North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
2013-10-16

The first chairman of the National Defence Commission of North Korea, Kim Jong Un, took office two years ago. Since then, construction of sports and entertainment facilities are reported to have increased considerably. According to the South Korean Ministry of Unification, North Korea’s Pyongyang Folk Park (September 2012), Taesongsan General Hospital (March 2013), and Haedanghwa Service Complex (April 2013) were recently completed. Since the launch of the Kim Jong Un regime, the Masik Pass Ski Resort and other similar sports facilities have been undertaken and are nearing completion.

In addition, the People’s Theatre (April 2012), Rungna People’s Pleasure Ground (opened in July 2012), Sunrise Restaurant (September 2012), and Unification Street Center (September 2012) have been recently renovated. In addition, the Mirim Riding Club, Pyongyang Gymnasium, Munsu Wading Pool, Aprok (Yalu) River Amusement park, Karma Hotel, and New Day Hotel and other hotels around Pyongyang are currently under renovation and repair. Entertainment and sports facilities around other major cities are being constructed as well. Furthermore, after the successful launch of Kwangmyongsong 3-2 last December, North Korea has begun to construct major residential complexes for scientists, granting them preferential housing in Unha scientist residence, Kim Il Sung University educator residence, and Pyongsong residence. Other large-scale housing projects are also reported to be under development.

In the wake of major celebrations in North Korea — such as the 100th anniversary of the birth of Kim Il Sung and 60-year anniversary of the “Victory in the Fatherland Liberation War” — a large memorial was erected and existing facilities were repaired. Specifically, the Korean People’s Army Exhibition of Arms and Equipment, Kumsusan Memorial Palace, War Victory Monument, and the Cemetery of the Fallen Fighters of the KPA were refurbished.

Unlike the large-scale construction of sports and entertainment facilities, new constructions of harbors, roads, power plants and other social overhead capital (SOC) is reported to be in decline.

Last August, North Korea’s trade with China has shown an 8 percent increase in exports and 6 percent decrease in imports, following a similar trend from last year. According to the South Korean Ministry of Unification, North Korea’s current trade volume with China is reported to be 4 billion USD (1.89 billion USD in exports and 2.2 billion USD in imports).

North Korea’s most popular export items are mineral resources such anthracite, coal, and iron ore. In the case of clothing products — which are mostly consigned processing — there has been an increase of 42 percent (200 million USD) against the previous year. Major categories of imports from China are crude oil, food, and fertilizers. Compared to the previous year, food imports have declined 57 percent (17.4 million tons), and fertilizer and crude oil imports are also showing gradual reduction at 27 percent (18.3 million tons) and 6 percent (34.6 million tons), respectively.

Pictured Above (2012-12-13): Tanchon Port

UPDATE 2 (2013-4-25): Yonhap reports on the DPRK’s plans for the Tanchon Port:

North Korea is scurrying to develop the resources-rich city of Tanchon on the east coast as part of the country’s efforts to make it a source of foreign currency income, recent news reports from the North showed.

Tanchon will become a key transit point in shipping goods to and from Russia’s Siberia, the northeastern part of China and Mongolia, said the Wednesday issue of the Choson Sinbo, a Korean language newspaper published by North Korean nationals in Japan.

The newspaper, a mouthpiece of North Korea, said the port city of Tanchon should become the source of finance for the country’s broader policy line of pursuing both economic development and nuclear capacities.
In a bid to boost exports, the country completed the construction of a port in May last year in the city with rich reserves of magnesite, zinc and other mineral resources, which sits about in the middle of the country’s east coast line. the Choson Sinbo said the city has about 5.4 billion tons of magnesite deposit, possibly the third biggest reserve in the world.

The news outlet also highlighted the country’s planned ways to increase earnings in the resources-rich city from which the country used to export mineral resources to China for meager profits.

“North Korea will move to manufacture processed magnesite goods in order to make high-value added goods,” the Choson Sinbo noted. “To that end, many plants will be built in the Tanchon region and the areas will become a new industrial zone.”

North Korean leader Kim Jong-un has also underlined the country’s plan to boost profits from the Tanchon development, saying in a national meeting of light industrial workers last month that profits from Tanchon development should be exclusively used to prop up the livelihood of North Korean people.

UPDATE 1 (2012-5-3): KCNA announces the completion of  the Tanchon Port:

A modern trading port made its appearance in the area of Tanchon in South Hamgyong Province on the occasion of the 100th anniversary of President Kim Il Sung’s birth.

