Diamond miners face turning point amid weak prices

The diamond industry, once a symbol of timeless stability, finds itself in a state of flux as prices for natural diamonds hit multiyear lows, driven by a mix of evolving consumer preferences, geopolitical upheaval, and the meteoric rise of lab-grown diamonds (LGDs), a new study shows. 

The reversal of fortunes that followed a surge during the covid-19 pandemic has left industry stakeholders grappling with how to adapt to ensure long-term sustainability, consultancy McKinsey & Company says in its latest report.

During the pandemic, diamond prices rose unexpectedly. Supply chain disruptions and the delay of weddings initially dampened sales, but many consumers stuck at home turned to diamonds as a form of self-care. This led to an unanticipated spike in demand and a sharp rise in prices. 

The post-pandemic market has painted a very different picture. As traditional engagement and marriage cycles return and supply chains normalize, prices have tumbled amid changing market dynamics, McKinsey & Co. says.

Ten years ago, young customers were an important segment of the overall demand for precious stones. Today, they seek more affordable and ethical alternatives.

With prices up to 80% lower than mined diamonds, LGDs have swiftly carved out a substantial share of the market, challenging traditional producers, the report shows.

Shifting customer values

Increased awareness of environmental, social, and governance (ESG) issues has also driven consumers to demand greater transparency and sustainability in diamond sourcing. Many buyers now insist on proof that their diamonds were mined under fair conditions with minimal environmental impact. This shift is particularly pronounced among younger generations, who are reshaping the jewelry market with their purchasing power and values.

Generation Z is leading a wave of change, favouring ethical and customizable products over traditional offerings. Younger buyers are more likely to seek out jewelry that aligns with their values, including fair labor practices and sustainability.

Many are turning to digital platforms for their purchases, with online fine jewelry sales growing significantly. In 2021, the average online purchase of diamond jewellery in the US was $2,204, compared to $2,994 in physical stores, signalling a growing comfort with digital transactions for high-value items.

The trend of self-purchasing is another key shift. Rather than waiting for significant life events like engagements or weddings, many consumers are now buying fine jewelry for themselves.

Industry actors Beers Group and Signet Jewelers launched in October their “Worth the Wait” campaign, aimed at reigniting demand for mined diamonds from youngsters, particularly amid “zillennials”, the microgeneration born between 1993 and 1998.

Geopolitical and gov’t factors

Adding to the industry’s challenges are geopolitical tensions. Sanctions targeting Russian diamonds have disrupted the global supply chain, particularly for larger stones. Russia’s Alrosa, once the world’s top diamond producer by output, has been heavily sanctioned by the US and the European Union, creating regional dislocations. 

McKinsey & Company warns that, by March 2025, these restrictions will tighten further, targeting stones of 0.5 carats and above, exacerbating supply chain issues.

The upheaval comes at a time when natural-diamond production is already constrained. Growth in supply is expected to remain sluggish, with an annual increase of just 1–2% through 2027, far below historical trends. Major mining companies are grappling with depleting resources, forcing them to shift from open-pit mining to more expensive underground operations. Companies like De Beers have invested billions to extend the life of their mines, but these efforts are costly and time-consuming.

Government intervention is also reshaping the industry. In diamond-rich regions, including Botswana, public authorities are taking larger stakes in mining operations, emphasizing the need for transparent and sustainable practices. 

Despite the challenges, there are opportunities for companies willing to adapt, the consultancy says. Producers can diversify their offerings by incorporating LGDs or recycled diamonds into their portfolios. They can also emphasize the unique, intrinsic value of natural diamonds, appealing to consumers who value rarity and tradition. Investments in sustainability and digital commerce are likely to pay dividends, as consumers increasingly demand ethical and seamless shopping experiences.

The consultants conclude that by embracing innovation and aligning with shifting consumer values, the industry may find a way to shine brightly once more.

Source: Mining.com

Russia’s finance ministry considering new diamond purchases from Alrosa in 2025

Russia’s Finance Ministry is considering new purchases of rough diamonds from Alrosa for the State Precious Metals and Gemstones Repository (Gokhran) in 2025, Deputy Finance Minister Alexei Moiseyev told reporters on the sidelines of the Moscow Financial Forum.

“We are considering this possibility,” Moiseyev said in response to possibly resuming purchases. “In order to allow Alrosa the opportunity to be calm and not feel obliged to sell on the market in order to maintain its liquidity position. Because the market looks alarming.”

The government could use budgetary allocations for precious metals and stones to purchase rough diamonds. The purchase limit is planned at 51.5 billion rubles for next year, Moiseyev said.

It became known in March that Alrosa and the Finance Ministry had concluded an agreement to buy out part of the raw materials produced in 2024 and completed a transaction for the first consignment of rough diamonds. There have been no reports since then regarding Alrosa purchasing diamonds from Gokhran.

“There are no plans for this year, though we are considering the possibility for next year,” Moiseyev said. “In general, this is all confidential, so we may not announce it.”

