North Korea’s geological resources are reportedly selling at giveaway prices due to the low competitiveness of the processing industry.
The North Korea Resources Institute has released a report entitled, “Present state and prospect for North Korea’s geological resources processing industry.” The paper asserts, “North Korea has abundant geological resources, but due to the deterioration of facilities and power shortages in the processing industry, the country has lost international competitiveness.”
Geological resources are either used as they are mined or commercialized through processing. Coal is a representative ore that is commercialized in the mined state, while most metal minerals such as copper and zinc are processed and sold as commodities. According to the paper, the processing of underground resources is divided into four steps. The primary processing is conducted on-site and the resources are then reprocessed at the secondary processing stage. The third and fourth processing stages are the final stages.
The report estimates that the average operational rate for North Korea’s primary geological resources processing industry including lead, zinc, copper, and magnesite is 28.3%, and the average operation rate for the secondary underground resources processing industry including lead, zinc and copper is 16.9%, based on data from the United States Geological Survey (USGS).
The report based its assumptions on data from the Korea Foreign Trade Association (KITA) showing that North Korea has suffered annual export losses of 185 million to 258 million USD (approx 200 billion to 300 billion KPW) solely in the three major commodities – lead, zinc and copper, due to a lack of competitiveness in the processing industry.
North Korea is suffering severe profit losses by exporting primary processed products with lower added value, rather than secondary processed products.
In addition, the export price of these underground resources is usually lower than standard international prices.
The export price of North Korea’s zinc concentrate, the primary processed product, is 56% of the international price, while the price of copper is 24% and the price of magnesite is 42% of the international price. On the other hand, North Korea’s secondary processed products are being sold at similar levels or even at more expensive prices compared to international market prices. It has been confirmed that the export price of zinc ingots is 89% of the international price, while the price of lead ingots is 119% and the price of copper ingots is 99% of the international price.
Accordingly, it appears that North Korea intends to pursue a policy of concentrating on the export of processed geological resources in order to add value to its industry.
Kim Il Sung University published a paper on December 10, 2016, describing a strategy for processing and exporting North Korea’s abundant mineral resources including lead, zinc, magnesite, graphite, silica and rare earth metals.