The construction of the port with a cargo traffic capacity of millions of tons provides a guarantee for greatly contributing to developing the nation’s foreign trade and improving the people’s living standard.

A ceremony for the completion of the construction was held on the spot Thursday.

Present there were Choe Yong Rim, Kwak Pom Gi, Ro Tu Chol and other officials concerned, officials of the Ministry of Land and Marine Transport, builders and working people of industrial establishments in Tanchon City.

Read out there was a joint congratulatory message sent by the Central Committee of the Workers’ Party of Korea and the Cabinet of the DPRK to the officials and members of shock brigades who performed labor feats in the construction of the port.

The message highly praised them for successfully building another giant structure in the era of Songun greatly conducive to building an economic power true to the life-time desires and last instructions of President Kim Il Sung and leader Kim Jong Il.

It expressed belief that they would perform greater feats in the efforts for the country’s prosperity united close around the WPK Central Committee headed by the dear respected Kim Jong Un.

Minister of Land and Marine Transport Kang Jong Gwan, in his speech made for the occasion, said the construction of the port was a brilliant fruition of the wise leadership of Kim Jong Il who initiated the construction of the port and worked heart and soul to translate the desire of the President into a reality till the last moments of his revolutionary life and the clear-sighted guidance and meticulous care of Kim Jong Un.

Speakers at the ceremony pledged themselves to carry out their tasks including dredging in a short span of time in the same spirit as displayed in the construction of the port.

At the end of the ceremony the participants looked round different places of the port.

You can see video of the port inauguration here. (KCNA)

Just a few days ago, the Choson Sinbo reported the following (via Yonhap):

The North is estimated to have 15 billion tons of anthracite coal, a key mineral Pyongyang uses to produce steel, the Choson Sinbo newspaper said.

The North also has an estimated 5.4 billion tons of magnesite in Tanchon, a home to mines in South Hamgyong province, and other areas, according to the newspaper.

North Korea is set to open Tanchon as a modern trade port, the newspaper said, without giving any specific time frame for the opening.

ORIGINAL POST (2010-12-9): On December 2, KCNA announced that Kim Jong-il visited the port in Tanchon County, South Hamgyong County (40.412522°, 128.917731°) where he gave guidance on the port’s reconstruction.

Judging by the satellite imagery of the area on Google Earth, it appears that the project had already begun by May 13, 2009, where we can see concrete blocks ready to be used to extend the jettys (breakwaters).  I have outlined the proposed port project on Google Earth imagery below and provided a picture of the completed project from KCTV:

After the jettys are extended, the major construction work and dredging can begin.  Below are images of the port’s main construction site as it appears on Google Earth and a prediction of the project’s conclusion from KCNA:

It appears from the picture that the port will be connected to the railway system—likely via the nearby Tanchon Smeltery and Magnesia Plant (both recently renovated) whose products will probably be exported from the port.

Tanchon is also home to the DPRK’s Komdok and Taehung Youth Hero Mines (among others).  As is well known to readers, raw materials exports are the DPRK’s most significant (legal and transparent) source of hard currency.  According to Yonhap’s North Korea Handbook 2002:

Geomdeok [Komdok] Mine is a special company in Bonsan-dong, Dancheon, South Hamgyeon Province, and is very famous for about 300 million tons of deposited leads and zincs. This mine annually produces 52,000 tons of lead, 124,000 tons of zinc, both of which account for 47% of total production in North Korea, and more than twice as much as the production of Eunpa Mine, North Korea’s second largest mine, in Eunpa-gun North Hwanghae Province. Concentrates of lead and zinc produced from Geomdeok Mine are processed into electric zinc at Dancheon refinery. Opened in 1932, this mine produces 14,200 tons of raw ore annually with three ore dressing plants. Annual production capacity can reach up to 11 million tons. The first dressing plant was completed in July 1953, near the end of the Korean War. It now processes a million tons of ore a year. The second dressing plant was opened with a production capacity of 3,200 tons of ore. The third one constructed in September 1983 can process 10 million tons of ore.

The Wall Street Journal offers an interesting story on American investor Jim Rogers. Here is an excerpt from the article:

By Sunday, Pyongyang-based Korea Pugang Coins Corp. had sold its entire stock of coins, which included 20 one-ounce gold coins featuring mostly century-old generals as well as several hundred silver coins featuring North Korean sports achievements, cultural landmarks and national animals.

