by Alex Francis

In 2009, following the global financial crisis, Russia started stockpiling diamonds. About three million carats of diamonds were being washed and sorted by the diamond company Alrosa every month, but none of them were ever reaching the market. Instead, the state-owned company made the decision to stash the precious gems and has subsequently surpassed De Beers as the world’s largest diamond producer – subsequently taking control of global diamond prices. In an industry notorious for fixing prices and promoting an artificial scarcity of the precious gems, this shift of power is certainly interesting.

Manipulating the Diamond Market

Until 2008, De Beers produced around 40% of the world’s supply of rough diamonds compared to Alrosa’s 25%. As the production of diamonds increased in 2008, prices began to drop. In response, De Beers closed some of its mines in order to curb production, cutting it by 91% compared to the previous year. The markets for both rough and wholesale polished diamonds, however, still dropped dramatically. So instead of continuing to flood the market with diamonds, furthering lowering the cost by increasing the supply, Alrosa began to stockpile. The Russian state-owned company also convinced the central bank of Angola to buy 30% of the diamonds produced by the country’s mines in order to further deplete the market.

Future of the Industry

The entire diamond industry is reliant upon continuing the idea that diamonds are scarce in the face of a conflicting reality, and Alrosa is doing its best to perpetuate that illusion. Russia recently reported that it has known since 1970 about a massive asteroid crater in Siberia that supposedly contains enough diamonds to supply the global market for the next 3,000 years. While the diamonds that Russia has been keeping secret for over 40 years are now known to not be of jewelry quality, the Russian news agency ITAR-TASS reports that they are twice as hard as normal diamonds and will likely be sold to scientific institutions.

The economy has begun to improve since 2009, and Russia’s diamond manufacturing industry produced $850 million worth of diamonds in 2011 as opposed to 2009’s $350 million. And this year, Alrosa finally sold part of its massive stockpile to Gokhran, the Russian State Precious Metals and Gems Repository. Alrosa also reported that revenue from its core businesses increased 27% from 2011 to 2012. The Russian diamond industry leader maintains that it is preserving what it considers to be an acceptable level of price stability throughout the industry. But if, unlike Russia, you have no interest in stockpiling you diamonds, check out CashForDiamondsUSA.com to find out how you can earn cash for your unwanted precious stones.

Sources:

http://articles.timesofindia.indiatimes.com/2012-04-09/surat/31312629_1_alrosa-indian-diamantaires-rough-diamonds
http://www.csmonitor.com/World/Global-News/2012/0917/Russia-reveals-shiny-state-secret-It-s-awash-in-diamonds
http://www.businessinsider.com/huge-russian-diamond-find-overhyped-2012-9

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