ALROSA: Long-term contracts to remain the cornerstone of the Company's sales policy
At a meeting held on October 26, ALROSA Supervisory Board considered and approved the Company's Sales Policy Concept for 2018-2020.The document outlines fundamental principles of rough diamond sales and forms a basis for a new three-year contract period.
Key principles of the Company's sales policy will remain unchanged. Long-term contracts for the sale of rough diamonds with large trading, cutting and jewellery companies for up to three years are the keystone of ALROSA's sales."The practice of long-term contracts, being implemented by the Company since 2009, has repeatedly proved its efficiency. It ensures sustainable employment for the seller and the buyer, and protects them from price volatility in the diamond market. Therefore, long-term contracts will remain the key sales channel for ALROSA, their share in the volume of our sales will remain at the current level of about 70 per cent," said ALROSA Vice President Yury Okoemov.
As to long-term contracts, the Company is planning to switch over to annual mutual approval of the volume and assortment within three-year contracts. The existing contracts stipulate for the monthly volume and assortment of purchased goods for the entire three-year period ahead. A switch to annual planning will allow both the Company and its customers to respond more flexibly to any changes in the market.
Today, ALROSA has long-term contracts for the sale of gem-quality rough diamonds with 47 companies from the international market, and 9 companies from the domestic market. There are also 3 long-term contracts with domestic companies for the sale of industrial diamonds. The new contract period will start on January 1, 2018. Upon approval of the Sales Policy Concept, the Company will proceed to forming new contracts and the list of long-term customers for 2018-2020.
Apart from long-term contracts, ALROSA sells rough diamonds in almost equal shares at auctions and under spot contracts.
The Sales Policy Concept also includes the initiatives to develop polished diamond trade.So far, the Company's affiliate DIAMONDS ALROSA is the second largest cutting and polishing facility in the country. The Company is planning to increase the share of cutting and polishing of special-size and fancy-colored rough diamonds, increase the share of sales in large diamond-consuming centers, including via ALROSA's foreign-based trading companies.
Participants of the meeting noted the need to implement marketing initiatives, primarily large-scale programs of generic marketing, for maintaining and strengthening consumer demand for diamond jewelry that encourages the demand for rough diamonds.
ALROSA was one of the initiators to establish DPA that started working in 2015.The association, uniting seven world's leading diamond-mining companies today, was created to promote and protect the reputation of the diamond industry. The DPA's primary focus area is the program of generic marketing of diamonds. Its aim is to spur consumer demand for diamond jewelry, primarily to reach out to a younger generation of buyers. The first marketing campaign "Real is Rare. Real is a Diamond" was launched late in 2016 in the USA, the world's largest jewelry consumer market. Looking ahead, promotion campaigns will be launched in the Chinese and Indian markets.