Most of the coins were purchased by Mr. Rogers, an American commodities investor now based in Singapore, said a Korea Pugang Coins representative, who didn’t give her name. The company knows Mr. Rogers from last year’s fair, when he bought the entire lot of North Korean coins offered.

Mr. Rogers, who started the Quantum Fund with George Soros in the 1970s, couldn’t be reached for comment, but had said in a previous interview: “Coins and stamps are the only way I can invest in North Korea.”

By invest in, Mr. Rogers means he wants to wager against the long-term prospects for the isolated, economically struggling country. He views his purchase as a bet on the collapse of North Korea.

“At some point down the line, North Korea will cease existing as a country. Then the value of the coins will go up,” Mr. Rogers said.

According to North Korea’s state-controlled news agency, a special series of gold coins were minted last year to commemorate Kim Jong Il, the country’s leader who died in late-2011. The inscription: “The Great Leader Comrade Kim Jong Il Will Always Be Alive.” However, none of those coins were put up for sale at the Singapore fair.

Mr. Kim was succeeded by his son, Kim Jong Eun.

Situated next to the American Numismatic Association, the North Korean stand drew immediate attention from many visitors, when the Singapore International Coin Fair opened its doors Friday morning. By lunchtime, the sales team, wearing Kim Jong Il pins on their jackets, hardly found time to finish their sandwiches and cans of Coca-Cola KO -0.59% .

Thirteen of the gold coins were purchased by an assistant of Mr. Rogers, said a representative of state-owned Korea Pugang Coins. “He wanted to buy more, but we only had 13 left,” she said. The company offered the gold coins for 2,500 Singapore dollars, or $2,014—well above Friday’s closing gold price of $1,598.25 an ounce.

Mr. Rogers is a fervent believer that the commodities bull-run will continue and that China and other Asian nations will set the global economic agenda for this century. He advocates investing in frontier markets such as Myanmar and Cambodia, and in 2007, sold his New York mansion and moved to Singapore, in part because he thinks it is crucial for his children to learn Mandarin.

…

Korea Pugang Coins has minted coins in Pyongyang since 1987, but the mintage is only around 2,000 each year, as North Korea’s own gold resources are limited.

The coins draw only a limited amount of buyers within North Korea and are mainly sold to international investors and collectors at fairs in Hong Kong, Beijing and Singapore, the company said.

Estonia-based Tavex Group, a company that specializes in gold and currencies, made a deal with Pyongyang in 2008 to sell North Korean gold coins.

But the North Koreans ended it after the first shipment of coins from a 2007 series featuring elephants, rhinos, owls, lions and buffalos.

“We sold them at a relatively high price to collectors, but demand was not big,” says Tomas Pavelson, who works in sales at Tavex Group.

“Actually, we still have one left.”

See some examples of DPRK coins here and here.

Here is some additional information from the Choson Ilbo:

In March last year, American investor Jim Rogers went to an international coin fair in Singapore and snapped up 13 rare North Korean gold coins each valued at 2,500 Singaporean dollars, as well as hundreds of silver coins worth 70 Singaporean dollars each.

The commemorative coins were produced by Pyongyang-based Korea Pugang Coins Corp., a subsidiary of Pugang Trading Corp.

Pugang Trading operates under the “guidance” of the Workers Party’s Munitions Industry Department but is believed to be run by Chon Song-hun, the son of the former North Korean ambassador to China, Chon Myung-su. The younger Chon is a former professor at Kim Il-sung University.

The firm imports and manufactures motorcycles and owns six subsidiaries involved in metals, machinery, chemicals, electronics and pharmaceuticals production. It also owns a gold mine that supplied the commodity for the coins.

Pugang Pharmaceutical has even exported health products to South Korea and runs a mineral water business. The group’s annual transaction volume amounts to US$150 million with 15 overseas branch offices, including in Beijing and Moscow.

Now Pugang Trading is on the UN Security Council’s blacklist, but the company is still very active in the North.

“Pugang is the North Korean equivalent of South Korea’s Samsung Group,” said Cho Bong-hyun of the IBK Economic Research Institute. “It appears to have been thriving even after Kim Jong-un stepped into power.”

Chon’s brother Yong-hun, meanwhile, apparently controls the import of diesel fuel into North Korea as the head of a company affiliated with the party’s Finance and Accounting Department. “North Korean businesses usually split their profits 50:50 with the party,” said a government source here. “The Chon brothers are believed to be worth millions of dollars.”

