Alrosa Ends Some Long-Term Deals as March Diamond Sales Plunge
Alrosa PJSC, Russia’s largest diamond producer, ended some long-term deals with customers as sales in March collapsed to half the level of a year ago because of the coronavirus pandemic.
“We would like to thank those of our customers who stick to our long-term contracts though with several companies we had to terminate such contracts and switch to spot sales,” Deputy CEO Evgeny Agureev said in a statement. Alrosa didn’t elaborate on the names of the clients.
Sales dropped to $153 million last month from $346 million in February and $377 million in March of 2019, according to Alrosa’s statement. Total sales in the first quarter were $904 million.
Alrosa reported March sales earlier than its main competitor -- De Beers, the world’s largest diamond company -- so the results signal how deep the crisis is across the industry, said Kirill Chuyko, head of research at BCS Global Markets. “Since De Beers allowed customers to delay purchases in March, its results might be even weaker.”
The coronavirus pandemic has crippled the global diamond supply chain. India’s cutting industry, which handles most of the world’s stones, has shut down, effectively halting manufacture of the gemstones. At the same time, retailers have closed their doors across the U.S., where shoppers buy about half of all diamond jewelry.
While Alrosa may resume the canceled long-term deals after the crisis, the company’s switch to more flexible spot sales shows how hard the global quarantine measures are hitting, according to BCS Global Markets. The market weakness is likely to persist into June, analysts led by Chuyko said in a note.
“March demand for rough and polished diamonds in all key markets showed a steep decline,” Agureev said. “The uncertainty in February was followed by severe restrictions and trading suspensions because of border closures and quarantine measures across the world.”
April may be no better as Alrosa allowed buyers to defer purchases to later in 2020, the company said last month, following De Beers.
©2020 Bloomberg L.P.