Alrosa’s sales and production slumped to their lowest levels in over a decade in the second quarter amid unprecedented weak demand for rough diamonds during the coronavirus crisis.
Rough sales fell 91% year on year to $74.1 million, lower than during the 2009 slowdown, as the miner allowed its contract customers to defer purchases to later in the year. Sales volume dropped 92% to 634,000 carats, Alrosa reported Thursday July 16.
Indian manufacturers showed minimal interest in rough during the period as factories in Surat shut during the pandemic and polished demand dried up. Customers were also unable to attend Alrosa’s monthly contract sales due to travel restrictions, and faced limitations in shipping goods.
“Alrosa took steps to optimize production by cutting down its output for 2020…and [balancing] supply and demand through a flexible sales strategy,” the miner said. This resulted in the company “selling diamonds only if there is a real demand and allowing customers to defer contract volumes to later periods,” it added.
Where demand existed, contract clients sought alternatives to Alrosa and De Beers during the period, perceiving the miners’ prices as too high given the state of the polished market. Prices were lower at open tenders, customers explained to Rapaport News.
Alrosa’s rough-price index fell only 1.4% compared with the previous quarter as the company reduced supply to avoid slashing prices significantly. Its average selling price rose 22% to $117 per carat as demand shifted to larger goods. The company sold 102 rough diamonds between 5 and 10 carats to long-term clients at an online tender in May. Meanwhile, polished sales grew 16% to $12.8 million as the company had more goods to offer than a year ago following its acquisition of manufacturer Kristall in late 2019.
Rough production declined 42% to 5.7 million carats, the lowest for any quarter since Rapaport records began in 2008, as the company paused operations at some of its mines to account for the lower demand during the pandemic.