With China’s adoption of sanctions on coal imports from North Korea according to UN Security Council Resolution No. 2321, coal prices in North Korea have reportedly fallen from 100 to 70 USD per ton. Due to these developments, North Korean trading companies are reportedly experiencing difficulties in preparing monetary contributions to the Party as the end of the year approaches.
“The Chinese government has abruptly suspended coal imports from North Korea since December 10 [a temporary ban to implement UNSC Resolution 2321]. Coal that had already entered China’s ports was allowed to be unloaded, but the remaining trading ships waiting for customs clearance at Port Nampo are all tied up now,” a source close to North Korean affairs in China reported to Daily NK on December 12.
“The Chinese trading companies have lowered the coal price for imports to Port Rizhao from 100 USD to 70 USD per ton, ignoring the contract prices and dismissing protests by the North Korean trading companies,” the source added.
UNSC Resolution 2270, which was adopted in March following North Korea’s fourth nuclear test and long-range rocket launch , also specified restrictions on imports of coal from the North, but it was not effectively implemented as the controversial “livelihood exception” served as a loophole and was exploited.
The new resolution, however, does not allow exports of North Korean coal for public purposes to exceed 409 million USD per year or 7.5 million tons of coal (whichever is lower in terms of total profit). With the Chinese government’s implementation of import control in accordance with the resolution, North Korea’s coal exports will face an inevitable decline.
“The North Korean trading companies, who simply believed that coal exports would not be affected much by the adoption of the new UNSC resolution, are at a loss in the face of the current import ban. They have no choice but to accept the lower prices that the Chinese companies are offering,” the source noted.
A source in South Pyongan Province added, “The domestic coal market has been dependent on exports to China, with the volume of exports at 1.25 billion USD, or 19.6 million tons in 2015. It is expected to be severely shaken by the loss of income. The foreign currency-earning companies are only hoping for the import ban to be eased from the new year.”
According to the sources, most of the companies that export coal to China are controlled by the North Korean army. By the end of the year, these companies are expected to ramp up their efforts and compete among themselves to achieve their mandatory loyalty contributions to the authorities.
The North Korean trading companies have no choice but to comply with the loyalty payments, as the authorities distribute trading licenses according to their foreign currency earnings. As a result, it is possible that some trading companies will turn to covert methods, including smuggling, if the import ban is not eased in the near future.
“The trading companies used deceptive practices in April, with the Chinese companies borrowing vessels for coal transportation and misrepresenting the trade volume during customs clearance. If the Chinese government does not ease the coal import limit in the near future, it is highly likely that the trading companies will turn to smuggling,” the source in China noted.
Professor Jeong Eun Yi of Gyeongsang National University added, “The coal mines operated by foreign-currency earning companies must continuously sell coal to survive. Therefore, these companies are likely to keep trying to smuggle and the Chinese companies will welcome this as the North Korean coal becomes cheaper but retains its same level of quality.”
