Trade in Russian diamonds has slowed sharply since late May as diamond cutters meet the demand for polished goods from other sources, independent diamond industry analyst Paul Zimnisky said in an interview with industry news agency Rough&Polished.

This is partly due to difficulties in paying for Russian goods in U.S. dollars, but some diamond manufacturers are hesitant to buy if their customers specifically request non-Russian goods, he explained.

Pressure on suppliers is being exerted by the decision of major industry players such as Signet Jewelers, LVMH (EPA:LVMH) (Tiffany) and Richemont, which have pledged not to buy newly mined Russian diamonds, the expert said.

He believes that given the circumstances, it would be appropriate for ALROSA (MCX:ALRS) to reduce production, eventually producing below the 34 million carats planned for this year.

Sanctions against Russian diamonds and ALROSA led to an increase in prices for small diamonds and near-jewelry-quality stones, which came to the market mainly from the Russian Federation. According to Zimnisky’s calculations, these items went up in price by 32% from late January to mid-May, while the average market price adjusted by 13%.

The relative stability of diamond prices, compared to, for example, oil or wheat, is due, in his opinion, to the fact that by February the industry was fully supplied with products, while the shortage of supply, taking into account the seasonal lull, has not yet fully affected prices.

The shortage of small-size rough in processing and retail will start to be felt as we approach the second half of 2022, but if demand falls significantly due to the macroeconomic situation, this will partially even things out, the analyst believes.

De Beers is operating at full capacity, so there is little it can do in terms of increasing supply, Zimniski noted.

Given the situation, the priority of De Beers’ diamond tracing initiative, the Tracr technology platform, which the company says will allow it to trace diamonds “at scale,” will increase, he said.

“I think this will be the big story for the industry this year. The diamond industry has been working on supply chain transparency initiatives for a number of years, but I think the sanctions have been the catalyst to accelerate all of this. …I think we’re on track to see, along with the traditional 4Cs [the four main criteria for grading a diamond], to see an origin column in most grading reports,” Zimnisky concluded.

“ALROSA maintains its initial production forecast for this year at 34-35 million carats, the company’s head Sergei Ivanov told reporters in mid-June. According to the results of the first half of the year, the results are in line with the forecast, and there are no plans to reduce production in the second half. Even poor-commodity assets, which ALROSA canned or limited during the pandemic, are operating at full capacity, he said.

According to him, there is still a high interest in the company’s diamonds. Although some customers have left, others are occupying their niche around the world amid the resulting deficit, Ivanov explained.

Russia supplies about 30 percent of the world’s diamonds. The U.S. banned imports of rough and polished diamonds from Russia in early March, and in April ALROSA was put on the SDN list. Indian diamond cutters, the key buyers of Russian diamonds, began to reject stones from Russia because of the uncertainty created, preparing to specify the origin of each stone and redirecting diamonds from Russia to the markets of China, Southeast Asia or the UAE. From January to March, Russia, according to India’s Ministry of Industry and Trade, reduced diamond shipments to that country by 45%, to 718,000 carats.