Another tycoon is Cha Chol-ma, a former diplomat who amassed a fortune worth millions of dollars by taking charge of business projects the North engages in overseas to earn hard currency.

“As a market economy evolves in North Korea, we are seeing early signs of monopolization of wealth,” said a researcher at the Korea Institute for National Unification here. “Tycoons have grown wealthy through collusion with high-ranking party members.”

Experts say North Korean businessmen also act as proxy investors on behalf of high-ranking party members, who cannot get involved in business, and often share the profits.

Read the full story here:
Executing a North Korean Coin Flip
Wall Street Journal
Jacob Gronholt-Pedersen
2012-3-29

According to Yonhap:

North Korea imported an unusually massive amount of silver from China in January, possibly in relation to leader Kim Jong-un’s birthday that month, sources and China’s customs office said Thursday.

Data from China’s customs office showed that North Korea imported 661.71 kilograms of Chinese silver for US$653,128 in January.

The monthly import is unusually enormous given that the North took in only $77,593 worth of precious metal and other jewels for the whole of 2012. The corresponding amount for 2011 was $57,000.

Before January this year, the North had hardly spent more than $10,000 on monthly imports of such goods, according to the data.

Given the leader’s birthday on Jan. 8, North Korea watchers said the massive amount of imported silver may have been used to produce silverware souvenirs to celebrate the leader’s birthday.

“It’s difficult to assume the exact purpose of the silver imports,” a source said. Given that late leader Kim Jong-il used to bring in foreign brand luxury sedans and expensive watches to treat the country’s top echelon on major holidays, the bulk of silver imported in January may have been used for similar purposes, the source said.

Backing this assumption, the customs data also showed that the North imported an unusually large amount of costume jewelry worth $10,447 in the same month.

A reader points out this Daily NK story hypothesizing that the silver could have been used in batteries:

As such, there are suspicions that the recent North Korean decision to import more than 600kg of silver through China was done to facilitate the production of batteries for submersible production.

A North Korean military source told Daily NK on the 4th, “The [North Korean] Navy has been producing submersibles at every shipyard on their east and west coasts ever since the attack on the Cheonan in 2010.”

According to the inside source, prior to the Cheonan sinking such vessels were produced at one shipyard, the disguised ‘Bongdae Boiler Factory’ in Sinpo, South Hamkyung Province, at a rate of five per year. However, following the sinking of the Cheonan that rate went up four times to 16 per year, as the vessels started being produced across multiple shipyards including Yongampo, Chongjin and Rajin.

The source explained, “The reason why the North Korean authorities are increasing production of this kind of submersible that can fire torpedoes is to maximize their underwater attack capacity. The subs can take 12 to 15 soldiers yet still sink destroyers weighing thousands of tons with their twin torpedoes.”

“The engines noise on the submersibles is very quiet, making them able to approach their targets underwater in secret, while it is impossible to trace crimes such as the Cheonan incident,” the source went on, adding that during North Korean military training exercises they also emphasize the essential nature of the subs.

The rising production is pushing up demand for batteries, the source then went on to add, saying that this required the bulk production of both silver and zinc. “All the silver produced in North Korea is supplied to the shipyards,” he claimed.

The source admitted to being confused, therefore, at North Korea’s recent decision to import 660kg of silver from China, declaring, “There is lots of silver being produced in North Korea, so it’s hard to say why they are importing it from China…I suppose it may have been just that more batteries were being produced so they needed more silver.”

Read the full stories here:
N. Korea imports massive amount of Chinese silver in Jan.: data
Yonhap
2013-3-28

NK Producing More Silvery Subs
Daily NK
2013-4-5

Pictured Above: New hotel under construction. See more here. I am still not sure about the gold mine.

By Michael Rank

A Chinese company has announced plans to invest $20 million in a gold mine in North Korea as well as in the country’s first five-star hotel, a Chinese-language website reports.

The mine, with deposits of 50 tonnes of gold, is in Unsan county 운산군 in North Phyongan province 평안북도 in northwestern North Korea near the Chinese border.

The report said Weijin Investment Group is the first Chinese company from Hunan province to invest in North Korea.

It quoted Weijin chairman Xia Juhua as saying, “North Korea is backward in infrastructure construction, so we can fulfill the requirements of mineral resources exploitation by offering technology and management support to the country’s key projects like highways and hotels”.

