enhanced due diligence for their supply chains. With U.S. State Department recently calling members of the diamond industry to a meeting in Washington, D.C., it is clear the government is watching and expects jewelers to take steps to keep Russian goods out of their inventories.

Lab-Grown Fills the Melee Gaps

Russia’s war on Ukraine has also accelerated the need – especially in places like India and China, for smaller diamonds. Prior to the invasion, the closure of Rio Tinto’s Argyle mine had pushed Russia to the forefront when it comes to smaller, lower quality supply. Post invasion, lab-grown has become even more important for these types of stones.

While lab-grown is a legitimate product, jewelers need to be sure they know what they are selling and require testing and full disclosure from their suppliers. If they are selling jewelry with lab-grown, they must convey this information to customers.

Lab-grown continues to grow and makes up an increasing share of the engagement and personal buying markets. If the size of the overall market is not growing, this means that lab-grown is taking market share from the natural market. How this growth will impact structured mine plans of the big miners remains to be seen, but the small-scale and artisanal mining sectors may not be able to compete.

Russia and the Kimberley Process Plenary

The meeting, to be held in Gaborone, Botswana is expected to be challenging with the European Union pushing for an agenda item to discuss the Ukraine invasion. Russia, as Chair of the Working Group on Rules & Procedures is refusing to allow the debate – which means the participants may not get past the point of agreeing on the agenda. On a positive note, there could finally be some movement toward agreement that the definition of conflict diamonds needs to change.

Jewelers of America members can access specific guidance on the Russia/Ukraine conflict, lab-grown diamonds and other industry issues by logging in to their member account here.

About JA’s Industry Risk Reports

Staying well ahead of the curve on issues that can damage consumer confidence or restrict your business operations is a critical component of the work Jewelers of America is doing on behalf of our members. In fact, part of our Board governance includes a committee dedicated to ethical initiatives within the industry. Each quarter, the committee reviews a professionally prepared “risk report” to identify key risks -- and opportunities -- facing the jewelry sector. While we don’t have a crystal ball forecast of the future, the risk assessment reports help Jewelers of America develop member guidance on issues, so you minimize the risk to your business and your reputation stays secure.

For further information, JA Members have access to a full range of Member Guidance and can browse past Risk Reports. 
Follow Us: Facebook Twitter Pinterest Instagram Linkedin