Archive for the ‘Coal’ Category

China – DPRK open new shipping route

Friday, September 25th, 2015

According to Xinhua:

A bulk cargo and container shipping route between China and the Democratic People’s Republic of Korea (DPRK) has been put into operation, focusing on coal import from DPRK and grocery export from China, authorities said on Friday.

The route, linking Longkou port of east China’s Shandong Peninsula to Nampo port of western DPRK was the first scheduled shipping line for bulk cargo and container between the two countries. It is serviced by seven ships, which complete one circuit of the ports every ten days, according to Longkou Port Group.

The route was jointly established by Longkou Port Group, Liaoning Hongxiang Industrial Group and a shipping company in DPRK in a bid to promote international trade under China’s “Belt and Road” initiative.

Located at the Bohai Sea coast and built in 1914, Longkou port handled 75.07 million tonnes of cargo and 550,000 TEU of containers last year.

“The opening of the route can help improve the service function of the port and is of great significance for the port’s transformation and upgrading,” said Zhang Haijun, general manager of Longkou Port Group.

Read the full story here:
Bulk cargo and container shipping route links China, DPRK


North Korea’s domestic impacts of lower coal prices

Tuesday, September 22nd, 2015

By Benjamin Katzeff Silberstein

North Korea is seeing some interesting impacts domestically from the lowered coal exports. DailyNK reports that market trade has picked up in intensity as a result of the lower exports of coal:

Amidst the growing private economy in North Korea, a number of people are growing wealthy by cashing in on the expanding distribution industry. Recently, a growing number of these newly rich are purchasing China’s Jinbei brand of small 2-3 ton load trucks to facilitate business operations, Daily NK has learned.

“Recently, Jinbei trucks coming in from Dandong Customs House through to the Sinuiju customs office in North Korea are becoming very hot items in the transportation market,” a source in North Pyongan province reported to Daily NK on September 16th. “Foreign-currency earning enterprises are importing these smaller Jinbei trucks which are quite different from the 20-30 ton load trucks that were previously the norm.”

This information was cross-checked via an additional source in the same province and a source in South Pyongan Province.

As North Korean coal exports have decreased and domestic market activity has picked up, the small trucks have become more useful for delivering goods to local markets. “Ordinary men use bicycles or motorbikes to distribute goods, but the rich are able to buy these small 2-3 ton load trucks and use those instead,” he explained.

These trucks, as with most vehicles in North Korea, are first imported by foreign-currency earning enterprises and sold unofficially to individuals with the cash to pay up front and in full–i.e. the donju. Because possession of vehicles is still officially forbidden in North Korea, the car remains registered under the name of the affiliated enterprise’s name; the entrepreneurial individual utilizing it kicks back a portion of his–or, less frequently, her– profits to the company.

Read the full article:


Jinbei trucks roll in, ‘donju’ distribution operations rise



DPRK – China Trade in 2015 (UPDATED)

Tuesday, August 11th, 2015

UPDATE 2 (2015-8-17): Marcus Noland weighs in on the H1 2015 KDI report.

UPDATE 1 (2015-8-11): KDI reports that DPRK-China trade continues to fall in 2015. According to Yonhap:

North Korea’s trade with China plunged more than 10 percent in the first five months of 2015 due mainly to a drop in raw material prices, a report showed Tuesday.

North Korea’s outbound shipments to its neighbor sank 10.3 percent on-year to US$954 million in the January-May period, while imports plunged 14.3 percent to $1.09 billion, according to the report by the Korea Development Institute (KDI).

“Bilateral trade was down 12.5 percent compared to the year before with exports of anthracite coal and iron ore affecting overall numbers,” KDI said. “Compared to the year before, when trade fell 4.8 percent, this year’s drop is more pronounced.”

The think tank based its assessment on data provided by the International Monetary Fund, the United Nations and the Korea International Trade Association.

North Korea’s exports of coal to China declined 1.6 percent in dollar terms, with the number for iron ore nosediving 70.3 percent.

Falling exports and a subsequent drop in earnings were probably felt by Pyongyang, which will have to consider other means of generating hard currency.

Compared to 2013, when the North’s exports of coal reached its peak, this year’s numbers represent a 24.6 percent drop.

“The contraction is noteworthy because the North actually diversified the places it shipped coal to in China,” the KDI said.