He said Wejin plans to construct a 30-storey, five-star hotel to be completed this year but did not give a location. Xia also mentioned plans to invest in the rare earth sector in North Korea but gave no details.

The report said about 200 Chinese companies were investing in North Korea and that over 70% were focusing on the mining sector. But at least one of these ventures went spectacularly sour last year, when the Chinese partner launched an extraordinarily bitter attack on its North Korean counterpart, accusing the North Koreans of tearing up a multi-million-dollar deal, intimidating its staff, imposing outrageous extra charges and cutting off its power and water, as well as of corruption and demanding prostitutes whenever their North Korean colleagues visited China.

UPDATE (2013-3-13): NK News has published that the hotel will be named “Yonggwang Hotel (영광호텔)”…which is the name of the closest metro stop.

The DPRK’s Naenara web page posts PDF copies of the DPRK magazine, International Trade. No updates have been made for 2013, however, Choson Exchange points an interesting article from the Q4 2012 issue which contains interesting information on the DPRK mining sector.

Choson Exchange posted a high resolution .jpg from the most recent issue of International Trade and you can see it here.

The article, “Abundant Underground Resources and the Policy for Their Development,” provides information on the “DPRK Law on Underground Resources” which was allegedly adopted by Decree No. 14 at the fifth session of the ninth Supreme Peoples’ Assembly (1993-4-8: during the Arduous March).

The text of the law is not given, and most of the article is “fluff” language, but here are some interesting tidbits:

Institutions, enterprises and organizations can develop underground resources.  They are obliged not only to make mining equipment large, modern, and high-speed, and diversify transportation but to give priority to tunneling and introduce efficient mining methods to boost mineral output.

Development of underground resources is subject to the approval of the state organ of deliberation of underground resources development .

Institutions, enterprises and organizations engaged in underground resource development shall ensure high efficiency of investment pursuant to the design of underground resource development.

They shall ensure rational organization of mining to excavate ore bodies that conform to mining criterion and standard of calculating deposits of underground resources. But the practices of digging out only high-grade and thick ore bodies in good condition to excavate are prohibited.

Abandoning of ore and coal mines and their pits should be subject to the approval of the state organ of deliberation of underground resource development.

Institutions, enterprises, and organizations, concerned should actively tap the resources of geotherm, underground water and mineral water for the economic development and improvement of people’s [sic] life [sic].

The living environment of inhabitants and ecological environment of animals and plants, including land, resources and landscapes should not be damaged in the course of their development.

The DPRK policy of underground resources development makes a tangible contribution to protection and development of underground resources to fully meet the increasing demands of the national economy for raw materials and fuel, and thus gives the impetus to the building of a thriving socialist country.

The Daily NK reports that coal prices in the DPRK have surged this winter (150,000w/ton in 2011 vs. 300,000w/ton in 2012) . They also report the price in hard currency:

At the time of writing, this coal can be bought at source for $150-$200 per ton. Wholesalers then sell it on in regional centers like Chongjin for up to $300. However, according to Daily NK’s source, “They even say that $300 leaves them with little profit, given the cost of transportation.”

This implies the exchange rate is approaching 10,000 w / 1US$. Exchange rate data shows this trend as well.

The Daily NK gives the following reasons for the price increase:

1. Inflation (2011-11 exchange rate with USD was between 2,9oow – 5,000w. 2012-11 exchange rate 4,000-8,000w)

2. Decreased supply from exhausted mines

3. Exports to China (According to statistics published by the Korean Trade Association in late 2011, coal exports from North Korea to China in the nine months to September that year were worth USD$830 million, double the 2010)

If we had the economic data it would be a fairly straightforward regression to determine the contributions of each of these variables on the price of coal. But we do not have the data.

Read the full article here:
Coal Prices Fuelling Chilly Times
Daily NK
Choi Song Min
2012-12-5

These are all interesting data points. Do you think they offer reasonable journalistic evidence that the DPRK is practicing inflationary public finance?

First, Yonhap reports on DPRK food imports from China (2012-9-29):

North Korea’s grain imports from China slipped 16.3 percent on year in the first eight months of this year, in an apparent sign that the North may diversify its supply channels of grain, a Seoul researcher said Saturday.

North Korea imported 181,264 tons of rice, flour, corn and other grains from China in the eight-month period, compared with 216,535 tons for the same period last year, said Kwon Tae-jin of the state-run Korea Rural Economic Institute.

