War in Ukraine. Swiss watchmakers are forced to reconsider their supplies to Russia

Mining company Alrosa alone, which has been on the sanctions list since the first day of the February 24 invasion, accounts for 90% of Russia’s diamond mining capacity and 28% of global capacity, according to the US Treasury Department. And while trade between Switzerland and Russia is modest, gold is the first product imported from Russia, after precious metals like platinum, followed by set or set diamonds, according to data provided by the federal customs department to AFP.

Compared to other sectors of the Swiss economy, “watchmaking is the industry least affected by supply problems in 2021,” Jean-Daniel Pachet, president of the federation of watchmakers, told AFP. “Now we are talking about other terms,” he admitted, although he said it is still difficult to assess the implications for the watch industry at this stage. “Obviously, there are reserves. Then we will also have to look at the duration of the conflict, ”he weighed.

Recycled gold and palladium

Swiss luxury giant Richemont, owner of jewelry houses Cartier and Van Cleef & Arpels, as well as eight prestigious watch brands including Piaget and IWC, took the lead by explaining on Wednesday that all of the group’s brands had stopped supplying diamonds to Russia. . This decision, taken early in the conflict, represents a big job of reorganizing the supply chain to find quality diamonds from responsible sources elsewhere, insisted Jérôme Lambert, its general manager, during a press conference.

The supply of gold, on the other hand, is less of a concern. Over the course of about a decade, Richemont set up a chain of recycling gold purchased from industry and electronics to reuse it in watchmaking, he says.

With regard to palladium used in jewelry, in particular for wedding and engagement rings, the group decided “before the sanctions” to switch to suppliers specializing in recycled palladium, the head of Richemont said.

Use inventory

At Patek Philippe, one of the most prestigious Swiss watch brands, his boss is counting on his shares to wait for the storm to die down. “I am lucky that I produce in small quantities,” said Thierry Stern, who represents the fourth generation at the helm of the company. “So today I don’t feel any difference yet,” he told AFP. By 2022, Patek Philippe plans to produce 66,000 pieces. “And if I can’t find certain stones, I can always engrave,” explains the owner of this house, who makes a wide range of crafts, from marquetry to ceramics or enamel.

It’s the same tone with H. Moser, a niche brand for wealthy collectors that turns out 2,000 watches a year. “Purchases are made in advance. For example, for cases that I want to make in 2023, I have already bought all the necessary gold,” explains her boss Eduard Meylan. “But maybe in six months one of our suppliers will call to extend the deadlines because they haven’t received the materials,” he admits.

This raw material tension “will obviously drive prices up,” predicts John Cox, an analyst at Kepler Cheuvreux. But compared to other sectors, luxury goods companies have more opportunities to pass this inflation on to their prices,” he notes.

At the Haute Horlogerie, which brings together 38 brands in Geneva until April 5, the windows are full of diamonds, reflecting the sector’s “general optimism” after a successful year in the face of a surge in luxury demand. in 2021, the analyst notes. “But with the war in Ukraine, I can certainly imagine that product development will move towards more low-profile luxury goods,” he reasons.

Leave a Comment