US Lifts Ban on Grandfathered Diamonds Amid New Sanctions on Russian Gems

The Office of Foreign Assets Control (OFAC) has issued new licenses under the Russian Harmful Foreign Activities Sanctions Regulations, allowing for the sale of diamond jewellery and loose gem-quality diamonds imported before recent sanctions were implemented. This significant policy shift permits goods that were previously prohibited to re-enter the market.

Under the new guidelines, diamond jewellery purchased before March 1, 2024, as well as loose diamonds of 1 carat or larger bought before that date, and those of at least 0.50 carats purchased before September 1, 2024, can now be sold. The relaxation for loose diamonds will remain in effect until September 1, 2025.

However, starting September 1, 2024, the next phase of G7 diamond sanctions will impose restrictions on all goods of 0.50 carats or above from Russia, regardless of where they are cut and polished. This phase of sanctions is set to take effect next Sunday, despite substantial opposition from various industry stakeholders.

In response, the Jewelers Vigilance Committee has reported that the United States is considering supporting a delay in the implementation of these sanctions. This potential delay, which aligns with the European Union’s proposed extension to March 1, 2025, aims to provide additional time to resolve the intricacies of the sanctions and their impact on the diamond trade.

Source: DCLA

G7 bans Russian diamonds from January in show of solidarity to Zelensky

The Group of Seven (G7) nations will ban direct imports of Russian diamonds starting next year as a punitive measure against Moscow’s invasion of Ukraine.

There will be phased-in restrictions on indirect imports of Russian gems from March, a joint statement on Wednesday after the G7 nations’ meeting said. The measures were announced as Joe Biden and leaders of the G7 countries met Volodymyr Zelensky virtually in a show of solidarity.

The new measures will ensure a ban on non-industrial diamonds from Russia by 1 January and on third-party nations which sell Russian diamonds from March.

The move was being mulled as a part of fresh sanctions by the European Union last month. The G7 will phase in restrictions on indirect imports from a targeted date of March and introduce a “robust traceability-based verification and certification” mechanism for rough diamonds within the G7 by 1 September 2024. The ban excludes diamonds for industrial use.

Russia is the biggest producer of rough diamonds, which are taken from swathes of mines beneath the Siberian permafrost. The trade of precious rock has helped Russia stop from bleeding under economic sanctions after the invasion of Ukraine in February last year.

Source: DCLA

Alrosa says mines largest gem-quality diamond in Russia in a decade

Sanctions-hit Alrosa, the world’s biggest diamond-producing company, said on Sunday it has mined the largest gem-quality diamond in Russia in the past decade.

The 390.7-carat diamond was mined at one of the company’s mines in the Republic of Sakha, Alrosa said in a statement. The region, commonly known as Yakutia, lies in Russia’s Far East along the Arctic Ocean.

“The found diamond is a light crystal of an irregular shape, bordered by a yellow-brown halo – a combination of mass, shape and colour that is unique today,” Alrosa said.

The company mined the largest gem-quality diamond in Russia in 2013, weighing 401 carats, Alrosa said.

The world’s largest gem-quality diamond ever mined – the 3,106-carat Cullinan stone – was recovered in South Africa in 1905.

Alrosa was last year placed under sanctions by the United States, which cut it off from its banking system and banned direct sales to the US market after Russia invaded Ukraine.

Last month the company reported a rise of 0.2% in revenue for the first half of the year but said net profit fell 35% year-on-year to 55.6 billion roubles.

Source: DCLA

Alrosa Finds 2 Huge Diamonds at Udachnaya on the Same Day

Two large high-quality diamonds – each larger than 50 carats – were unearthed in Yakutia on December 2, 2022, Bankers Day, “when Russian bankers celebrated their professional holiday,” according to Rough & Polished.

The two stones were extracted at Processing Plant No. 12 from the ore mined at the Udachnaya diamond pipe. One weighs over 67 carats, while the second diamond, a type IIa, weighs more than 52 carats,

Dmitry Amelkin, Alrosa’s Strategy Director, commented: “Finding two of these rare gem-quality diamonds on one and the same day is a unique coincidence. It is symbolic that this happened precisely on the Udachnaya diamond pipe, which has been accompanied by good luck since its discovery 

Credit: Alrosa

Alrosa CEO Sergey Ivanov Reportedly Leaving

  

                            Sergey Ivanov 

Alrosa CEO Sergey Ivanov is stepping down from the position, a Russian news outlet reported.

The executive has decided to resign before the termination of his contract, according to a Google-translated version of an RBC article. He might move into a role at Volga Group, which controls gas and petrochemicals assets, the report added, citing an unnamed source.

An Alrosa spokesperson declined to comment to Rapaport News on Sunday.

Ivanov joined the Russian diamond miner in the top job in 2017, succeeding Andrey Zharkov. Earlier this year, the US named Ivanov as a sanctioned person following Russia’s invasion of Ukraine.

Source: DCLA