Russian diamond miner Alrosa sold $180.2 million in rough diamonds during the month of August, representing one if its lowest sales months in years as continuing headwinds - macroeconomic as well as industry-specific - conspired with a traditionally slow summer month to keep the market soft.
The $180.2 million is a 36% drop from August 2018 ($288.2 million), but remarkably shows a 9% increase over July ($164.6 million), which is the first time since 2010 that August sales were higher than in July, the company noted, mainly due to the replenishment of stock by diamond cutters and polishers. Alrosa only sold $1.5 million in polished diamonds last month, compared with $11.7 in August last year, due almost exclusively to the August 2018 sale of a 51.38-carat round stone, the central diamond in the Dynasty collection, for about $10 million. For the first eight months of the year (Jan.-Aug.) Alrosa's rough-diamond sales are down 35% to $2.13 billion from $3.26 billion, while polished sales have fallen 48% to $34.6 million from $67 million.
“The diamond market is still experiencing headwinds from both macroeconomic and industry specific factors, which have an adverse impact on the midstream," said Evgeny Agureev, Director of the United Selling Organization ALROSA, member of the Executive Committee. He also noted that "a regular trade session in August started later than usual, so that some sales recognition were moved to September. It is still too early to come to firm conclusions based upon it. However," he adds, "we are still expecting that after a significant decrease in rough diamond supply by major diamond producers since the beginning of the year, the excess stock in the system is decreasing. This will help to restore supply and demand balance which should not take too long.”
Alrosa, along with its main competitor De Beers, has been doing its part to lower supply in response to falling demand for diamonds in all categories, deliberately reducing the volume of diamonds for sale. Prices for smaller stones have fallen dramatically as their strategy of reducing supply has not yet to removed the oversupply. They are instead pursuing a “value over volume” strategy. Alrosa expects to produce 38.5 million carats in 2019 but will sell only 32 million to 33 million carats, stockpiling the rest until the market regains its balance. Demand has been hit by the trade war between the United States and China, the world’s two biggest diamond markets, as well as reduced financing for rough purchases under increasingly stringent conditions for obtaining that financing, among other challenges.