In regards to iron ore, exports declined, both in terms of volume and prices, with the weakening of China’s steel industry directly impacting trade. Exports stood at 600,000 tons, down from 1.11 million tons, with the value standing at $22.96 million.

The KDI said Pyongyang’s No. 1 import item from its neighbor was filament yarn, followed by cargo trucks and petroleum products. Imports of yarn and petroleum products were down, while shipments of cargo trucks rose.

In bold above I have highlighted what appears to be bad news for North Korean coal exporters. I was surprised to see this because an earlier report by Bloomberg indicated that North Korean coal exports to China had increased by 25% this year (over 2014).  However, it is worth pointing out that the Bloomberg report focuses on the actual quantity of coal crossing the border and KDI  reports on the value of the coal crossing the border. The only way both reports can be true is if the North Koreans are again taking lower prices from the Chinese for their coal compared to their international competitors. Another explanation for the conflicting reports could arise if there was a significant difference between Chinese customs data (Bloomberg) and that used by the International Monetary Fund, the United Nations and the Korea International Trade Association (KDI). I don’t have enough experience with these data sets to know how consistent they are.

Benjamin Katzeff Silberstein offers a link to the report here (in Korean only).

Read the full story here:
N. Korea’s trade with China tumbles this year: KDI

ORIGINAL POST (2015-4-26): Yonhap reports that DPRK – China trade has fallen in the first quarter of 2015:

Trade between North Korea and China, its economic lifeline, slipped 13.4 percent on-year in the first three months of this year amid frayed bilateral ties, data showed Sunday.

Bilateral trade volume fell to US$1.1 billion in the January-March period, compared with $1.27 billion for the same period last year, the Beijing unit of South’s Korea Trade and Investment Promotion Agency (KOTRA) said, citing Chinese customs data.

China is North Korea’s top economic benefactor, but its political ties with Pyongyang have been strained since the North’s third nuclear test in February 2013.

No crude oil was officially sent to North Korea from China for all of last year.

China’s shipments of crude oil to North Korea were also absent during the first quarter of this year.

South Korean diplomatic sources in Beijing, however, have cautioned against reading too much into the official Chinese trade figures because China has provided crude oil to North Korea in the form of grant aid in the past and such shipments were not recorded on paper.

Read the full story here:
N. Korea’s trade with China dips 13.4 pct in Q1


DPRK coal shipments to China 2015

Sunday, July 19th, 2015

Back in 2014, Kevin Stahler argued that the DPRK’s anthracite coal exports were falling due to Chinese environmental and trade policies. This year Bloomberg reports that coal exports are showing heavy growth:


North Korea was the only country to boost coal shipments to China this year as Vietnamese supply slumped.

Chinese coal imports tumbled 40 percent in the five months through May, according to customs data. North Korean shipments jumped 25 percent, overtaking Mongolia and Russia to become China’s largest foreign source of coal after Australia and Indonesia, as Vietnamese imports dropped 91 percent.

An expanding power sector means Vietnam is preparing next year to start importing coal, ending its role as the world’s biggest supplier of a high-quality grade known as anthracite. North Korea’s benefiting from the rising exports as it needs foreign income amid a three-month drought that’s threatening harvests and raising the possibility that it will need to import food.

“It may be a replacement for the lack of exports from Vietnam,” Guillaume Perret, founder and director at Perret Associates, a coal research company in London, said by phone Friday. “It could be that some power plants or industrial sectors need high-quality anthracite for blending. There’s not so much anthracite in the world, so they may be replacing Vietnamese exports with North Korea.”

Vietnam Shipments

China’s shift to a more consumer-driven economy from heavy industrial investment has damped the nation’s demand for commodities from iron ore to copper. The country imported 7.5 million metric tons of coal from North Korea in January through May as Vietnam’s shipments fell to 180,000 tons and total foreign supplies dropped to 62 million tons. The customs data doesn’t distinguish between grades of thermal coal.

“North Korea is the new No. 1 exporter of anthracite,” Georgi Slavov, head of basic materials research in London at Marex Spectron, said Friday by e-mail. “Vietnam held the No. 1 spot for many years before that.”

Australia and Russia’s coal sales to China dropped as much as 45 percent in the period, while South Africa and the U.S. made no shipments at all in 2015, the customs data show. North Korea produced 43 million short tons (39 million metric tons) of coal in 2012, the last year for which the U.S. Department of Energy has estimates. That’s about 1 percent of Chinese output.

