RAPAPORT... The Russian State Treasury may sell some of its diamond stock on the open market so that rough prices won't go up due to speculative demand and the shortage of rough. The two issues were debated during the 34th World Diamond Congress in Moscow.
“The government of Russia decided to buy $1 billion of rough last year to support price stability, and based on this logic the government is planning its commercial strategy of selling of stocks from Gokhran,” said Aleksey Kudrin, Russia's finance minister. In his speech, he praised the actions of governments that helped support the prices of rough and polished on reasonable levels during the crisis.
“We are discussing the sale of $500 million to $800 million worth of rough with Gokhran by the end of the year in order to stop supporting the speculative demand from the market,” said Fyodor Andreev, the president of ALROSA. Andreev said that the diamond market is 120 million carats at the moment compared with 150 million before the crisis.
He expressed the concern that the price bubble is once again emerging in the market. ALROSA sees sales through long-term contracts as a way to prevent this negative development. “Selling all diamonds though auctions is unacceptable, only long term contracts will give stability to the manufacturers,” said Andreev. ALROSA reached its target of selling half of its production though long-term contracts and the other half on the spot market.
The concern over the shortage of rough and the negative impact of selling though auctions was voiced at committee meetings of the World Federation of Diamond Bourses (WFDB) today. Shmuel Schnitzer, the honorary life president of the Israel Diamond Exchange, called auctions one of the “sicknesses” of the industry. “This moves small and medium sized companies out of the industry,” he said.