In its recently released “Investor Presentation”, ALROSA, in an overview of the market said that the global luxury goods market slowed down after achieving a high single-digit growth from 2010-13. While growth from 2014 to 2015 clocked in at merely 1%, from 2015 to 2016 the global luxury goods market was largely flat.

Coming specifically to diamonds, ALROSA noted:  “Lower than expected consumption of diamond jewellery in 2014-2015 led to an accumulation of inventory surplus by diamond polishers, which was almost depleted by the end of 2015.”  

The Company also said that in 2016, demand for rough diamonds was higher than demand in 2015, due to lower volumes sold by diamond producers in H2 2015.

The diamond industry, according to ALROSA has grown between 3-5% over the last decade. Diamond jewellery is expected to grow at about 2-4% annually over the coming decade.

Summing up the supply-demand graph, ALROSA said: “Rough diamonds market is expected to be balanced in the mid-term; demand is expected to exceed supply after major diamond mining companies sell rough diamonds from inventories accumulated in 2015.”

ALROSA also noted that global rough diamond production has remained relatively flat, despite companies announcing increases in production; and that diamond exploration has become increasingly challenging.

The Company went on to highlight its own long-term prospects, and estimates. ALROSA stressed that it has a well diversified range of production between divisions and types of production. This is mainly spread in three areas: within the Russia Federation, in the Republic of Sakha (Yakutia) which accounts for 95% of its production assets, and in the Arkhangelsk region which accounts for 5%; and in Angola where ALROSA owns 32.8% of Catoca Ltd. 

ALROSA says it intends to increase diamond production to about 41.5 million carats by   2019 from the current 37 million carats produced in 2016. The Company sees Severalmaz and Udachny as the key drivers of growth. 

The Company made another significant point regarding its overall strategy saying: “ALROSA continues to streamline its operations to focus on diamond mining.” In pursuit of this aim, ALROSA divested itself of several non-core assets both prior to, and in 2015. It will continue to follow this policy and has earmarked some four companies for sale.

In the presentation, ALROSA also delineated its three channel distribution policy    saying that it was based on long-term contracts supported by tenders and spot sales. 

About 66% of ALROSA’s sales are effected through long-term contracts; 19% by spot sales and 15% through tenders.

Marketwise, Belgium accounts for a 49% offtake of ALROSA’s rough diamonds; India accounts for 17%; Israel for 12%; Russia 10%; China 5% and Others 7%.

“Currently ALROSA has 71clients under long-term contracts, including 57 for gem-quality diamonds, with committed volumes and assortment,” ALROSA averred.

Further, it explained that “Long-term clients are selected based on their financial position, reputation and track record.”

ALROSA also noted that the number of its long term clients has risen substantially over the past few years.