Alrosa has raised its production outlook for 2021 after rough-diamond demand picked up at the start of the year.

The Russian miner plans to recover 31.5 million carats this year, an increase from its previous forecast of 28 million to 30 million carats, it said Tuesday. That would result in a 5% jump in output versus the 30 million carats Alrosa produced in 2020.

“When we report out first-quarter results, investors will be surprised by the low level of inventory our company will have,” Alrosa CEO Sergey Ivanov said in a conference call following the release of the miner’s full-year earnings. “Not only our company, but the industry is low on rough.”

Demand recovered in the fourth quarter of 2020 as consumers showed a steady appetite for diamond jewelry, with sales in the US and China growing by double-digit percentages compared with 2019, the miner explained. Manufacturers in India restocked in early 2021 while also lifting polished production to full capacity ahead of the Chinese New Year.

This has put Alrosa in a better inventory position than during the peak of the coronavirus crisis, with its diamond stockpiles decreasing 32% during the fourth quarter to 20.7 million carats as of December 31. Despite the higher 2021 production, the miner expects to deplete its inventory further during the year.

“Our aspiration is to sell 34 million to 36 million carats this year, given our inventory levels at the beginning of the year and our production plans,” noted Alrosa chief financial officer Alexey Philippovskiy. “That would be the maximum we could do this year. But we will look at the market conditions and adjust our behavior accordingly.”

In November, Alrosa gave a more cautious prediction for the year, estimating flat production levels as it sought to sell goods that had built up in its safes during the Covid-19 pandemic. Improvements in the global diamond market prompted the company to rethink. For example, it recently announced it would bring the processing plant at its Lomonosov division back into operation on March 1, a month earlier than planned.

“Even the new higher guidance is some 20% below the average production run rate of 2018 to 2019,” commented Boris Sinitsyn, an analyst at Russia-based VTB Capital. The investment bank’s base case assumes Alrosa will reach a more normal output level of 37 million to 38 million carats in 2022 or 2023. “So it’s a slight acceleration of ramp-up towards the previous steady-state production level,” Sinitsyn added.

Alrosa’s revenue surged 55% year on year to RUB 98.61 billion ($1.33 billion) in the fourth quarter as demand recovered ahead of the festive season. This helped peg the company’s full-year sales drop at 7%, for a total of RUB 217.13 billion ($3 billion), despite heavy declines earlier in the year. Profit for the 12 months slumped 49% to RUB 32.25 billion ($436.5 million).