Alrosa To Debut New Model Of Long-Term Agreements In January 2022
Alrosa has presented its customers with a new concept of creating a list of partners eligible for signing long-term agreements and new rough diamonds allocation principles, which will be relevant for the 2022–2024 contract period. Based on the lessons learned during the 2019 and 2020 crises, this approach takes into account the business specifics of different types of rough diamond buyers. It will prevent volatility and dependence on outside factors in the diamond industry, reinforcing stability.
Traditionally, Alrosa sells the bulk of its diamonds to long-term clients under three-year supply contracts. These contracts may specify in advance the mix and volume of diamonds offered to each specific client. In the past, contract specifications were based on a client’s purchase history.
Another contract period was due to start in 2021. However, given the difficulties faced by the midstream segment of the global diamond chain in 2020, Alrosa extended its long-term contracts to support the long-term stability of the industry and give it time to recover following several months of a trade slump. The company postponed the revision of its long-term clients list and their respective specifications. This allowed the clients to update their sales and purchase strategies and to forecast their future demand for rough diamonds as accurately as possible under the new circumstances.
In 2021, the company’s thorough analysis of the situation showed the need for adjusting its goods allocation model under long-term contracts. As a result, Alrosa has developed a new system, which ensures that specifications meet clients’ requirements as closely as possible. This new system, in addition to the client’s purchase history, takes into account the specific business needs of each diamond consumer category, such as diamond cutters, traders and jewellery retailers.
Evgeny Agureev, Deputy CEO of Alrosa, said, “The diamond market has successfully overcome two of the gravest shocks in a row. The local industry crisis in 2019 and the subsequent global coronavirus pandemic have transformed the industry, making it much more transparent and open for discussions. After the transitional period of 2021, the time has come to start a new contract period. On the other hand, the market needs a new model of long-term agreements in rough diamond trade to help withstand external shocks. The key distinction of this new system is its division of contracts and goods depending on the clients’ business activity. We give special priority to creating added value at all stages of a diamond’s journey. The continuous open dialogue we have been having for recent years has allowed us to improve the understanding of our customers’ needs even further. Thanks to this, we are now able to tailor extremely unique specifications for each client, ensuring the most effective buyout. This approach has been approved by the regulatory body, so the January 2022 trading session will follow these new rules.”
Alrosa’s sales policy is based on three-year long-term contracts with major manufacturers, traders, jewellery retailers and industrial diamond consumers. Long-term contracts account for the bulk of Alrosa’s total sales. Alrosa’s long-term clients and candidates for signing these types of contracts form the Alrosa Alliance community. Its members are all committed to responsible business practices. The updated list of Alrosa Alliance members will be published in December.
Long-term contracts with Alrosa guarantee a monthly supply of rough diamonds of previously specified categories and volumes, as well as an option to request additional goods.
Alrosa also sells regular rough diamonds as part of one-time spot deals. It also offers special size diamonds (weighing 10.8 carats or more) and coloured rough diamonds for auctions and tenders.