The diamond market must be more transparent, said participants in the recent World Diamond Congress held in Moscow. However, bringing transparency to a traditionally closed, sellers market – particularly as pertains to pricing and sales volume – might be easier said than done.

Yuri Okoemov, Vice President of Sales at Alrosa – Russia's largest diamond company – discussed transparency in diamond sales in an interview with the Interfax news agency. Alrosa understood the need for transparency in the diamond trade, he said, noting that over the past decade, the diamond industry had made a "huge leap" forward, due in part to the Kimberley Process.

The KP, Okoemov explained, pushed governments toward keeping and publishing orderly data on diamond production and on the import and export volume of rough diamonds. In addition, the KP certification manual made governments a party to the process of verifying the origin of rough diamonds. As a result, he continued, the diamond industry today could be considering ahead of other commodities sectors in terms of data flow.

Any enduring lack of transparency, Okoemov said, existed at company level. He noted that diamond companies have historically been privately held companies, meaning that they were not obligated to release the information on production, long-range plans, finances, partnering criteria, and policy that shareholders in a public company demand.

When asked how the diamond pricing process could be made more transparent, Okoemov replied that valuing diamonds was to an extent a subjective matter and that the more buyers educated themselves, the greater the transparency would be as regards diamond prices. He stressed that diamond prices – like prices for all commodities – were linked in a large measure to market expectations.

Speculation in diamonds, he added, could only benefit "talented dealers." Speculation harmed diamond producers, he said.

The most transparent and stable base for diamond pricing was long-term contracts, Okoemov said, explaining that during auction sales the buyers set the price based on their assessment of the product's value at the time of the sale and future value.



"Expectations of growth give the seller an additional plus, and when a downturn or stagnation is expected - an additional minus." As a result, prices could swing drastically, he said.

Alrosa now sold roughly 60% of its product under long-term contracts and would raise that figure to 70% in 2012, Okoemov said.

"In the first half as a whole, our sales came to $1.97 billion, about 60% being sales under long-term agreements. Another 10% was sold at competitive trades, including auctions for the sale of diamonds of special size. The remaining 30%, that was sales under one-time contracts and on the spot market," Okoemov said.

"In accordance with the conception for sales until 2012 that was approved by the company's supervisory board, Alrosa plans that no less than 70% by value of overall sales will be sales under long-term contracts," he said.

Alrosa now has long-term deals with buyers in four countries - Russia, Belgium, India, and Israel - a total of 24 companies. Alrosa is also negotiating with companies in China, Armenia, and Belarus, and a number of other companies in Russia, Israel, and India.

Okoemov did note that while long-term contract were preferable for the bulk of the trade, auctions were a good way to sell rare stones. "All diamonds of so-called special sizes, of more than 10.8 carats, we sell at auctions," he said.

These stones comprised a relatively small part of the company's overall sales volume and could therefore be regulated in accordance with upswing or decline in demand without affecting Alrosa's general sales.