ALROSA did not carry out sweeping changes to prices at its diamond trading session with long-term clients in January and February, representatives of two of the miner's counterparties told Interfax, but the company did adjust prices for small, low-quality diamonds, or so-called Indian 'makeables' in January, reacting to weaker demand for this category. Again, this rebalancing was in response to currency reform in India, as a result of which many small and medium cutting and polishing enterprise lost some of their liquidity, but it hardly had any impact on the price index, one of the sources told Interfax.
"The latest price rebalancing took place in January. Prices for the sort of rough that is most in demand rose slightly, and they fell a little for the makeables, which haven't been selling very well. This was one reason for a recovery in demand," the source familiar with the trends council's decisions said.
ALROSA's price correction livened up demands for small diamonds and gave a boost to the Indian cutting and polishing industry, the world's biggest. Also, Indian cutting plants were underutilized in December due to a working capital shortage, but started buying rough again in January and February.
"The diamond cutting sector in India is obviously coping with the problems caused by the currency reform in this country somewhat faster than expected. We still remain cautiously optimistic about the activity in the small-size, low-cost rough diamond segment," Yury Okoyemov, ALROSA Vice President, has said. ALROSA has noted fairly brisk demand for rough diamonds in practically all segments of the market in January.
But there's no talk of prices for makeables going up yet, the source familiar with the council's decisions said. "Prices might go up only if demand is sustained," the source said. "There has to be a fairly high take-up for this type of rough over a number of months. If one month clients took it all, the next month they left half of it on the table. This means demand is not robust. It frequently happens that even a run on diamonds can be met in the space of a month, after which diamond cutters will have topped their inventory of this category up and it will no longer be in demand."
ALROSA is more exposed to demand in this category as Indian makeables account for a larger share of its mine output than De Beers, the world's leading diamond miner by revenue, but a smaller producer by volume. ALROSA produces chiefly melee diamonds weighing up to 0.15 carats, Morgan Stanley said in a report on synthetic diamonds last year. Around 82% of the diamonds ALROSA mines weigh less than 0.5 carats, and, with 40% yield, they can be cut and polished to produce cut diamonds weighing 0.2 carats. These diamonds account for 31% of Alrosa's sales revenue.
Source: The Diamond Loupe