UN sanctions on N Korea coal exports to hurt 2017 export earnings

VANCOUVER (miningweekly.com) – Sanctions imposed by a 2016 resolution of the United Nations (UN) Security Council in retaliation for unauthorised nuclear tests by North Korea, will probably see the rogue East Asian country’s coal exports fall to a third of its value five-year average.

Analysis by the US Energy Information Administration (EIA) shows that North Korea, under the dictatorship of Kim Jong-un, stands to earn coal export earnings of only about $400-million in 2017, down from $1.2-billion, or about 40% of the embattled country’s total export revenue in 2016.

In March 2016, UN Resolution 2270 condemned North Korea’s January 2016 nuclear test and its February 2016 ballistic missile launch. As part of the resolution, the UN decided that all member nations should prohibit imports of coal and iron-ore from the country.

However, Resolution 2270 included two exclusions: UN members are permitted to import coal that originates outside of North Korea and transits North Korea’s Port of Rajin, and second, UN members are permitted to import coal for humanitarian purposes.

In November 2016, UN Resolution 2321 reaffirmed the earlier imposed sanctions, and it placed a cap on total coal imports for humanitarian purposes to all UN member countries. For December 2016, this cap was 1.1-million short tons, or $53.5-million, whichever is lower. Beginning January 1, total yearly coal imports for humanitarian purposes was capped at 8.3-million short tons, or $400.9-million, whichever is lower.

According to the EIA, more than 99% of reported coal exports from North Korea went to China in 2016. According to Chinese trade data, imports of coal from North Korea from April through November 2016 – after the March UN resolution – were 13% higher than in 2015.

In December 2016, the first month when UN Resolution 2321 was in effect, China reported importing slightly more than 2.2-million short tons of coal originating in North Korea, an amount more than twice the UN’s volume limit, with a total value of $184-million, a value more than three times the UN’s value limit. China attributed the excess December imports to a time lag between the issuance and implementation of the sanctions, the EIA states.

Meanwhile, in the first two months of 2017, China’s reported imports of coal originating in North Korea were more than one-third of the yearly UN volume cap and more than half of the yearly UN value cap. In late February, China announced that it was banning imports of North Korean coal for the rest of the year.

UN data indicates that one unidentified country imported a minimal amount of coal from North Korea in March.

Russia is also a significant trading partner for North Korea. In 2014, the railroad line between Russia and the North Korean Port of Rajin was renovated, and the coal facilities at the port were modernised.

Rajin, near North Korea’s border with Russia and China, is part of the Rason Special Economic Zone. After completion of the rail and port project, the level of Russian coal transiting North Korea increased sharply, from 100 000 short tons in 2014, to 1.1-million short tons in 2015 and 1.5-million short tons in 2016. Reported North Korean imports of Russian coal in the first quarter of 2017 were slightly higher than in the first quarter of 2016.

The EIA notes that it does not have a basis for assessing the accuracy of reported trade data, or determining whether all the coal moving through Rajin that is sold pursuant to the exemption for coal originating outside of North Korea is sourced from abroad.