Anthracite in China closed unchanged on July 14 at 604 renminbi ($97.27) a metric ton, according to weekly data from the China National Chemical Information Center. Prices slid 12 percent so far this year.

NK News followed up with a separate story. You can read it here.

Here are comments by Marcus Noland.

Read the full story here:
North Korea Gains in China Coal Exports as Vietnam Bows Out
Alessandro Vitelli


Mongolian mining firm to export coal from Rason

Friday, June 19th, 2015

According to the Reuters:

A Mongolian coal miner has signed a deal with a shipping company to deliver its coal via Russia to North Korea’s Rason port, part of the landlocked north Asian nation’s efforts to find new ways to reach overseas markets such as Japan and South Korea.

Miner Sharyn Gol signed a binding agreement on Friday with Mongol Sammok Logistics to ship its coal to Rason, where Mongolia already has an agreement with North Korea that gives its exporters preferential treatment at the port.

Mongolia currently ships the bulk of its mostly resource-based exports to China, leaving its economy dependent on its powerful southern neighbour and putting it at a disadvantage when it comes to negotiating prices.

“This is a pretty historic deal,” said James Passin, who controls Mongolian Stock Exchange-listed Sharyn Gol through the New York-based Firebird Mongolia Fund.

“This deal has to be viewed in the context of international relations and diplomacy,” he told Reuters on the sidelines of a signing ceremony.

Sharyn Gol currently has no sales agreements in place with any potential overseas buyers, Mr. Passin said, adding that he could not disclose any further details.

Mr. Passin declined to reveal any estimated delivery cost for shipments from the Sharyn Gol mine to Rason, but pointed to the preferential treatment at the port and the Russia exports that already go through there to South Korea.

South Korea has at least twice in the past year taken deliveries of Russian coal from Rason, with steelmaker POSCO one of the regular buyers, according to a company spokesman.

Namgar Algaa, executive director of the Mongolian Mining Association, said opening up new markets would allow Mongolian miners to manage the risk of slowing Chinese growth.

China’s weakening growth this year has meant its coal imports from Mongolia fell 6.9 percent across the first four months of the year to 5.2 million tonnes.


Read the full story here:
Mongolian miner signs deal to ship coal to North Korea


China rejects DPRK coal shipment (Again)

Saturday, April 4th, 2015

UPDATE 1 (2015-4-4): For the second time this year, the Chinese have rejected a shipment of North Korean coal. According to the Korea Herald (Yonhap):

China has returned a shipment of anthracite coal to North Korea because it failed to meet standards for mercury emissions, according to a local report on Saturday.

This appears to be the second rejection by China of the North Korean mineral this year.

The shipment arrived at the Longkou port of China’s northern coastal province of Shandong late last month, but was returned as its quality did not satisfy China’s environmental regulations,, a local Shandong Internet news site, reported, citing an unnamed Longkou port official.

The report did not elaborate further or include the volume of the rejected North Korean coal.

In September last year, China announced strict regulations against the sale and import of coal with high toxic pollutants, including mercury and sulfur, to improve the country’s air and water quality.

Anthracite coal accounted for 39.8 percent of North Korea’s total exports to China last year.

China’s imports of North Korean coal plunged 53.2 percent from a year earlier to 16.78 million tons in January this year, according to Chinese customs data.

ORIGINAL POST (2015-3-9): Back in October of 2014, Kevin Stahler was the first person to point out (as far as I am aware) that the DPRK’s coal exports to China were in decline. Quoting Kevin:

However, this year North Korea’s anthracite exports to China are on course for a hard landing. The total value of imported anthracite is down 23 percent in the first half of 2014 compared to a year earlier. That’s an annualized $340 million hit to North Korea’s balance of payments. But North Korea is not alone: China has seen a double-digit decline in both the value and volume of its total world coal imports from January – August 2014.

On March 4, 2015, Yonhap reported that China returned a shipment of coal to the DPRK for reasons related to domestic environmental protection regulations:

China has rejected imports of some North Korean anthracite coal because the coal failed to meet domestic standards for mercury emissions, a local newspaper reported Wednesday, in what appeared to be China’s first rejection of North Korean minerals over environmental concerns.

