Diamond Prices Will Need 1.5-2 Years to Recover

Moscow: After rough diamond prices dropped by 15% in 2015, they will need 1.5-2 years to bounce back, in the opinion of Andrey Zharkov, head of ALROSA.

“We expect the market to stabilize in 2016, but in any case prices will require a year and a half or two years to recover,” he said in an interview to Yakutiya24, a news agency of Yakutia.

Diamond miners posted higher sales in the first quarter of this year, reflecting the transition of the market to a restocking phase. ALROSA earned at least $ 1.3 billion in diamond sales revenue in January-March of 2016 (vs. $ 1.1 billion in the previous year). In April, the Russian company lowered prices (by 1-2%) in its trading session with long-term customers for the first time since September. De Beers also improved performance in January, February and April (missing out a sight in March), but the company’s CEO Philippe Mellier warned that the market was entering the period of seasonal weakening.

Andrey Zharkov noted that amid falling demand in the market in 2015 ALROSA’s sales system under long-term contracts, which guarantees stable supplies for the company and its customers protecting them against price volatility, reaffirmed its effectiveness.

In 2015, 66% of the company’s rough sales were carried out within the frames of such contracts. During 2015, the number of long-term customers of ALROSA went up to 54 from 47, including those awarded first-time long-term contracts for the supply of industrial diamonds.

Andrey Zharkov said, that ALROSA may revise its output forecast for the current year from 39 to 37 million carats as a reaction to the difficult situation in the market.

The sanctions against Russia have not affected ALROSA directly, the president of the company said, reminding that market players from Belgium, the world’s major diamond hub, lobbied to reject such measures in regard to the Russian diamond miner. “When the situation in Ukraine escalated, people working at the diamond exchange in Antwerp, which houses offices of diamond traders, jewelers and retailers, were nervous more than anyone else. As far as we know, Belgian officials even appealed to the European Commission asking not to touch the diamond sector in the event of extension of sanctions against Russia. After all, ALROSA accounts for one quarter of rough supplies to Antwerp. This is why the existing sanctions do not affect our company, as well as the Russian diamond industry as a whole, in a direct way,” Andrey Zharkov said.

“We have free access to finance in the European and American banks, as well as free access to all capital markets. In this regard, our hands are not tied,” he said. According to Andrey Zharkov, ALROSA reduced its loan portfolio by more than $ 400 million in 2015.

In the second half of this year, ALROSA intends to refinance $ 500-600 million of the debt maturing in 2017 ($ 1.09 billion).