Alrosa, Russia’s largest diamond miner, has reduced rough diamond prices at this month’s trading session, following similar price cuts by De Beers. According to market insiders, Alrosa’s reductions average 10%, with some estimates ranging between 5% and 15%.
Narrowing the Price Gap
The move narrows the price gap between Alrosa and open-market prices, which had reached 20% to 25% for certain categories. Industry players attribute this decision to the easing of a polished diamond crisis, driven by:
- Stronger U.S. holiday demand.
- Reduced production in India due to the extended Diwali period.
Although Alrosa had previously resisted price cuts, the shift reflects the challenging market conditions. “Goods should sell, but I feel the discount is too far from reality,” commented one manufacturing executive.
Responding to Industry Trends
Earlier in the year, Alrosa executives traveled to trading centers, assuring customers that price cuts were unlikely. However, the oversupply of polished diamonds forced the miner to reconsider. Similarly, De Beers reduced its rough diamond prices by 10% to 15% during its December contract sale, citing stabilization in polished prices and inventory levels.
Sanctions and Sales Challenges
Alrosa continues to face significant obstacles:
- Western sanctions have deterred many buyers since Russia’s invasion of Ukraine in 2022.
- Reputational risks and Group of Seven (G7) import bans have further limited demand for Alrosa’s rough diamonds.
Despite the price cuts, many traders believe the adjustments may not generate substantial demand, with Alrosa’s goods still priced higher than those sold at tenders.
Backing From Gokhran
Anticipating weak demand, Alrosa secured an agreement to sell inventory to Gokhran, Russia’s state-owned gem repository, which has traditionally supported the miner during downturns. Meanwhile, large volumes of rough diamonds from Angola have contributed to cautious purchasing behavior among buyers.
Alrosa CEO Pavel Marinychev recently indicated that the company might suspend production of less profitable items amid what he described as a “deep crisis” in the diamond industry. The company’s revenue fell 5% year-on-year to RUB 179.47 billion ($2.01 billion) in the first half of 2024.