Russia's Alrosa expects drop in 2019 sales as demand falters from China

Russian state-controlled miner Alrosa, the world's biggest producer of rough diamonds in terms of carats, expects a drop in its sales in 2019 due to weaker demand for polished diamonds from China, a senior company official told Reuters.

"We will not reach last year's sales number," Evgeniy Agureev, director of sales for Alrosa, said late on Wednesday.

The company's sales in 2018 rose 6 percent from the previous year to $4.5 billion but the trend has changed, he said.

Alrosa's sales in the first quarter fell 38 percent from a year earlier to $988 million, Agureev said, and in the second quarter sales are likely to hold near the first-quarter level.

The trade war between the U.S. and China has been cutting into polished diamond sales in China, said Agureev, who was in India this week to meet customers.

China is the world's second-biggest diamond market after the United States.

The trade war between the U.S. and China has been cutting into polished diamond sales in China

Demand for polished diamonds during China's Lunar New Year was also subdued and sales in 2019 are likely to be lower than a year ago, Agureev said.

Retail sales growth overall during the Lunar New Year holidays slipped to its lowest since at least 2011.

Leading diamond miners, however, have been cutting production, and that will help support rough prices during the rest of the year, he said.

India's diamond industry, which cuts and polishes 90 percent of the gems sold globally, curtailed rough diamond purchases in the first quarter of 2019 to make balance sheet adjustments before the closing of their financial years, Agureev said.

India's financial year runs from April to March.

Indian diamond companies could start restocking in coming month as their exports of polished diamonds were rising even as they trimmed imports of rough diamonds, said Agureev.

"Inventory level with Indian polishers has come down significantly," he said.

(By Rajendra Jadhav; Editing by Tom Hogue)