Interview on the HKET website
After the global economy recovered and the diamond prices experienced a long-term downward trend, it has stabilized in the past year. The Russian diamond miner ALROSA expects the global diamond market to remain stable this year, and is optimistic about the Chinese and Hong Kong markets.
In addition, the company will strengthen its marketing efforts in response to the rise of artificial diamonds in recent years.
ALROSA is one of the world's major diamond miners. It produced 39.6 million carats of natural stones last year, accounting for 30% of the world's total natural diamond supply. Sales increased by 18% in the first four months of this year to $2 billion.
ALROSA’s CEO Sergey Ivanov said in an exclusive interview with the newspaper that the demand for diamonds in all categories is stable, and retailers have performed well in the past winter sales and are now in the replenishment period. Currently, the company mainly supplies 70% of diamonds to 55 jewelers from around the world in the form of long-term contracts. There are six Chinese and Hong Kong jewelers among them, including Chow Tai Fook. Another 30% of diamonds are sold through auctions and spot contracts.
He pointed out that Hong Kong is one of the most important markets for ALROSA. In March this year, the company sold diamonds worth 16.3 million yuan at the auction in Hong Kong. It is expected that a total of 7 auctions will be held here this year. Chinese companies purchased $180 million worth of diamonds from ALROSA last year, which accounted for a small amount of total sales. However, it has grown by 18% in the past three years. Ivanov expects this year to still record growth, and is optimistic about the prospects of the Chinese market.
As for the United States, which is the world’s largest consumer market for diamond jewelry, last year’s fourth quarter saw a 5% increase in total diamond sales, driving ALROSA’s sales performance in the region. The group is now resetting the US trading office.
He is optimistic that the global diamond market will remain stable this year, which means that the industry expects the annual growth rate of diamond jewelry demand will be 1% to 4%. ALROSA has also set up an additional office in India this year, and the group's branch office in Vladivostok in eastern Russia will be responsible for expanding the Asia-Pacific market.
Artificial diamonds have risen in the market in recent years, and their prices are much lower than natural diamonds. Ivanov believes that if retailers specify that their products are synthetic diamonds, they will not form bad competition with natural diamonds. "This is fair competition. Consumers know what they are buying. Just as Swarovski sells crystal, it can coexist with natural diamonds in the market."
He believes that products have their own markets, many consumers will still purchase natural diamonds, and the industry will establish market positioning by promoting the "eternal" significance that natural diamonds symbolize. However, he pointed out that there were occasions when some traders mixed and sold synthetic diamonds as natural diamonds. This is worrying. "Artificial stone can only be distinguished at the rough stone stage. If it has been polished and inlaid into jewelry, it can hardly be distinguished."
ALROSA, one of the world’s major diamond miners, is currently located in the Sakha Republic in northeastern Russia, where the winter temperatures are as low as minus 50 degrees Celsius.
In order to maintain stable supply, the company has cited a big data system in recent years to predict the annual demand for diamonds.
ALROSA owns several diamond mines in the Sakha Republic and Arkhangelsk. Most of the local operations are carried out in permanent ice bands. In addition to the need for high-tech mining technology, the company also has higher wages than average salary in Russia in general. Three times higher salary is used to hire miners, and 3% of annual revenue is placed in social projects.
ALROSA’s CEO Sergey Ivanov expects this year's diamond production to be about 36.6 million carats, down 7.6% from 39.6 million carats last year. He pointed out that the group has a sound inventory management system and provides a reasonable supply for the market. Currently, 70% of the sales come from contract jewelers. Last year, an electronic system was introduced to manage customer sales activities, including purchases and amounts, which will help set sales plans in the future.
With the company’s new mine in the Sakha Republic starting operations this fall, and with multiple mines now fully operational, it is estimated that production in 2019 will increase.