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Alrosa Moving to Annual Rough Allocations

Nov 6, 2017 2:11 AM   By Rapaport News
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Alrosa will start assessing its clients’ rough-diamond needs annually rather than every three years, beginning in its next contract period — a move that will give the Russian miner more opportunity to match supply with demand.

At present, Alrosa clients enter a contract of up to three years, which stipulates the monthly allocation of goods for the entire period, Alrosa noted last week. And while long-term contracts will continue to be the company’s main method of selling rough to major buyers, “a switch to annual planning will allow both the company and its customers to respond more flexibly to any changes in the market,” it explained. 

The move will make Alrosa’s sales practices more similar to those of De Beers. While De Beers signs three-year contracts with its sightholders, those clients then apply for goods each year, mapping out their annual allocation.  

The change is part of Alrosa’s new sales policy for the contract period beginning January 1, 2018, and running through 2020. Contract sales will continue to constitute about 70% of the company's sales volume, with the rest of its production split equally between auctions and ad-hoc, or “spot,” sales.

Alrosa currently has long-term contracts for gem-quality rough with 47 international companies and nine Russian buyers. It also has three domestic clients for industrial-grade goods under the same system.

The new sales strategy, which Alrosa’s supervisory board approved on October 26, also includes initiatives to develop the company’s polished-diamond business. Its polishing unit, Diamonds Alrosa, plans to increase the number of “special”-size (10.8 carats or larger) and fancy color diamonds it manufactures. The division expects its polished sales to reach about $125 million this year from $122.3 million in 2016, it told Rapaport News.

Meanwhile, Alrosa sold $9 million worth of rough diamonds at a sale in the Russian city of Vladivostok last month, including a 40.47-carat stone that fetched more than $1 million. The auction included 66 stones with a combined weight of 1,084 carats. The branch in the eastern city, which Alrosa launched to help it target the Asian market, is now a year old, with sales there reaching a total of $47 million in that time.

Image: Mir mine, Siberia (Alrosa)
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Tags: Alrosa, asia, De Beers, Diamonds Alrosa, long-term contracts, mining, Polishing, Rapaport News, Rough Diamonds, Russia, sightholder sales, Sights, Vladivostok
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