Alrosa Said to Double Planned Diamond Sale in Extended Offer

  • Russian miner sells as much as $500 million of diamonds
  • De Beers also sold more gems than expected after price cut

Alrosa PJSC extended its January diamond offering and is set to sell about double the amount originally planned, boosting supplies to the market, according to two people with knowledge of the matter.

Russia’s state-backed producer will probably sell $450 million to $500 million in its first sale of the year, said the people, who asked not to be identified because the information is private. The sale has lasted longer than the typical 10 days, the people said.

The move follows a bigger-than-expected sale from rival De Beers last month and is an indication that the two biggest producers, which control almost two-thirds of global diamond supply, are seeing better demand for rough gems amid shortages of some stone types. The industry cut production and held back sales last year as prices slumped 18 percent after China’s economic slowdown and an industry-wide credit crunch curbed purchases.

Alrosa’s press service declined to comment.

De Beers sold $540 million of diamonds in its first sale this year, more than analysts expected, after reducing prices by as much as 7 percent. Polished diamond prices have firmed after output cuts and a positive holiday season in the U.S., the unit of London-based Anglo American Plc said last week. Alrosa hasn’t reduced prices in its sale, the people said.

Unstable Market

While it’s too early to say demand has recovered, holiday sales provided at least a temporary boost to sales, Konstantin Yuminov, an analyst at Raiffeisenbank AO in Moscow, said by phone. Many polishers have cut inventory in the past several months, while the biggest producers are looking to sell stockpiles, he said.

“Alrosa is using the moment to try to cut its stockpiles,” Yuminov said. “The diamond market remains unstable because polishers still have low margins, and demand may decline later in the year.”

De Beers, which says it matches production to demand, cut its output target three times in 2015, reducing the goal by as much as 15 percent to 29 million carats. The 26 million carats it forecasts for this year will be the least since 2009. Alrosa, based in the Yakutia region in Russia’s Far East, sold less than half of the stones it mined in the third quarter.

That’s led to the two companies holding more than $3 billion worth of stones that eventually will have to be sold, RBC Capital Markets estimates. Alrosa had more then 20 million carats valued at $2 billion in inventory, Interfax reported in November, citing First Vice President Ilya Ryashchin.

UBS AG said last week that while prices are likely to remain volatile, it expects prices to start rising toward the end of the year. Panmure Gordon & Co. has forecast that prices may drop another 5 percent before steadying by the second quarter.

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