Russia’s diamond giant halts sales with prices in free fall

By

Bloomberg

Published



Sep 20, 2023

Russian diamond miner Alrosa PJSC has taken the almost unprecedented step of halting all its diamond sales in an attempt to prop up plunging prices.

Bloomberg

Diamond demand across the board has weakened in the aftermath of the pandemic, as consumers splash out again on travel and experiences, while economic headwinds eat into luxury spending. However, the drop in prices has accelerated in recent weeks, and buyers in India — the industry’s biggest customers for rough diamonds — have been putting pressure on the biggest miners to rein in supply. 

Alrosa has now halted sales until November, while rival and one-time monopoly De Beers is giving its accredited buyers increasing flexibility to reject diamonds that they are contracted to buy.

The decline in prices started in larger goods, and especially those popular in US bridal market. However, the steep fall in prices has now spread to smaller goods in recent weeks, as concerns grow about demand and growing competition from lab-grown diamonds.

While the two dominant diamond miners have a long history of curtailing supply or letting buyers refuse some goods when demand weakens, freezing sales altogether is extremely unusual outside of a major crisis such as the outbreak of the pandemic. 

Alrosa is temporarily halting the sale of rough diamonds in September and October, it said in a memo to customers, which was seen by Bloomberg. The company said that it believed its move would address the supply and demand mismatch that has emerged in recent months.

The decision also follows a call earlier this month by India’s influential diamond association — where about 90% of the world’s diamonds are either cut, polished or traded — for miners to limit supply.

So far, De Beers has no plans to cut its own sales. Instead, the Anglo American Plc unit has increased the flexibility it offers to its buyers. It was already allowing them to defer purchases for the rest of the year of up to 50% of the diamonds bigger than 1 carat, and in a memo this week told customers they will be able to remove some smaller goods from parcels they are contracted to buy, according to people familiar with the situation.

De Beers sells it gems through 10 sales each year in which the buyers — known as sightholders — generally have to accept the price and the quantities offered. While customers can decline to buy, doing so can impact the allocation of diamonds they get in future, making many reluctant to turn down unprofitable goods.

Both larger and smaller diamonds are selling at more than 10% discounts to De Beers and Alrosa’s selling price in the “secondary” market, where traders and manufacturers sell among themselves, the people said, suggesting that the miners may need to cut prices further. 

State-controlled Alrosa is under US and UK sanctions that were imposed right after the Kremlin sent troops to Ukraine. The company’s sales took a hit after US sanctions were first announced, but recovered by shifting volumes to Asia, mainly India.

Last week, a Belgian official said a ban on imports of Russian diamonds is expected to be agreed by Group of Seven nations in the next two or three weeks.

 

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Chronicles Live is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – chronicleslive.com. The content will be deleted within 24 hours.

Leave a Comment