Alrosa follows De Beers with price cuts

The two biggest producers for months refused to cut prices even as sales collapsed during the coronavirus pandemic, to avoid giving up too much ground before demand returned. De Beers and Alrosa don’t publish prices for their rough stones and their dominance in the often-secretive diamond industry has allowed the two companies to dictate terms to their customers over the years.

The two biggest producers have traditionally sought to keep any price cuts private to avoid ripple effects through the supply chain. For example, polished-diamond buyers like jewelry retailers could use the information to seek lower prices from De Beers and Alrosa’s customers.

“We avoided speculative trading during the worst phase of the crisis, keeping ‘price over volume strategy’ intact. We believe it is the only viable strategy to protect the value of the stones in the market conditions our industry faced recently,” said Evgeny Agureev, Alrosa’s head of sales. “As demand for the rough diamonds starts to recover, we make sure that prices under our long-term contracts reflect the actual market trends and a confirmed real demand.”

The decision to cut prices is the latest in a string of concessions to normal sales rules by the two diamond giants during the health crisis. They’ve already allowed customers to renege on contracts and view diamonds in alternative locations. Still, smaller rivals were selling at a 25% discount, eating into the companies’ market share.

An increase in demand for rough diamonds may be inevitable after most big cutters and polishers hardly bought any stones since February and their inventories are running low. However, a sustained recovery of the industry will depend on consumers returning to jewelry stores. While demand has improved in China, the US will be key as it accounts for nearly half of all sales.