Will sanctions and inflation weigh on the gemstone market?

By 2021, Alrosa had produced 32.4 million carats, with sales estimated at over $4 billion. This represented 90% of Russian production and 37.9% of the world's rough diamond production market. The head of the company, Sergei Ivanov, whose father is close to Putin from the time they worked together at KGB, is now on the list of sanctioned companies. However, countries that do not apply these measures continue to import diamonds from Russia, and Alrosa has still been able to sell some of its production to the Gulf States, India and China.

The world's rough diamond trade is driven primarily by three major diamond producers, De Beers, Alrosa and Catoca of Angola. De Beers, 85% owned by the British holding company Anglo American plc, is the leader in terms of value, having reached a record $4.83 billion with 34.5% of the volumes produced in 2021. The Russian Alrosa, first in volume with 37.9% of world production (45.5 million carats) is in second place in value with 28.4% to 3.98 billion dollars in sales. Next in line are Catoca, owner of the fourth largest mine in the world, with 7% of world production, the Anglo-Australian multinational mining group Rio Tinto with 3% (Rio Tinto's production has fallen significantly in 2021), Petra 3% and Gem Diamonds 0.1%. The six producers alone account for just under 80% of the world's diamond production, according to the specialist platform Edhan Golan. Five months after the boycott initiative by some countries against Alrosa, what is the impact on the sector?

 For Elke Berr, gemmologist, gemstone wholesaler in Geneva, consultant to banks and ambassador of the Gembridge platform: "Alrosa is a major player in the market, as it represents 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 the sanctions are not applied, such as India, Turkey, etc. So you can't say that there is a shortage of diamonds in the market. The volume that Alrosa is not selling represents at most between 10% and 15%, a volume that De Beers has quickly counterbalanced, since the diamond leader has increased its production accordingly. Therefore, the sanctions are not having too much of an impact on the market and the price of diamonds."

But how can we be sure that the diamond we buy is not an Alrosa diamond that has been smuggled through a third country that does not apply sanctions? Elke Berr continues: "It is difficult to be sure, the only way is to rely on one's network of serious suppliers who apply the sanctions. Good knowledge of the supplier network is crucial. The key word is to avoid trying to get a good deal and buy cheaper. Recently, there have been lots of diamonds on the market that have been sold at a lower price. There is a possibility that these contain Alrosa diamonds. It is important to know who the supplier of rough diamonds is and who cut them. This is known as a sightholder, a dealer invited by the major producers to buy rough and who often incorporates a cutter. Their number is limited. For example, De Beers refers to a hundred or so approved sightholders. This is a guarantee of security for the merchant. In this case, traceability is possible."