World’s biggest miner plans Hong Kong diamond auctions to spur impulse buys of ‘girl’s best friend’ (South China Morning Post)

Interview at the SCMP website

Russia’s Alrosa, the world’s largest diamond miner, plans to hold seven auctions in Hong Kong this year and work with the city’s jewellers to sell to Chinese consumers, who are more methodical than American buyers.

Experienced Chinese diamond consumers have a greater propensity to make planned purchases of "a girl's best friend" than American customers, according to a survey commissioned by the world's biggest diamond miner Alrosa.

Up to 86 per cent of Chinese respondents in GfK Research’s 2017 poll of 4,000 respondents aged between 25 and 55 said they plan to buy at least one piece of diamond jewellery this year, compared with 59 per cent of Americans surveyed.

Some 73 per cent of the Chinese respondents have bought diamond jewellery for themselves in the previous 12 months, and around a third purchased at least one piece as a gift.

The respondents have average or above average income and have bought or received diamond jewellery as a gift in the previous 12 months.

The study attributed the findings to Chinese consumers’ habit of planned purchases for diamonds, compared to a greater propensity of spontaneous, or impulsive purchases in the US.

To get a tighter grip of the Chinese market, which it believes will grow faster in the long term than its No. 1 market, the United States, Russian state-backed mining giant Alrosa plans to hold seven auctions in the port city of Vladivostok near the Chinese border this year, compared to four last year when US$74 million of sales of gem-quality products were made.

The Moscow-listed company will also host seven auctions and tenders in Hong Kong.

The bulk of the firm’s China sales are done via long-term agreements with six customers, which also buy Alrosa diamonds through traders.

Alrosa is in talks to forge more direct sales and closer marketing partnerships with some of them, such as Chow Sang Sang, Chow Tai Fook and Luk Fook, Evgeny Agureev, Alrosa’s head of sales and board director told the South China Morning Post in an interview.

“For us, it is important to have direct relationships with our Chinese retailer clients,” he said at the sidelines of the Hong Kong International Jewellery Show. “With the big names, it is important to create trust.”

“The Alrosa brand is not so well known in the Chinese market, we will invest more in marketing and brand building among Chinese jewellery retailers, and are open to showing them our production facilities, processes and how we fulfil our social responsibilities,” he said.

The firm contributes around US$180 million a year to fund social programmes in the region where its main mining capacities are located in remote East Siberia.

Despite being the world’s biggest producer of rough diamonds in carat terms and the biggest reserve holder, Mirny, Sakha Republic-based Alrosa only began strengthening its own marketing and distribution capabilities around a decade ago.

Up until the mid-2000s, nearly all of its export sales went through South Africa’s DeBeers, the diamond mining and marketing unit of mining giant Anglo American.

Agureev, a veteran commercial banker before joining Alrosa six months ago, said the firm signed its first long term supply agreement with a Chinese customer in 2010, and last year sales to mainland China and Hong Kong amounted to US$180 million - less than 5 per cent of Alrosa’s global sales.

China’s diamond demand may grow by an average rate of 5 per cent through to 2030 in the optimistic scenario, compared to up to four per cent in the US, although the latter is expected to remain the world’s biggest market, Agureev said.

The 66 per cent state-owned firm posted a net profit of US$1.92 billion on revenues of US$4.69 billion in 2016.

Alrosa had a 28 per cent share of global rough diamond output, followed by 20 per cent of De Beers and 13 per cent of Rio Tinto, according to a report by Antwerp World Diamond Centre and Bain & Company, and data from Kimberley Process which aims to remove from the supply chain diamonds illegally traded to fund conflicts in war-torn regions.

Alrosa has around 653 million carats of reserves, or 16.5 times its output of 39.6 million carats last year.

This page was last updated on 05 March 2018 at 17.44