Swiss watchmakers face difficulties due to lack of raw materials from Russia

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 Sanctions targeting Russia could soon force the Swiss watch industry to produce less sparkling designs because of a lack of diamonds.


Russia is a major supplier of diamonds, gold and other precious metals to luxury watchmakers exhibiting at "Watches and Wonders", one of the world's leading watch fairs.


Russia's Alrosa Group, the world's largest diamond miner, was hit by US sanctions just hours after President Vladimir Putin launched a special military operation in Ukraine on February 24. .


Alrosa accounts for 90% of Russia's diamond mining capacity and 28% globally, according to US Treasury data. And while trade between Switzerland and Russia is modest, gold is the main import, alongside precious metals like platinum and diamonds.


Compared to other sectors of the Swiss economy, "watchmaking is an industry that will be less affected than others due to supply problems in 2021", said Jean-Daniel Pasche, President of the Federation of Industry Swiss Watch Industry, told AFP.


“But that may not be the case anymore,” he admitted, adding that it is difficult to gauge the implications for the watch industry at this stage.


Richemont CEO Jerome Lambert said that watchmakers are under pressure to find alternative sources of quality diamonds, which are reliably sourced elsewhere.


"Obviously there are reserves. Then we'll have to see, depending on how long the Ukrainian conflict lasts," Mr. Pasche said.


Recycled gold and palladium


Swiss luxury watch giant Richemont owns the luxury watch brands Cartier and Van Cleef & Arpels, along with eight other prestigious watch brands. But on March 30, Richemont said all of its brands had stopped buying diamonds from Russia.


Gold supply is less concerned. For over a decade, Richemont has been sourcing recycled gold for watchmaking, purchased from the electronics industry.


For palladium, which is used for wedding and engagement rings, for example, the team decided to turn to suppliers that specialize in recycled palladium, Lambert added.


At Patek Philippe, one of the most prestigious Swiss brands, the president of the company is checking his stock to weather the current "storm" of supply.


Thierry Stern, who represents the fourth generation leading the company, told AFP: "It's fortunate that I produce in small quantities. So I haven't felt any difference yet." In 2022, Patek Philippe plans to produce 66,000 watches.


H. Moser, a brand that produces 2,000 watches a year for the rich, is of the same opinion. "I've bought enough supplies in advance. For example, for the covers that I want to make in 2023, I've bought all the gold I need." "But maybe in six months time, some of our suppliers will call to delay the deadline," he admitted.


Jon Cox, an analyst at financial services firm Kepler Cheuvreux, said that concerns about raw materials "will, of course, drive up prices". However, compared to other sectors, companies dealing in high-end luxury goods have more flexibility to shift the cost burden to customers who are willing to spend large sums of money to buy luxury goods. satisfactory goods.


At "Watches and Wonders" in Geneva, where 38 brands are on display until April 5, the displays are filled with diamonds, reflecting the industry's "generally optimistic mood" this year following prosperous 2021.


"However, with war and its consequences, I think manufacturers will shift product development toward lower-priced luxury items," Mr Cox said.

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