The temporary move comes amid shrinking demand for the precious stones on international markets
Russian mining giant Alrosa has placed a temporary suspension on sales of rough diamonds in September and October in a bid to prevent overstocking and avoid a drop in prices amid low demand, the company announced on Wednesday.
The move was taken at the request of India's Gem & Jewellery Export Promotion Council (GJEPC) following a meeting of leading Indian diamond cutters.
"The move to halt rough-diamond allocations reflects Alrosa's commitment to stabilizing the market's supply-and-demand balance. With the ongoing trend of declining demand, Alrosa believes that this decision will help prevent overstocking, especially as the industry approaches the Diwali season, when many manufacturers traditionally shut down," GJEPC said in a press release.
Alrosa's press service told RBK that it had a "solid and high-quality asset base and a stable financial position," which will make it possible for the company to weather the suspension without incurring heavy losses.
"We expect that this will have a stabilizing effect to support the balance in the market and strengthen the stability of the links in the diamond supply chain by the beginning of next year," the press service added.
Earlier this month, GJEPC chairman Vipul Shah said the country's diamond industry was concerned about several problems affecting the gem trade, including declining demand pressures, the impact of lab-grown diamonds, polished inventory and production challenges, economic downturns in the US and China, overall geopolitical instability, and changing consumer preferences. According to Shah, "exploring mechanisms to manage the supply and prices of natural diamonds through collaboration among miners can be instrumental in bringing balance to the market."
Alrosa's move does not appear to be connected with the proposed G7 and EU bans on Russian diamond sales. The measures expected to be announced next month reportedly envisage restrictions on direct and indirect diamond exports from Russia, as well as a tracking mechanism that would facilitate Western states in determining the origin of gems. The measure, if introduced, may see Russian gems processed in India banned from Western markets.
India's diamantaires had earlier warned that the ban could be disastrous for the entire sector. According to a recent report by the Economic Times, the Indian diamond industry cuts and polishes nine out of every ten diamonds in the world at a processing hub in the city of Surat. A potential embargo would put at risk Surat's 4,000 diamond-processing companies, which employ at least one million people. According to media reports, Indian exports of cut and polished diamonds have already slumped as US and EU firms shun buying diamonds sourced from Russia.