North Korea and coal

From Global Energy Monitor
This article is part of the CoalSwarm coverage of North Korea and coal
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Background

The USGS notes:[1]

"From its founding in 1945 until the dissolution of the Soviet Union in 1991, North Korea relied upon the Soviet Union for investment and financial aid for most of its major economic development projects. Mine production generally increased until 1990, but after that time, foreign investment in North Korea’s infrastructure diminished, and supplies of equipment, materials, and energy also decreased. A major reason for the decline was that the newly organized Russian Federation strengthened its relations with the Republic of Korea and supplied less funding to North Korea, in large part because North Korea had failed to repay most of its loans from the Soviet Union."

North Korea's trade with Russia in recent year has been in the order of US$100 million a year while its trade with China and Korea has been about US$6.5 billion and $1.1 billion respectively.[1]

In early September 2015 discussions were held at the Eastern Economic Forum between Russia and North Korea on expanding the coal trade between the two countries and with South Korea. A media release announcing North Korea's participation in the event stated that that in addition to discussion of the Rhasan-Rason coal project.

The release also stated that North Korea and Russia would also discuss co-operation on "coal and iron barter initiatives and a joint concerning the DPRK’s zinc industry." Under this deal, estimated to be worth $25 million, Russia would supply coal "to meet the needs of North Korea’s industry" and in exchange North Korea would supply iron to Russia.[2]

Coal mining

The USGS estimated that in 2013 42 million tonnes of anthracite was produced in North Korea.[3]

The USGS also estimated that the two main coal companies had a production capacity of 15.5 million tonnes in 2013.[4]

The USGS lists the main coal mining operations as:[4]

  • mines in the the Pyongbuk and Pyongnam Provinces with 9.5 million tonnes production capacity which are owned by the Anju Coal Mining Complex and Sunchon Coal Mining Complex; and
  • mines in Hambuk Province with 6 million tonnes production capacity which are owned by Saebyol Coal Mining Complex and Northern Coal Mine Enterprise.

Coal exports

According to the US Geological Service anthracite coal represents the leading mineral exported from North Korea. North Korean coal exports have been estimated to generate about US$1 billion a year.[5]

Exports to China

In 2014 it had been estimated that North Korea exported about 1.2 million tonnes a month to China.[6] It was estimated that North Korean exports of anthracite accounted for about 40 per cent of the country's total exports to China in 2014.[7]

However, the introduction of new coal quality standards from early 2015 initially brought exports to China to a halt. “Not even one ton of North Korean coal has been carried to China so far, because the Chinese government has regulated sulfur content in coal,” a trader surnamed Wang told Radio Free Asia in mid-January. The Chinese standards sought to end the use of coal with over 0.5 percent in sulphur content.[6]

Exports did resume and even increased. In the first five months of 2015 North Korean coal exports to China grew by 25 per cent, as the country, desperate for foreign currency – has boosted exports.[8]

However, not all of the export shipments have gone according to plan. In April it was reported that two shipments of North Korean coal had been rejected at Chinese ports due to failure to meet new mercury content specifications. In late February a shipment was rejected from Rizhao port in Shandong province and the following month a load was rejected at Longkou port.[7]

Exports from Rajin

With Russian coal exports constrained by the capacity of existing ports, an alternative option was for the development of a rail link between Khasan in Russia and Rajin port in North Korea. Rajin is just 56 kilometres from the Russian border. Russian Railways proposed the reconstruction of railway infrastructure between Khasan station, Rajin station and then on to Port Rajin; the overhaul of three major tunnels and the construction of a 4 million tonne per annum cargo terminal at the port of Rajin.[9]

The port was designed to cater for ships of 40,000 tonnes capacity and with storage capacity of 200,000 tonnes.[10]

On April 24 2008, the RZD Trading House - a subsidiary of Russian Railways - and the port of Rajin established the RasonKonTrans joint venture to develop the project. (Russian Railways held a 70% share of the joint venture.[11]) The following year Russian Railways began the construction of the project with finance raised through the joint venture company. In October 2011 the first test train ran between the city of Rajin and Khasan.[9]

It was initially intended that the reconstruction of Pier No.3 at Rajin port would be completed in 2013 enabling the first coal exports.[9]

However, the project was delayed with the first shipment not occurring until April 2014. The first shipment was of 8,840 tonnes of coal supplied by Mechel from the Konbass and was destined for Chinese ports of Shanghai, Lianyungang and Guangzhou.[10] [11]

Test shipments to South Korea

Later that year 40,000 tonnes of coal was exported in a trial shipment from Rajin to the South Korean port of Pohangs for use in steelworks owned by POSCO. The shipment was the first commercial transaction with South Korean after all ties werecut between the two countries after the sinking of a South Korean naval warship in 2010.[12]

However, by August 2015 there was uncertainty about how far the project would go. "South Korean are still reluctant to enter Khasan-Rajin project and the final outcome would depend on the state of Inter-Korean relations,” Georgy Toloraya, Executive Director of the National Committee on BRICS Research for Russia told NK News.[13]

Exporting Mongolian coal

North Korea also agreed in early 2015 to do a test shipment of Mongolian coal via the port of Rajin. "There are no technical problems with delivering coal to North Korea, and we are seeking ways to deliver coals through trans-Siberian railway to Rajin,” the Mongolian Railway Authority’s chairman said.[5]

Coal ports

Articles and Resources

Sources

  1. 1.0 1.1 Susan Wacaster, The Mineral Industry of North Korea: 2013, US Geological Service, US Department of the Interior, July 2015, page 2.
  2. "N. Korean delegation to attend Eastern Economic Forum: Meetings with South Korean delegations planned for the Russian Forum in Vladivostok", NK News, August 25, 2015.
  3. Susan Wacaster, The Mineral Industry of North Korea: 2013, US Geological Service, US Department of the Interior, July 2015, page 4.
  4. 4.0 4.1 Susan Wacaster, The Mineral Industry of North Korea: 2013, US Geological Service, US Department of the Interior, July 2015, page 5.
  5. 5.0 5.1 "Mongolia to send coal through N. Korean port: News comes one day after the two countries sign a memorandum of understanding to increase cooperation", NK News, February 25th, 2015.
  6. 6.0 6.1 "North Korean Coal Exports to China Hit a Snag", Radio Free Asia, January 16, 2015.
  7. 7.0 7.1 "North Korea Newsletter 357 (April 9, 2015)", Yonhap News Agency, April 9, 2015.
  8. Alessandro Vitelli, "North Korea Gains in China Coal Exports as Vietnam Bows Out", Bloomberg, July 20, 2015.
  9. 9.0 9.1 9.2 "North Korea: The Khasan – Rajin Project", Russian Railways, undated, accessed October 2015.
  10. 10.0 10.1 "Russian Railways Logistics to transport coal through port of Rajin in North Korea to Asia-Pacific", Russian Railways website, April 8, 2014.
  11. 11.0 11.1 "First Russian Coal Heads to North Korean Port", Moscow Times, April 8, 2014.
  12. "S Korea eyes 40,000 tons of coal shipment from N Korea", Customs Today, November 29, 2014.
  13. "N. Korean delegation to attend Eastern Economic Forum: Meetings with South Korean delegations planned for the Russian Forum in Vladivostok", NK News, August 25, 2015.

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