Diminished demand for rough diamonds is forcing Alrosa to respond to rising pressure from the market. However, instead of reducing prices, which would make the goods more economical, Alrosa is decreasing supply.

The Russian diamond miner is planning to sell "considerably reduced rough diamond supplies" under its long-term contracts in October, Alrosa announced last week. "Overall supplies in November and December will be conditioned by the market demand," it added.

Alrosa is downplaying the situation, claiming "a slight decrease in diamond purchase volume in the world market." Secondary market purchases have been cutback considerably, and buyers are willing to pay significantly less for the goods.

DTC Sightholders are offering rough diamonds at 12-13 percent below what they paid for it – and still have a hard time finding buyers.

Alrosa explains the current disinterest in rough as a traditional August-October slowdown in business activity. Further, the fall in world stock market indices is resulting in a shortage of liquidity, leading in turn "to a significant reduction of speculative component in the diamond market."

The diamond miner further states that it "will react to the diamond price stabilization in accordance with the current trade policy aimed at maintaining market stability and avoiding negative influence of speculative factors."

In a brief outlook, company added that it expects global diamond jewelry sales "to hit very high rates" this year as compared to 2010 and 2009.

Due to the decreasing global diamond production, Alrosa also expects rough diamond prices to continue growing as early as in the beginning of 2012.