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De Beers hikes small diamond prices as sanctions cause shortages

Even after the price rises, there is strong demand for the goods.
Image: Bloomberg

De Beers has raised the price of smaller diamonds as sanctions on its Russian rival creates a growing shortage of some stones.

The price of small rough diamonds, the type that would end up clustered around the solitaire stone in a ring, has surged since the start of March as cutters, polishers and traders struggle to source supply after the US levied sanctions on Russia’s Alrosa PJSC, which accounts for about a third of global production.

De Beers raised the prices of smaller stones by between 5% and 7% at its sale this week in Botswana, according to people familiar who asked not to be identified because the information is private. Even after the price rises, there is strong demand for the goods, the people said.

De Beers produces relatively few of the type of diamonds Alrosa specialises in: the smaller and cheaper gems that are used in lower-end jewelry sold by Walmart Inc. or Costco Wholesale Corp. That’s creating increasing shortages as Alrosa’s ability to supply the market remains uncertain.

The diamond industry was one of the surprise winners as the global economy rebounded from the first effects of the pandemic. Consumer demand for diamond jewelry grew strongly last year, while supply remained constrained.

De Beers raised prices of rough diamonds throughout much of 2021 as it sought to recover from the first year of the pandemic when the industry came to a near halt. Yet most of those price rises were focused on larger and more expensive diamonds, while the emphasis now is on cheaper stones.

The industry has been thrown into turmoil by Russia’s invasion of Ukraine and the sanctions that followed. Indian buyers, who dominate the industry, have struggled to find ways to buy stones from Russia as banking, insurance and shipping services dry up.

Many in India’s diamond industry still want to keep buying, according to people familiar with the matter. And while big-name US jewelers, Tiffany & Co. and Signet Jewelers Ltd., have said they will stop buying new diamonds mined in Russia, retailers in places like China, India and the Middle East have not followed suit.

© 2022 Bloomberg

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