Russia weighs selling more diamond stocks to tap global demand

Russia is considering selling more rough diamonds from state stockpiles this year to benefit from a recovery in global demand following a Covid-19-induced slump last year.

The government is preparing a decree to increase planned sales of diamonds from the state repository, known as Gokhran, said two people familiar with situation, who asked not to be identified as the information isn’t public.

Alrosa PJSC, Russia’s largest diamond miner, is likely to bid at the sales to replenish its own inventories, which have declined to a record low, the people said. The sale would be organized via public auction.

“If Gokhran announces more rough diamond auctions, we will consider the offer thoroughly and participate if it’s interesting,” Alrosa Chief of Sales Evgeny Agureev said.

The diamond world came to a standstill at the height of the coronavirus pandemic, raising concerns that oversupply could hurt the sector for years. But surging purchases by intermediaries who cut, polish and trade stones has all but wiped out miners’ stores, even as top producers De Beers and Alrosa raise prices.

De Beers increased the prices for some rough diamonds bigger than 2 carats by about 10% at this week’s sale, according to people familiar with the matter.

Alrosa’s diamond inventories fell to about 10 million carats last month, after peaking in the third quarter at 30.6 million carats.

Gokhran is due to sell 5 billion rubles ($69 million) of gems and precious metals, according to the state budget. That’s before the planned increase. A breakdown for diamonds isn’t given.

The size of Gokhran’s stockpiles is state secret. Last year, Russia considered purchasing as much as $1 billion of diamonds from Alrosa, before the market recovered. A large portion of Gokhran’s diamonds were purchased from Alrosa in 2009 to support the company during the global financial crisis.

Courtesy: Bloomberg