Prices are on the rise in parts of the rough diamond market as sanctions against one of the world's two largest miners spread throughout the supply chain. In the past, the industry may have turned to giant De Beers for extra gems when supply was tight, but not this time.
The price of a small rough diamond, which will eventually be clustered around a solitaire stone in a ring, has jumped about 20% since early March, according to people familiar with the matter. Reason: Diamond cutters, cutters and traders are having difficulty finding sources for the stones after the US imposed sanctions on De Beers' Russian rival Alrosa PJSC, which accounts for about a third of global production.
For most of the modern history of diamonds, this has been a sort of situation where De Beers could tap into their vast reserves or simply tap into hidden diamond mining capacity. A little over 20 years ago, his vaults in London held stockpiles of diamonds worth perhaps up to $5 billion.
Those days are long gone. The company has only working reserves, and its mines are operating at full capacity. The likelihood of a significant increase in supply until 2024, when the expansion of the flagship mine in South Africa is completed, is unlikely.
“It is very hard to imagine that we are launching any new production,” said CEO Bruce Cleaver in an interview in Cape Town. "Removing thirty percent of supplies is not sustainable."
For many in the sector, this means a growing shortage unless ALROSA and its trading buyers can find a workaround.
Alrosa has canceled its last sale in April and is unlikely to sell large volumes again this month, people said. It is not known when the company will be able to sell normally again, they said, although the company, banks and buyers are looking for solutions.
Although the famous American jewelers Tiffany & Co. and Signet Jewelers Ltd. announced they would stop buying new diamonds mined in Russia, retailers in countries such as China, India and the Middle East have not followed suit.
This dynamic raises concerns that diamonds from Russia will be passed off as diamonds from other origins.