【Geneva, Swit】Will Sanctions and Inflation Weigh on the Gemstone Market? – Jewelry and Gem

Editor’s Note

The global diamond market faces a pivotal moment as geopolitical sanctions and economic pressures converge. This analysis examines how potential EU actions against Russian diamonds, coupled with inflationary headwinds in key consumer markets, could reshape pricing and the competitive landscape among the world’s top producers.

Major Diamond Producers in Full Growth

The boycott of Russian Alrosa’s diamonds last April had slowed down the activities of the world’s second-largest producer. Will the upcoming sanctions requested by the European Union against Russian diamonds, as well as the inflation affecting the sector’s largest importing markets, cause a price drop? Analysis.
De Beers, Alrosa, and Catoca are the three main producers in the rough diamond trade.
$4.83 Billion: De Beers’ revenue in 2021.
$3.98 Billion: Alrosa’s revenue in 2021.

72.4%: The volume of diamond production from the two largest players, De Beers and Alrosa.
In 2021, Alrosa produced 32.4 million carats, with sales estimated at over $4 billion. This represented 90% of Russian production and 37.9% of the global rough diamond production market. At the head of the company is Sergei Ivanov, whose father has been close to Putin since their time working together at the KGB, and the company is now on the sanctions list. However, countries not applying these measures continue to import diamonds from Russia, and Alrosa has still managed to sell part of its production to Gulf countries, India, and China.
Since the sanctions, Alrosa can sell less, but it can continue to do so in countries where sanctions are not applied.

“Alrosa is a major player in the market, representing nearly 38% of production. Since the sanctions, it can sell less, that’s a fact, but it can continue to do so in countries where sanctions are not applied, like India, Turkey, etc. So, we cannot say the market is in a shortage of diamonds. The volume that Alrosa does not sell represents at most between 10% and 15%, a volume that De Beers has quickly counterbalanced, as the diamond leader has increased its production accordingly. Therefore, the sanctions do not have too much impact on the market and the price of diamonds.”

Elke Berr, gemologist and precious stone wholesaler in Geneva, consultant to banks, and ambassador for the Gembridge platform.

Globally, the rough diamond trade is primarily supplied by three major diamond producers: the companies De Beers, Alrosa, and the Angolan Catoca. The De Beers company, 85% owned by the British holding Anglo American plc, is the leader in value, having reached a record figure of $4.83 billion with 34.5% of the volumes produced in 2021.
Russian Alrosa, first in volume with 37.9% of global production (45.5 million carats), ranks second in value with 28.4% at $3.98 billion in revenue. Followed by Catoca, the company holding the world’s fourth-largest mine, with 7% of global production; the Anglo-Australian multinational mining group Rio Tinto with 3% (Rio Tinto’s production decreased significantly in 2021); Petra with 3%; and Gem Diamonds with 0.1%. According to the specialized platform Edhan Golan, these six producers alone represent just under 80% of the world’s diamond production. Five months after the boycott initiative by some countries against Alrosa, what is the impact on the sector?

Tracing Sanctioned Diamonds

The colored gemstone market is rising and allows for better margins than rough diamonds.
But how, then, can one be sure that the purchased diamond is not an Alrosa diamond that has passed through a third country not applying sanctions? Elke Berr continues:

Alrosa, de la Sibérie aux diamants africains

“It is difficult to be sure; the only way is to rely on your network of serious suppliers who apply the sanctions. Good knowledge of the supplier network is crucial. The key is to avoid trying to make good deals and buy cheaper. Lately, lots of diamonds sold at a lower price have been circulating on the market. There is a possibility that these contain Alrosa diamonds. It is absolutely necessary to know who the supplier of the rough diamonds is and who cut them. These are called sightholders, merchants invited by major producers to buy rough and who often integrate a cutting workshop. Their number is limited. For example, De Beers refers to about a hundred approved sightholders. This is a security guarantee for the merchant. In this case, traceability is possible.”

The United States remains the world’s largest buyer of diamonds.

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⏰ Published on: October 04, 2022

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