The shipment was returned to North Korea on Feb. 27 from the Rizhao port of China’s northern coastal province of Shandong, the National Business Daily newspaper reported, citing an unnamed port official.

The report did not elaborate further, or include the volume of the rejected North Korean coal.

After three decades of rapid industrialization, China regularly sees hazardous air pollution with levels of particulate matter rising to nearly 40 times the limits set by the World Health Organization during the winter months.

In September, China announced strict regulations against the sale and import of coal with high toxic pollutants, including mercury and sulfur, to improve the country’s air and water quality.

Anthracite coal accounted for 39.8 percent of North Korea’s total exports to China last year.

In January, China’s imports of North Korean coal plunged 53.2 percent from a year earlier to 16.78 million tons, according to Chinese customs data.

On March 9, UPI reported on one of the key aspects of China’s new environmental policies and how it will affect the DPRK:

China’s crackdown on coal-related pollution will take a heavy toll on the North Korean economy, South Korean newspaper Donga Ilbo reported Monday.

China’s plan is to drastically reduce coal consumption by 160 million tons in the next five years. The plan, presented at the National People’s Congress in Beijing, aims to reduce the fossil energy use that is contributing to severe pollution in big cities, The Australian reported.

Countries exporting coal to China are all affected, but the plan could create an economic crisis in impoverished North Korea. Coal and iron-ore exports are two of North Korea’s biggest exports to China, its biggest trading partner.

According to the Donga Ilbo, more than 97 percent of North Korean exports are shipped to China*, and coal, iron ore comprise 60 percent of all North Korean exports.

China’s anti-pollution policy is affecting North Korean cargo. A North Korean ship delivering coal to China was turned away at the coastal city of Rizhao on Feb. 27. The Donga Ilbo reported the coal did not satisfy China’s environmental regulations.

The rising ban and other factors are placing the impoverished North Korean economy in a tight squeeze.

Anna Fifield also covered this story for the Washington Post and Guardian.

*The article reports that China accounts for 97% of the DPRK’s international trade. This is only true if one excludes South Korean trade–which South Korea does because they consider North-South trade as “inter-korean” trade.


North Koreans discuss curbs to outflow of natural resources

Thursday, March 5th, 2015

The Institute for Far Eastern studies (IFES) published the article below:

The Issue of Regulating Coal and Iron Ore Exports Raised in North Korea

There is a growing sense inside North Korea for a need to regulate the export of underground resources such as coal through imposing export tariffs or other trade barriers.

An overwhelming percentage of the country’s exports consist of underground resources and there is rising speculation that North Korea is pushing forward long-term transformation of its trade and industrial structure.

An article in a recent edition (published October 20, 2014) of Kim Il Sung University’s school newspaper has argued that “We need to protect the country’s precious resources by applying different tariff rates.”

The article stressed that “The subjects of export tariff first need to be selected for raw materials and energy resources that is urgently needed for the construction of a socialist economic powerhouse.”

In other words, there is a need to prevent the excessive exportation of goods through levying a high export tariff rate on underground resources.

The article specifically picked out coal and iron ore as underground resources which are important for economic development, and pointed out that “We need to do all we can to prohibit the export [of these resources].”

According to KOTRA (the Korea Trade-Investment Promotion Agency), in 2013 the percentages of coal and iron ore among North Korea’s total exports were, respectively, 42.9 percent and 9.3 percent, which amount to over half of all exports.

North Korea’s consideration of regulating the export of underground resources in such a situation is seen as an attempt to achieve long-term industrial development, which may decrease its foreign currency earnings in the short-run.

The Kim Il Sung University newspaper article also argued that “We must actively protect our country’s resources so that we can develop a vibrant and self-reliant national economy.”

The fact that last year North Korea’s export of anthracite* to China dropped for the first time in 8 years is also thought to be a product of such a policy consideration.

North Korea’s push to regulate the export of underground resources is viewed as an effort to reduce its dependence on China, but many are skeptical regarding how effectively North Korea will implement such a policy with its urgent need for foreign currency.

The article is interesting for three reasons.

The first is that DPRK policy-makers may find it preferable to impose a tariff on exports rather than actually control the number of organizations that are legally allowed to export natural resources. This raises a government capacity point. Alternatively, this could be seen as a tool to draw resources from the privileged JVCs and trading companies that are outside the control of the cabinet. In a sense, a tariff, if effectively implemented, could improve the fiscal position of the people’s economy by “taxing” all the trading companies under the control of different sectors of the party and military.

