Amber market review as on the beginning of 2018
The price dropped to the level of 2011
Although in the beginning of this year the prices of raw amber plummeted to the lowest level observed during the last seven years, the situation in the market is totally different from the situation of 2011.
In 2011, the global supply of raw amber made only 60% of the demand. The shortage of amber jewellery encouraged the development of major factories, investments and creation of new technologies. The current situation is totally different: the global supply of raw amber exceeds the demand by 60%. Therefore, major amber factories are closing down, investments are frozen, and discussions about technological development have calmed down.
The fact that the number of various amber buyers in Kaliningrad region, Lithuania and Poland, i.e. the territories with a great number of amber buyers, has significantly decreased, also serves as evidence of the deteriorating situation.
What has happened?
The boom in the supply of raw amber witnessed during the last several years and the fall in prices were determined by two factors. First of all, the years 2013 and 2014 saw the rise of uncontrolled export of raw amber from Russia. First ambers were exported illegally via Kazakhstan, and starting from the last year, ambers have been exported directly from Russia. Secondly, the political disturbances Ukraine was witnessing in the similar period opened the floodgates to mass smuggling of ambers to China.
The role of intermediaries
Intermediaries selling ambers further control the major share of the amber market. According to calculations performed by the association “Le’amber Consortium”, only 10% of the total share of the profit from the trade in processed amber go to amber processing companies. The remaining 90% go to various merchants – intermediaries or traders of suspicious reputation.
For example, at the end of 2016, Kaliningrad Amber Factory signed an agreement on strategic cooperation with a Chinese company “Jiangsu Yulingljng Jewelry Technology Co., Ltd“ (JYJT)”. The factory claimed that it is a well-known company in China, which belongs to a large vertically integrated group of jewellery companies. Neither “Le’amber consortium” nor the association of Chinese amber processors had heard about this amber processing company as on the beginning of 2017.
The association had sent a request to the “Shanghai Gems and Jade Exchange” regarding the above company, but no answer was submitted. Only after a certain period of time did the company “Jiangsu Yulingljng Jewelry Technology Co., Ltd“ (JYJT)” presented its activities in China, i.e. trade in Russian ambers.
Europeans maintain the profit
The review presented at the beginning of this year presents significant changes in the number of amber processing companies Russia and China have witnessed over the last four years. Only 70 amber processing companies are left from 500 companies, which operated in Russia in 2014. Whereas, China has been witnessing the growth in the number of semi-official processing companies from 300 to 2000.
Yet no significant changes took place in the same period in the European market (Poland and Lithuania). The number of amber processing companies remained the same, i.e. about 1000 companies. These companies sell about 70% of their production in various markets of the world. And only 30% of their production is exported to China. This allows European companies to maintain their prices and gain profit.
In Ukraine, on the other hand, the prices and demand in the field of raw ambers faced a total collapse. Illegal amber diggers offer raw ambers wherever it is possible. In 2014, the share of illegal amber excavation amounted to 100 tonnes. It is expected that due to the decrease in the amber demand, only about 70 tonnes of Ukrainian raw amber will be supplied to the market in 2018.
1) It can be boldly stated that the global trade in raw ambers (the redistribution of it) has totally relocated to China. About 70% of the global amber trade is performed via this country. About 80% of amber processing capacities are concentrated in China.
2) The concentration of raw amber resources and manufacturing capacities in one state (China) may lead to the monopolization of the global amber industry. It causes concern of states engaged in raw amber processing as well as of raw amber excavation companies. The concentration of the amber market in China creates all preconditions for the country to dictate global raw amber and jewellery prices (the association “Le’amber consortium” believes that it is already happening). More worse – uncontrolled manufacturing process in China which can break the whole China market.
3) Russia (represented by Kaliningrad Amber Factory), which holds about 70% of the global amber resources, has been unable to protect its national interest in the amber industry and create its own base of capacities. On the contrary, economically unjustified agreements further deteriorated the situation of its amber processing companies. Russia even was unsuccessful in becoming one of the major mediators in redistribution of raw amber resources.
4) Ukraine, which has eventually become the centre of amber smuggling, cannot legalise raw amber extraction and organise fight against illegal amber extraction and trade. It has a negative impact on the whole amber industry.
The main conclusion is that for all listed reasons, the global amber industry goes to a new economic stage – recession stage, which can outgrow to a deep worlds crisis.
Note: On 12 April this year, a total of 10 tonnes of ambers raw and about 1 tonne of amber jewellery and semi-finished products. were presented for free trade in the “Amber Trade Chamber” in China:
about 7 tonnes of ambers raw from Ukraine,
amber jewellery and semi-finished products