Russia's Alrosa expects inventory normalization, turnaround in demand, diamond prices in coming months

MOSCOW. Dec 27 (Interfax) - A gradual normalization of diamond and diamond product inventories across the entire supply chain from the cutting sector to retail is expected in the coming months, Alrosa said.

Sergey Takhiyev, the head of corporate finance at Alrosa, made this forecast in an interview with journalists on Friday.

The normalization of inventories will act as a catalyst for a turnaround in diamond product prices. Price growth will be supported by strong demand for jewelry and a significant reduction in diamond mining capacity by as much as 20% compared to the levels of 2018-2019.

The decrease in demand and prices in the global market over the past two years was due to the accumulation of significant diamond and diamond product reserves in previous years, as well as the exponential increase in the cost of working capital financing in the cutting sector in India, which accounts for about 90% of the global diamond cutting, Takhiyev said.

"At the same time, the rapid development of online jewelry sales has allowed jewelers and retailers to structurally reduce their needs for inventories. As a result, the normalization of inventories took a long time," he said.

"Nevertheless, the decline in mining which has been observed in recent years due to the natural depletion of the global resource base, and the growing market capacity for luxury goods and jewelry products in particular, are factors that will drive long-term price growth for diamond products," Takhiyev said.

In September, Takhiyev predicted a recovery in demand amid strong fundamental factors, including declining production at the same times as a gradual growth in demand for jewelry, as early as 2024. "Currently, the cutting sector is in a phase of freeing up inventories. This will likely take one to three months, perhaps a little longer," he said.

Amid the prolonged crisis in the market, Alrosa will have to suspend production at some of its least profitable sites in 2025 and optimize costs, including expenditure on staff, which will be reduced by 10%, the company's CEO Pavel Marinychev said in November.