The threat of a financial meltdown in Ukraine’s jewelry industry, as predicted by pessimists after the imposition of customs duty on imported bank metals (gold, silver, platinum, and palladium) and in connection with soaring prices of precious metals on international stock markets (the week before last, gold prices hit a sixteen-year high of $450 per troy ounce) — has been exaggerated. Political turmoil and adverse global trends notwithstanding, interest in the art of jewelry remains very high, as evidenced by the Eighth International Specialized Exhibition “Jewelry Expo Ukraine 2004,” which drew close to 200 leading Ukrainian and foreign jewelry makers and attracted widespread public interest.
To all appearances, the stable demand for gold and silver jewelry will continue in Ukraine through 2005. In the meantime, however, jewelry makers are reporting declining sales, according to Yury Filipov, deputy director for jewelry production at the Kyiv- based enterprise Solaris. Gold is going up in price, currently trading at $15 per gram, while inflation is eating away at family budgets. “Yet many companies are processing gold dust and scrap to obtain the yellow metal, and this way are able to contain prices and survive,” Filipov said. Meanwhile, in the future, jewelers will be able to remain afloat only by finding new solutions. Filipov believes that such a lifeline could be the production of jewelry masterpieces. “Jewelry art, much like any other art, must be approached from the heart, especially under conditions of tough market competition. It makes sense to strive to produce things that no one else is making. I’m certain that interesting custom-made jewelry will be in demand no matter what,” he said. Naturally, it will cost more and fewer people will be able to afford it. People who will be buying such ornaments will become the owners of treasures. Others will simply admire such rings or necklaces as if they were paintings by Repin or Rembrandt. “Current trends indicate that the skill of execution will be priced higher than gold,” says Mr. Filipov.
But representatives of the Lviv Jewelry Plant are not ruling out the likelihood that jewelry makers who do not want to incur losses will raise their prices in 2005. According to them, there is only one way out of this situation — society’s well-being must increase in tandem with jewelry prices. “In 2004 our sales rose by 30% from 2003, but our output volume also increased by the same amount. What happens next is anyone’s guess,” Lviv Jewelry Plant representatives told The Day. According to them, today many companies are managing to remain afloat only because of silver. It is significant that increased interest in silver items is not due to the fact that people can’t afford gold. There is growing popularity for silverware, which is increasingly seen as a status symbol. Jewelry makers have responded to this trend, stepping up their production of tableware.
Silver prices have shown much higher growth in percentage points compared to gold prices, says Serhiy Fedorov, general director of Cemes Trading House. But everything is relative in this world. An analysis of gold price hikes in the international market suggests without a doubt that such upward trends are largely due to the weaker dollar. If this fact is extrapolated onto the plane of the ruble or hryvnia, there will be no catastrophic changes. Thus, “the people will have jewelry” no matter what. Russians believe the Ukrainian jewelry market is filled with opportunities, especially since the two countries signed an agreement on duty-free trade. “The situation in the Ukrainian jewelry market is normal, and after the political turmoil has subsided, we could even call it stable. The main problem here is not the balance of demand, supply, and prices, but the fact that people view jewelry items as valuables instead of ornaments. When buying them, they take into account their weight and not the skill of execution. With such an approach, why bother to buy jewelry at all? It is better to invest money in gold ingots,” Fedorov says, adding that this kind of attitude will soon disappear. After all, today many jewelers are focusing on exclusive or fashionable items. Their quality is improving. The skill of execution is beginning to be priced higher than gold, and Fedorov thinks this precious metal should be imported not from Germany or Switzerland but from countries that are parties to the duty-free trade agreement (Kazakhstan, Kyrgyzstan, and Russia).
In the meantime, as The Day learned from Andriy Hryshchenko, deputy director of the Sevastopol-based jewelry enterprise Violet, large producers who are interested in higher turnovers are containing prices owing to their capacities. But how long this will last is anyone’s guess. It is very difficult to make definitive forecasts largely because of the mass turmoil in the country. Hryshchenko pointed out that his company has a very optimistic outlook, even though the development of the jewelry market largely depends on stable public well-being. According to Hryshchenko, the industry has its own specific problems. Apart from the international market and import duty, this industry is facing a shortage of skilled workers and inadequate laws: “Perhaps all jewelers would like taxation and licensing laws to be improved. In Sevastopol we have a vocational school where we are training our jewelers.”