Second, Chinese environmental policies may be inadvertently accomplishing this policy outcome without the DPRK having to actually do anything. The amount of coal being exported to China is down significantly in 2014, and there are questions as to whether 2013 numbers will be achieved again in the near-term. However, Chinese environmental policies which reduce imports from the DPRK have a negative fiscal effect for Pyongyang since no trade actually takes place. Indeed, if Chinese imports of DPRK resources continue to fall, a tariff will make less and less sense.

And third, one of Kim Il-sung’s strategic concerns was that fraternal socialist countries would not invest in industrial production in the DPRK, and it would only become a valuable member of the communist trading block as a source of natural resources. Kim Il-sung was worried about what would happen to his country when the natural resources were all gone. Perhaps imposing an export tariff can be seen as a sign that there is a coalition in the leadership that wants to move away from natural resource exports and into a greater reliance on SEZ’s, domestic production, etc.


DPRK-China trade in 2014

Monday, January 26th, 2015

According to Yonhap, DPRK-China trade drops slightly in 2014:

North Korea’s annual trade with its economic lifeline, China, fell 2.4 percent from a year ago in 2014, marking the first decline since 2009, data compiled by South Korea’s government trade agency showed Monday.

North Korea’s trade with China totaled US$6.39 billion last year, compared with $6.54 billion in 2013, according to the data provided by the Beijing unit of South’s Korea Trade and Investment Promotion Agency (KOTRA).

The annual trade figures between North Korea and China provided a fresh sign that strained political ties between the two nations have affected their economic relations.

At least on paper, there were also no shipments of crude oil from China to North Korea for all of last year.

A South Korean diplomatic source with knowledge of the matter, however, cautioned against reading too much into the official trade figures because China has provided crude oil to North Korea in the form of grant aid and such shipments were not recorded on paper.

Here is coverage in the Daily NK.

I have been unable to locate the KOTRA report, but the Choson Ilbo adds this:

China’s exports to the North were down 3.1 percent on-year and its imports from the North 1.5 percent, the diplomatic source in Beijing said quoting Chinese trade statistics.

Yonhap followed up with this from a Chinese foreign ministry press briefing:

Asked about the official absence of crude oil delivery to North Korea, China’s foreign ministry spokeswoman, Hua Chunying, referred the question to “competent authorities.”

“You mentioned a specific issue concerning trade between China and North Korea. I would like to refer you to competent authorities,” Hua told reporters during a regular press briefing.

“But, I want to highlight that the economic cooperation and trade between China and North Korea are normal,” Hua said.

Yonhap also provided the following information on oil shipments from China to the DPRK:

In previous years, China’s official shipments of crude oil to North Korea had been absent for several months, particularly after the North’s nuclear tests. However, it was extremely unusual that, at least on paper, China sold no crude oil to North Korea for all of last year.

In 2014, China’s exports of petroleum products to North Korea jumped 48.22 percent from a year earlier to US$1.54 million, according to the data based on Chinese trade statistics and compiled by the Beijing unit of South’s Korea Trade and Investment Promotion Agency.

“Although final statistics show that China’s exports of crude oil to North Korea were counted as ‘zero’ in 2014, experts suggest that the possibility of China’s suspension of crude oil exports to North Korea remains low,” the agency said in a statement.

South Korean diplomatic sources in Beijing have also cautioned against reading too much into the official Chinese trade figures because China has provided crude oil to North Korea in the form of grant aid and such shipments were not recorded on paper.

There has been no clear indication that the 2014 trade figures reflect China’s willingness to use crude oil as leverage to press North Korea to change course in its nuclear ambition.

Yonhap (via Korea Times) also reports that anthracite exports to China are down in 2014:

North Korea’s exports of anthracite to China tumbled nearly 18 percent in 2014 from the previous year, the first annual drop in eight years, data showed Friday.

North Korea exported US$1.13 billion worth of anthracite to China last year, down 17.6 percent from a year earlier, according to data from the Korea International Trade Association.

It was the first on-year decline in North Korea’s anthracite exports to China since 2006.

The volume of anthracite exports also decreased 6.4 percent on-year to 15.43 million tons last year, according to the KITA.

Despite the drop, anthracite accounted for 39.8 percent of North Korea’s total exports to China in 2014.

