Russia’s state minerals store plans to greatly boost diamond sales amid a widening budget deficit, adding to concerns that supply is rising too fast in an industry still reeling from the biggest rout in seven years.
The government depository known as Gokhran plans an auction on Feb. 29 to sell 16,799 carats and another on March 10 for as much as 150,656 carats, it said on its website. The expansion, compared with 8,800 carats sold in 2015, adds to concerns supply is growing too fast, according to Neri Tollardo, an analyst at Morgan Stanley in London.
“While these amounts are small relative to the global diamond market, these dynamics underpin our worries that too many rough diamonds may be coming to the market too soon after a very tough second half,” Tollardo said in a note. “It’s believed that Gokhran is carrying this out to support the state deficit.”
Russia is battling its longest recession in two decades with the government preparing to step in to shore up investment even as it struggles to contain a deficit that ballooned to almost 3 percent of economic output in 2015, the widest in five years. Gokhran, which bought gems during the 2008 global financial crisis to support state miner Alrosa PJSC, seeks to raise 4.52 billion rubles ($58 million) in diamond sales this year, Russia’s budget plans show.
The depository will raise 1.2 billion rubles in the February and March auctions if its gems are sold at the starting price.
A Gokhran representative declined to comment on Monday.
The auctions follow a combined $1 billion of sales this year by the world’s two biggest diamond miners, Alrosa and De Beers, amid industry hopes that supply cuts, lower prices and better-than-expected holiday demand would aid a recovery. Last year was bruising for the $80 billion industry, with prices dropping the most since the 2008 financial crisis.