Alrosa extended its existing rough diamond supply contracts through Q2 2021 after a thorough analysis of the market situation and its clients’ needs, as part of the preparation of new three-year arrangements. The company said the adaptation of its supply to real demand is aimed at ensuring support for an emerging supply demand balance.
During Q1 2021, Alrosa hosted a round of negotiations with all of its long-term clients in order to identify their needs and offer a product mix meeting them as fully as possible.
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. Limitations caused by the Covid-19 pandemic in 2020 suspended the regular diamond trade for several months. As a result, the purchase history falls into three parts: the one before the pandemic, selective purchases during the first wave of lockdowns, and the updated demand expressed after the regular trade resumed.
In these circumstances, Alrosa has decided to extend its existing contracts through Q2 2021 to let its clients update their purchase history.
Evgeny Agureev, Deputy CEO of Alrosa, said: “The rate of the market recovery seen during recent months proves that the diamond industry has become stronger and more resilient after the latest challenges. For many of our clients this transformation meant amending their business models. In this context the traditional practice of allocating goods for the contract period based on the previous period’s purchase statistics may lead to distortions. This is why we are extending our existing long-term contracts and formalizing our recent months’ practice of working upon clients’ requests without mandatory allocation of goods. This will allow us to support the real confirmed demand and maintain an equilibrium of the industry,”
Ordinarily Alrosa would start analysing the past trading activity of its clients, including both current and prospective members of Alrosa Alliance, at the end of the year. However, in 2020 due to the Covid-19 pandemic the company shifted this period to Q1 2021. Alrosa’s sales policy is based on three-year long-term contracts with major diamond cutters, dealers, vertically integrated companies and diamond tool producers with an established reputation. In general, diamond sales under long-term contracts account for about 70% of Alrosa’s total revenue.