According to the data, North Korea’s exports of iron ore to China plunged 25.7 percent on-year to $218.6 million last year, the smallest amount since 2010.

For lots more data on the DPRK’s international trade, see also these eight great posts:
1. North Korea-China Trade Update: Coal Retreats, Textiles Surge
2. How Has the Commodity Bust Affected North Korea’s Trade Balance? (Part 1)
3. How Has the Commodity Bust Affected North Korea’s Trade Balance? (Part 2)
4. Nicholas Eberstadt’s “Dependencia, North Korea Style” (I would have gone with “Our Style Dependencia”)
5. NK News on coal shipments in 2014.
6. Radio Free Asia on coal shipments.
7. N. Korea’s smartphone imports from China hit record
8. China’s exports of jet fuel to N. Korea rebounds in 2014

Read the full story here:
N. Korea’s 2014 trade with China marks 1st drop in 5 years


DPRK building new coal-powered plant in Pyongyang

Tuesday, November 25th, 2014


Pictured above is the new plant. Learn more about it on this new article at 38 North.


Russian investment into DPRK railway

Sunday, October 26th, 2014

Most of Russia’s current investment in the DPRK has been limited to Rason: Rason Port, Rason-Russia Railway. But there has been movement in bilateral relations this year.

In March of 2014, the North Koreans and the Russians announced bilateral trade would be conducted in Rubles and they discussed additional economic opportunitiesInter-Korean transportation, gas pipeline, and the Kaesong Industrial Complex.

On October 20, 2014, ITAR TASS reported the following:

Russian construction compnay NPO Mostovik has developed a plan of designing and upgrading railways and ore enriching plants, as well as developing and processing natural resources in North Korea, CEO Vladimir Shishov told PRIME on Monday.

“These are two interconnected and quite complex processes. But the NPO has lots of experience in designing, and we will promote our experience and technologies in this region,” Shishov said.

About 7,000 kilometers of North Korean railways require modernization, and 3,500 kilometers of them must be modernized urgently.

North Korea “has a large industrial and economic potential, the realization of which requires solving infrastructural problems.” Without the development of railways and roads and electrification, “it is impossible to solve the whole range of tasks, connected with the development of North Korea’s economy,” he said.

KCNA followed up on October 23:

Talks Held between DPRK Minister of External Economic Relations and Minister of Development of Far East of Russia

Pyongyang, October 23 (KCNA) — Talks between Minister of External Economic Relations Ri Ryong Nam who doubles as chairman of the DPRK side to the Inter-Governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia and Minister of Development of Far East of Russia Alexandr Galushka who doubles as chairman of the Russian side to the committee were held here on Thursday.

Present there from the DPRK side were Ju Jae Dok, vice-minister of Railways, and officials concerned and from the opposite side were the party of the minister of Development of Far East, Alexandr Timonin, Russian ambassador to the DPRK, and a staff member of his embassy.

Discussed at the talks were the issues of boosting the economic and trade cooperation between the two countries.

And on October 26:

Delegation of Ministry of Railways Back Home

Pyongyang, October 26 (KCNA) — The delegation of the Ministry of Railways led by Minister Jon Kil Su returned home Sunday after taking part in an international seminar held in Sochi, Russia.

However, while North Korea’s foreign minister and railway minister were in Russia, the North Koreans and Russians held a ground-breaking ceremony to announce the rebuilding of the Jaedong-Kangdong-Nampho railway line. According to KCNA:

A ground-breaking ceremony of rebuilding the section of Jaedong-Kangdong-Nampho railway stations took place at East Pyongyang Railway Station Tuesday.

Present there were Minister of External Economic Relations Ri Ryong Nam who doubles as chairman of the DPRK side to the Inter-Governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, officials concerned and working people in the city.

Also on hand were Minister of Development of Far East of Russia Alexandr Galushka who doubles as chairman of the Russian side to the Inter-Governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and his party, Alexandr Timonin, Russian ambassador to the DPRK, staff members of his embassy and foreign diplomatic envoys here.

Oleg Shishov, director general of the Russian Bridzh Group, and Won Phil Jong, senior vice-minister of Railways of the DPRK, made speeches at the ceremony.

They said that they were pleased that the ceremony of weighty significance in economic development between the two countries was being held in Pyongyang this year marking the 66th anniversary of the establishment of diplomatic relations between the DPRK and Russia.

