Alrosa, the world’s largest diamond miner, warned that global supplies of the precious stone would remain tight for several years because of mine closures and a dearth of new projects.
Evgeny Agureev, deputy chief executive of the Russian group, said Alrosa’s inventories had hit historic lows as demand rebounded from last year’s Covid-19 disruptions.
“Our industry will work with limited supply,” he told the Financial Times. “There are projects, but these projects will not provide goods next year or the year after.”
Lockdowns and weak demand last year prompted diamond miners to slash production by about 20 per cent, according to Bain. Large pits — including Rio Tinto’s Argyle mine in Australia which produced a 10th of global supply before it shut in November last year — have also closed.
Bain expects production to remain flat over the next decade. Agureev said this could prove tough to manage, but would help to avoid a repeat of gluts that had caused diamond prices to tumble, such as in 2016 when the industry faced a downturn because of oversupply.
“From one side, it’s a challenging situation because there is demand and limited supply,” he said. “But on the other side, it’s a good situation because the market will [not] experience overproduction problems.”
Alrosa is bullish that the crunch will support diamond prices, which remain below pre-pandemic levels, because of a sharp uptick of buying in key markets such as China and the US. The company expects industry-wide diamond jewellery sales to reach a new record of $90bn this year.
Agureev added that production had been further hampered this year by continued Covid outbreaks and difficult weather conditions. The company mines in Russia and southern Africa.
Alrosa was in the process of reopening its Mir mine in Russia, where a flood in 2017 killed eight miners, he said, but it would take “five to seven” years.
“It’s not easily achievable that we can easily increase the production,” he said. “Once you take the decision to correct your production, it’s not easy to restart in one, two, three months or half a year . . . We work in regions with very difficult conditions, difficult logistics.”
Agureev dismissed any potential challenge from lab-grown diamonds, supply of which is growing as fast as that of mined stones stagnates.
Production of the cultured stones, which are chemically identical to mined diamonds but cheaper, rose to 6m-7m carats in 2020 from just 2m in 2018, according to Bain.
“It’s not a diamond,” he said. “It’s not a competition. They’re absolutely different markets, absolutely different products.”
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