According to ALROSA CEO, Sergey Ivanov, changes in the rough and polished diamond industry reflect global transformations, ranging from shifts in consumer behaviour, to tighter financing requirements .
ALROSA is a Russian state-owned diamond mining company, which accounts for almost a third of global rough diamond production.
Ivanov recently led a delegation of ALROSA’s management who met with representatives of the industry’s largest banks and non-bank financial institutions to discuss the latest trends and developments in the diamond industry as part of a workshop hosted by the company.
The event, which took place in Moscow in early December, had among its attendees delegates from the State Bank of India, NBF, ABN AMRO, and representatives of the DelGatto and Channel finance funds.
Ivanov said that as part of the workshop hosted by the company for the first time, it got together with representatives of the financial sector to discuss key factors behind the weaker diamond market environment in 2019, and steps that need to be taken to shore up market stability in the long term.
“During the meeting, an exchange of opinions and experiences as part of an open dialogue has generated many useful insights. With transparent operations of industry players being one of the key drivers behind market efficiency, we have decided to hold meetings with financial institutions on a regular basis.
According to ALROSA, the rough and polished diamond market is starting to show the first signs of stabilisation. In the third quarter of 2019, global jewellery demand received some support for the first time in a year, primarily thanks to consumers from the US market.
ALROSA’s data also shows that in October and November prices for a variety of diamond products edged higher, with prospects for destocking now more visible. “At the same time, the participants believe that a more accurate assessment of the industry can only be made based on sales volumes in the festive winter season, as they will show if the current upward trend is here to stay.”
Ivanov reported that the banks recognised the efficiency of the measures ALROSA had taken to support the market, above all the reduction in diamond sales volumes. “They believe that the “price over volume” strategy chosen by diamond producers has helped the cutting segment to “digest the overstocking” amid a funding crunch in the midstream segment in India, which is home to more than 90% of all cutters.”
The participants also mentioned other support that ALROSA provided to its customers this year, including the gradual lowering of the mandatory amount of rough diamonds required to be bought during a trading session. The banks say that the flexible customer approach also enables the market, and notably the midstream, to continue operating in a tough environment.
ALROSA said that according to the workshop’s participants, the existing turmoil helps to “sanitise” the market, pushing out players that never invested in business efficiency or resilience and prioritised short-term profits instead.
“The general opinion is that the midstream segment is forced into a transformation. Industry players need to evolve into more transparent and responsible businesses, as it will help them to secure bank loans among other things. The banks also highlighted the importance of marketing initiatives, saying that market growth can only be driven by stronger consumer demand for diamond jewellery.”