Alrosa, the world’s biggest diamond producer, said its Q2 2020 diamond production decreased 42% year-on-year to 5.7 million carats, while its H1 production declined 22% to 13.7 million carats, as production was disrupted due to the pandemic.
In Q2, due to the economic crisis in its key markets caused by the spread of Covid-19, Alrosa took steps to further reduce its output for 2020 to 28-31 million carats. Earlier, in November 2019, the company cut down its 2020 production outlook from 38 million carats to 34.2 million carats.
Alrosa also balanced supply and demand through a flexible sales strategy – selling diamonds only if there is real demand and allowing customers to defer contract volumes to subsequent periods. As a result of Alrosa’s decision to offer flexible terms, its Q2 diamond sales decreased to 634,000 carats, including 361,000 carats of gem-quality diamonds. The company’s H1 sales declined 47% to 10.1 million carats.
Diamond inventories at the end of Q2 increased to 26.3 million carats (up 25% versus Q1 2020, and up 64% year-on-year) due to a significant decline in sales.
Proceeds from rough and polished diamond sales in Q2 came in at $87 million (down 90% quarter-on-quarter and 89% year-on-year), including $74 million from rough diamond sales and $13 million in revenue from polished diamond sales. Sales for H1 were $991 million.
In its diamond market overview, Alrosa noted that the retail markets of China followed by the US began to show promising signs of recovery. China coped with the pandemic ahead of other countries, which accelerated the recovery of demand for diamond jewellery in the country.
Major jewellery retailers in China reported higher-than-expected May sales. In May-June, jewellery stores began to reopen in other countries and regions, primarily in the United States, EU, Japan and South Korea. At the end of Q2, the recovery of the US market was negatively affected by protests.
“On the back of weak demand, Alrosa remains committed to its ‘price-over-volume’ policy and satisfies only the real demand while maintaining a stable price. The policy is aimed at supporting long-term customers and the entire diamond industry,” the company said.
Caption: Nyurba open-pit mine, Yakutia.
Credit: ©️ Alrosa