The project for remodeling railways, the first stage of realizing the large-scale cooperation project which is in line with the common development and interests of the peoples of the two countries, marked an important occasion in developing economic cooperation between the two countries, they noted.

Alexandr Galushka and Ri Ryong Nam made congratulatory speeches.

They said that Marshal Kim Jong Un is paying deep attention to boosting the bilateral friendly relations.

The relations of economic cooperation between the two countries are growing stronger with each passing day, they said, hoping for bigger successes in the work to develop the bilateral cooperative relations in the future, too.

A reception was given that day.

According to supplementary information in Yonhap:

A Russian broadcaster earlier reported that Pyongyang and Moscow signed a US$25 billion deal to modernize a combined 3,500-kilometer stretch of railways in North Korea. If confirmed, it would cover 60-70 percent of the North’s railways.

Russia Beyond the Headlines reports the following information:

The implementation of the Russian-North Korean project Pobeda (Victory) will make it possible for North Korea to start exporting metallurgical coal in 2015, one of the participants in the project, LLC NPO Mostovik CEO Oleg Shishov believes.

“We’re already discussing this with the North Korean government, that everything will go to [third countries], and they agree. The volume is tens of millions of tonnes at the initial stage, and then we’ll see. Let’s take the first step,” Shishov told reporters.

He said the North Korea stands out by its almost complete absence of sulfur. “This is a very important indicator for metallurgical production, particularly for production of high quality steels,” Shishov said.

“Mining is already underway there, only with such methods that little is being mined. the methods are very inefficient, unproductive. Modern mining equipment will be delivered there and this will increase production manifold. The reserves there are huge,” Shishov said.

He did not specify who would be investing in the development of North Korean coal fields or the countries that would be importing the coal.

Russia and North Korea are now beginning to implement the Pobeda project, which calls for the development of mineral resources and comprehensive reconstruction of North Korea’s railway network. A number of Russian companies are participating in the project, including Mostovik. The other participants have not been named.

Here is a Google Earth image of the proposed train route:


The total length of this route is approximately 175km.

Here is the proposed route relative to other railway lines in the area:


The obvious interpretation of the image is that the railway renovations will be used to facilitate coal exports. Jaenam Station exclusively serves the Sinchang Youth Coal Mine under the Sunchon Area Youth Coal Mine Complex Enterprise. Additoinally, the area surrounding Jaenam Station is doimated by coal mines. The Kangdong Station is not in the town of Kangdong, but just to the east where it services the Kangdong Area Coal Mine Complex Enterprise. Coal in these areas will supposedly be carried more efficiently to the port of Nampho where a coal terminal already exists.


If indeed this is the primary purpose of the project, then the obvious loser will be China (on multiple fronts). Currently Chinese state-owned mining companies are the only serious investors in North Korea’s extraction industries. Because of their unique relationship with and proximity to the DPRK, they are able to purchase coal and other resources at a bargain price (monopsony). North Korea can only strengthen its bargaining position with these companies by finding other buyers of its produce. Russia’s investment could help them accomplish this goal.

However there are two domestically-related uses that renovation of this railway route could facilitate.

The first is domestic steel production. Russian sources highlight the importance of sulfur-free coal for the production of steel, and this railway line passes directly by the Chollima Steel Mill, one of the largest smelters in the country. Increased steel production has long been a goal of North Korea’s economic policymakers going back to the “heavy-industry” days of the 1950s. With a renovated railway track that connects the correct kind of coal with Chollima Steel Mill, the DPRK may be able to produce more steel for both domestic use or for export.

A second potential domestic use could be the increase in energy supply to Pyongyang. As I highlighted in 38 North, the DPRK is constructing a new coal power plant in Kangdong. This new power plant, as well as the Pyongyang and East Pyongyang Thermal Power Plants lie along the Jaenam-Nampho line. Increased coal supplies to these mills could have significant impact on power supply in Pyongyang.

Are there any other potential uses? Maybe, but these are more difficult to see right now and may only become evident at a later date. After examining the composition of facilities along the track between Pyongyang and Jaenam, I cannot identify any other specific industries that may benefit, other than potential military factories that lie along the route. These, of course, are worth of examination, but I am not the most qualified to carry that out.

On November 6, 38 North Published this article on DPRK-Russia relations.