Rapaport Magazine

ALROSA Resumes Spot Market Sales

Russia March Market Report

By Anastasia Serdyukova

In response to increased demand, ALROSA, Russia’s largest diamond miner, plans to resume selling rough on the spot market beginning in March 2012. The company had restricted its sales to long-term contracts in late 2011, when diamond market activity slowed against the backdrop of European financial turmoil. Activity was at a standstill in the final two months of 2011, with traders either not renewing orders or sitting on their stock, unwilling to lower their prices.

“The market is growing quite well,” said ALROSA representative Andrey Polyakov. “Christmas sales in the U.S. were good, demand is growing in China and we have more companies contacting us to buy rough.” Polyakov said initial plans are to sell only a small amount of stones across the full quality range to gauge both the current price levels and the amount of speculation going on. Even with the resumption, it appears unlikely that spot market sales will reach 2011 levels, when they made up to 15 percent of ALROSA’s overall sales.

The company plans to sell $1.12 billion worth of rough and polished in the first quarter of 2012, a 21 percent increase year on year. Its January sales amounted to $318 million.

For 2011, ALROSA reported an addition of 30 million carats of diamond reserves to its balance sheet. “The company’s strategy is to make up the volume it extracts by adding the same amount to the reserves on its balance sheet every year,” explained Polyakov.
  The miner also said its projected reserves will reach 47 million carats with its exploration of the Nyurbinskaya placer and upper levels of the Zarya pipe. 

Polyakov said that ALROSA would allocate most of its capital expenses in 2012 to getting its underground mines to full production capacity. When this is achieved, the miner will devote more resources to developing new fields. The company’s expenses on diamond exploration totaled $133 million in 2011, and are projected to reach $178 million in 2012.

Polished sales have recovered slightly since the slowdown at the end of 2011. “The market is much better than it was two months ago,” said Valery Morozov, director general of Ruis Diamond. Traditionally, the demand in Russia is strongest for small stones of less then .30 carats. Diamond dealers say that although many buyers are asking for the best characteristics of D to E color and IF to VVSI clarity, they usually end up purchasing F to I,
  VS1 to SI2 stones because their prices are better. 

Princesses are the second-most-wanted cut after rounds. Dealers at the Junwex show in St. Petersburg in February said that among certified diamonds, which can be bought by individual buyers, only round stones of .50 carats and smaller were in demand. Under Russian law, individual consumers are allowed to buy only certified diamonds, sealed in special boxes. Sales of stones without certificates are restricted to jewelers and companies. “Only jewelers ask for anything other than round cuts,” said Aleksandr Fedulov from Zoloto Yakutii. He added that the most popular items at his booth were diamonds that could be placed immediately into a mount.

The demand for colored diamonds is growing in Russia, but its volume is so small, market participants struggle to even estimate it. Small black diamonds are the only ones used in mass-market jewelry, but their popularity peaked in the 1990s. Other popular colors are variations of yellow and brown, but they are mostly used in premium jewelry because the average Russian customer still doesn’t perceive diamonds as anything other than white. “Colored diamond prices are rising, so people are interested in them as an investment,” said Dmitry Kuntsev, director general of Smolensk Diamonds.

Most yellow diamonds are in K to Z colors and there are few that can be called fancy. “It’s a big problem to find good fancy color diamonds in Russia,” said Mikhail Epstein, director general of Mousson Atelier, an exclusive St. Petersburg–based jewelry maker. Another problem is that “there’s no classification ‘fancy color’ in the Russian diamond color system,” said Ararat Evoyan, vice president of the Russian Diamond Manufacturers Association. He said that work is underway to add this color grade, but the market is too small to provide enough samples for comparison stones. A temporary solution is to use Gemological Institute of America (GIA) certificates in combination with Russian certificates.

Jewelers reported better-than-expected sales at the Junwex show in St. Petersburg in February, with retailers purchasing items for spring and for International Women’s Day, which is a big gift-giving holiday in Russia. It was a pleasant surprise after modest New Year sales. (See show coverage on page 144.)

“The demand for jewelry is growing,” said Hayk Aghabekian, chief executive officer (CEO) of Gallery Sarkisian. “Jewelry items with big colored stones are in great demand.” According to Olga Semina of St. Petersburg–based Alexey Pomelnikov, “Most sales were in the midpriced category.”


Below are the prices for certified round diamonds sold at Junwex. Price includes

up to $30 spent on certificates.

  • .30 carat, G, VVS1: $1,500 a stone.
  • .30 carat, K, VS2: $1,100 a stone.

  • 1 carat, D, VS1: $15,000 a stone.

  • 1 carat, D, SI1: $11,000 a stone.

  • 1 carat, D, SI2: $9,300 a stone.

  • 1 carat, E, SI1: $10,200 a stone.

  • 1 carat, H, SI2:  $6,100 a stone.

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