Alrosa Delays New Rough Supply Deal Again

RAPAPORT… Alrosa has extended its long-term supply contracts with clients through the second quarter, postponing the announcement of its new three-year deals for a second time. The Russian miner wanted more time to consider demand from its rough buyers since the market has recovered from the disruptions the pandemic caused.

“The feedback received indicates that the current demand structure may significantly differ from the purchase history during the contract period, the latter usually considered as a basis for the allocation of goods,” the company explained in a statement last week. “Limitations caused by the Covid-19 pandemic in 2020 suspended the regular diamond trade for several months.”

Alrosa’s long-term supply program, known as Alrosa Alliance, was due for renewal in January. The company would ordinarily assess past trading activity of existing and prospective members in the months before the new contract deadline. However, the unusual trading conditions in 2020 forced it in October to postpone the process through the first quarter, and now again until the end of June.

Alrosa will consider clients’ purchase history before the pandemic, their selective buying during the first wave of lockdowns and demand since regular trading resumed, it explained. The company implemented the delay to gain more relevant post-pandemic purchase information so it could draft an offer that would meet clients’ actual requirements, it added.

Macroeconomic and Covid-19-related challenges have led to an evolution in the business models of Alrosa’s clients, which include diamond manufacturers, rough dealers and jewelry retailers. The traditional practice of allocating goods based on previous purchasing activity could result in distortions, undermining the firm’s goal of offering a product mix that is in line with current market requirements, Alrosa’s deputy CEO, Evgeny Agureev, noted.

Image: Rough-diamond sorting. (Alrosa)