Industry News by Nemesis

Cautious ALROSA Targets Steady Rough Prices

November 29, 2016

ALROSA pledged to keep rough diamond prices relatively stable in the short term even after demand recovered this year, as the company looks to support manufacturers’ profit margins.

“The current market priority is to maintain healthy midstream margins. So, at the moment, we see no reasons for major price increases,” ALROSA’s chief executive officer Andrey Zharkov said in an earnings call last week. 

Sales jumped 83 percent during the third-quarter and by 54 percent in the first nine months of the year, the company reported. Sales volume rose while rough prices were adjusted up or down by only about 2 percent at its monthly sales this year, Zharkov said. That after demand slumped last year, forcing the company to lower its prices by about 15 percent in 2015. 

“In 2016, there were no major price adjustments,” the executive added. 

Still, manufacturing margins continue to be squeezed as rough prices remained stable while polished prices softened this year. The RapNet Diamond Index (RAPI™) for 1-carat polished diamonds fell 4.2 percent in the first 10 months. 

Zharkov also acknowledged a possible slump in Indian demand that could result from the government’s decision to invalidate INR 500 and INR 1,000 notes. Those high denominations reportedly account for 85 percent of the total currency in circulation, heralding a fall in diamond jewelry sales in an industry that is highly cash-focused. 

“We do expect some impact on demand in the short term, I mean, on the horizon of three to five months,” he said. The monetary reforms “will affect the cheaper-priced categories that are polished and then sold inside India,” Zharkov predicted. 


Source: Rapaport

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