Clock ticks on raw materials for Swiss watches from Russia

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Geneva (AFP) – Diamonds shine brightly at this year’s Geneva Watch Show, but sanctions imposed on Russia could soon force the Swiss watch industry to produce more restrained designs.

Russia is a major supplier of diamonds, gold and other precious metals to the luxury watch manufacturers exhibiting at Watches and Wonders, one of the world’s leading salons for the prestige industry.

Russian group Alrosa – the world’s largest diamond mining company – was hit by US sanctions within hours of the Kremlin-ordered February 24 invasion of Ukraine.

According to the US Treasury Department, it accounts for 90 percent of Russia’s diamond mining capacity and 28 percent globally.

And while trade between Switzerland and Russia is modest, according to Swiss Customs, gold is the top importer, ahead of precious metals like platinum, followed by diamonds, which are unmounted or set.

Compared to other sectors of the Swiss economy, “the watchmaking industry was an industry that was less affected by supply problems than others in 2021,” Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry, told AFP.

About 38 luxury brands are exhibiting at the Watches and Wonders Salon, which runs through Tuesday Fabrice COFFRINI AFP

However, that may no longer be the case, he acknowledged, adding that it is difficult to gauge the impact on the watch industry at this point.

“Of course there are reserves. Then we have to see, depending on how long the conflict lasts,” said Pasche.

Recycled Gold and Palladium

Swiss luxury giant Richemont owns jewelry companies Cartier and Van Cleef & Arpels, as well as eight renowned watch brands, including Piaget and IWC.

The group took the lead on Wednesday, saying all of its brands had stopped sourcing diamonds from Russia.

The move will create a lot of work in the supply chain to find responsibly sourced, quality diamonds from elsewhere, Richemont chief executive Jerome Lambert said at a news conference.

At Patek Philippe, one of the most prestigious Swiss brands, the company president relies on his stash to weather the storm
At Patek Philippe, one of the most prestigious Swiss brands, the company president relies on his stash to weather the storm Fabrice COFFRINI AFP

Gold supply is less of a concern. Richemont has been sourcing recycled gold for watchmaking, purchased by the industry and electronics sectors, for about a decade.

For palladium, which is used in wedding and engagement rings, for example, the group decided to switch to suppliers specializing in recycled palladium “before the sanctions,” Lambert said.

draining the stocks

At Patek Philippe, one of the most prestigious Swiss brands, the company president relies on his stash to weather the storm.

“Fortunately, I produce in small quantities,” says Thierry Stern, who represents the fourth generation of his family at the helm of the company.

Worries about commodities
Worries about commodities “will obviously push prices higher,” says Jon Cox, industry analyst at financial services firm Kepler Cheuvreux Fabrice COFFRINI AFP

“So I don’t feel any difference yet,” he told AFP. For 2022, Patek Philippe plans to produce 66,000 timepieces.

“And if I can’t find specific stones, I can always engrave,” said the head of the brand, which draws on a wide range of disciplines including ceramics, marquetry and enamel.

H. Moser, a niche brand that produces 2,000 watches a year for wealthy collectors, struck the same note.

“Purchases are made in advance. For example, for the cases I want to make in 2023, I have already bought all the gold I need,” said boss Edouard Meylan.

“But maybe in six months some of our suppliers will call to push back the deadlines because they haven’t received the materials,” he admitted.

Worries about commodities “will obviously push prices higher,” said Jon Cox, industry analyst at financial services firm Kepler Cheuvreux.

However, compared to other sectors, luxury companies would have more leeway to pass costs on to customers, he added.

However, given the war and its aftermath, “I envision product development will shift to more subdued luxury goods,” said Cox.

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