Alrosa confirmed on Friday that it had already begin cutting supplies of rough diamonds for sale to sightholders, or clients. This is in effort to control the current supplies to their markets in protecting the venerability to the global rough price.

The spokesman of Alrosa , Andrei Polyakov told PolishedPrices: “We will begin  reducing the volumes of rough diamond sales at the beginning of November. In fact, we’ve already begun.”  As an alternative, giant diamond miner Alrosa is considering diamond sales to the state stockpile agency, Gokhran.

“We definitely are not going to give them the diamonds for free, but nobody understands what market price is normal for now.” He noted that other diamond producers, including De Beers, are also cutting back on rough diamond sales.
Ararat Evoyan, head of the Russian Association of Diamond manufacturers, told PolishedPrices:

“This is a reaction to the appeal of the president of the federation of commodity exchanges. The problem is that Alrosa doesn’t have enough turnover funds and working capital, so it simply can’t stop selling rough diamonds. Alrosa is not De Beers. It has to sell to survive.”

He added that there will be a problem with pricing diamond deliveries to Gokhran. “Prices have gone down so much that if Gokhran would buy at Alrosa’s current prices, it will have big problems to make a profit later, when it will aim to sell diamonds.

“Right now it is a very necessary measure, so that unsellable surpluses of raw diamonds will not go on to the market. Now the market already has a surplus of rough diamonds, because the Indians begun to sell everything they had. The market is almost dead.”

A source at Smolensk Kristall, Russia’s biggest manufacturer, said the measure was delayed too long, and is now too late.
“It definitely won’t benefit us. They will cover missing sales by diamond shipments to Gokhran. So it is actually the state which will buy their diamonds.

This is definitely a non-market measure, as Gokran will be buying at non-market prices. For the time being, Alrosa’s rough diamond prices are 15% to 20% higher than market. Smolensk currently has the rough diamonds it needs, but it is uncertain whether it can cut profitably for the rest of the year.

“Right now,” the source said, “there are just two types of players on the diamond market - those who don’t have any money; and those who have the money but are unwilling to spend it.”