ALROSA released its production and sales figures for Q2 2019, reporting a steep 36% year-on-year rise in inventories to 15.9 million carats at the end of June, as quarterly sales dipped 25% in value to US$ 796 mn and 8% in volume to 8.3 mn cts, while production increased 14% to 9.7 million carats.

Over the first half of the year (6M 2019), sales dipped by 32% y-o-y to US$ 1,784 million in value terms and by 16% to 18.9 mn cts in volume terms.

The miner said that the increase in production during the period was both due to its new mining projects as well as increased productivity at some existing sites. Demand, on the other hand, declined as a result of excessive stocking of rough and polished diamonds by cutters and retailers, and continued difficulties faced by India's cutting business in securing affordable financing, ALROSA said.

It also pointed to “ongoing consolidation in the jewellery sector and growth in jewellery sales through on-line channels in the US (that) result in a non-recurrent reduction in polished diamond stocks across the retail sector as businesses embrace more efficient stock management practices, which is in turn impacts rough diamonds purchases by mid-stream”.

ALROSA added that in order to “reduce excess stocks the Indian cutters have been decreasing output since May”.

While average realised prices for gem-quality diamonds were down 21% y-o-y to US$ 130/ct, the 5% q-o-q rise in Q2 indicated that small-size diamond sales were returning to normal. ALROSA said that early 2019 saw a rise in the share of small-size diamond sales on mid-stream were replenishing their stocks of this product category.

The company said its diamond price index came lower by 1.6% q-o-q and was down 4.6% year-to-date.

Looking forward, ALROSA stated that currently demand from jewellery consumers remains stable, which bodes well for renewed activity and higher demand for rough diamonds closer to the end of Q3 2019 in the run-up to 2019-2020 Christmas sales season.