The decline in grain imports from China may be attributed to a rise in food aid from China and purchases from non-China markets such as Europe and South America, Kwon said.

“Including imports from non-China markets, North Korea’s total grain imports appeared to rise this year,” Kwon said in a report posted on his Web site, adding Pyongyang may “diversify its import channels.”

At the same time the Daily NK reports that food prices continue to rise (2012-10-2):

Internal sources informed Daily NK over the holiday that on September 29th the price of rice was 6,700 won/kg in Pyongyang, 7,000 won/kg in Onsung, North Hamkyung Province and 6,500 won/kg further west in Hyesan, Yangkang Province.

Not only do these prices far exceed those of Chuseok 2011, they even far exceed those of earlier this year.

The Hyesan source explained that on the day before the Chuseok holiday (Saturday) the atmosphere in the market was thus rather uncomfortable. “It was very slack,” she said. “People couldn’t buy anything easily, so most just seemed to be looking.”

Secondly, Yonhap reports that despite situations like those experienced by Xiyang or in Musan, mineral exports to China are up (2012-10-2):

North Korea’s exports of mineral resources recorded a 33-fold jump over the past decade with China remaining the biggest importer of the North’s iron ore and coal, a report showed Tuesday.

North Korea’s mineral exports stood at a meager US$50 million in 2001, accounting for 7.8 percent of its total exports, according to the report by Seoul’s Korea Trade and Investment Promotion Agency.

The mineral exports soared to $243 million in 2005 and $1.65 billion in 2011, accounting for 59.4 percent of the North’s total exports last year, the report said.

South Korea has estimated the total values of mineral deposits in North Korea at some $6.3 trillion.

Last year, North Korea exported $1.17 billion worth of anthracite coal and $405 million worth of iron ore, with China importing almost 100 percent of anthracite coal and iron ore, it said.

UPDATE 2 (2013-1-17):  The latest issue of Digital Globe’s World View magazine contains information on the Musan Mine (page 7):

[…]In a New Year’s message, North Korea’s leader, Kim Jong-un, urged North Korea to become an economic powerhouse by improving productivity. He specifically mentioned the Musan Mine, as it is one of the largest iron ore mines in the region with a reserve of approximately three billion tonnes of ore.  This announcement comes after a Chinese investment firm, Tianchi Industry and Trade, pulled out of the mine in the early fall of 2012.  North Korea demanded a price increase of 20%, on top of the 50-year lease that had been in place since 2005.  With the price increase, Tianchi did not feel the location could remain profitable, and North Korea refused to renegotiate.  As a result, the associated smelter in China was shut down in September 2012.  The presents a loss for the Jilin provincial government in China, which had extended a rail line 42 kilometers to the border to transport ore north after it was processed at the smelter.  With the departure of the Chinese investment firm, the Musan Iron Ore Mine is currently operated by North Korea’s Ministry of Mines. The mine has the potential to produce 1.5 million tonnes of ore a year if the North Koreans can operate it at its former capacity under Tainchi.

UPDATE 1 (2012-10-17):  The Choson Ilbo has picked up on this story first reported in the Hankyoreh last month, yet they have a different English name for the Chinese company. According to the  article:

The Chinese apparently baulked at a price increase of more than 20 percent demanded by the North, although international iron ore prices are plummeting in the wake of the global recession. They won 50-year extraction rights for the mine in 2005.

A smelter in the Chinese province of Jilin near the border with North Korea and operated by Tianchi Industry and Trade, the Chinese partner to the Musan Mine, closed down in September, according to a source in Yanbian on Tuesday. The smelter used to process iron ore extracted at the mine.

The source added, “There’s been no progress in the implementation of plans to lay a railway line and a slurry pipeline between Nanping and Musan.”

Tianchi Industry and Trade turned down the North’s demand, saying it makes hardly any profit as is given wages for North Korean workers and transportation costs.

Tianchi, a private trading company based in Yanbian, has served as a conduit for iron ore produced at the Musan Mine to the Chinese market since the early 1990s. It obtained the extraction rights to the mine in 2005 after concluding a trilateral joint-venture contract with Tonghua Iron and Steel, a Chinese state-run iron and steel mill, and [North] Korea Ferrous Metals Export and Import Corporation.

Tianchi hired North Korean workers and extracted 1 to 1.5 million tons of iron ore at Musan every year, which it supplied to Tonghua and other companies.

But the first cracks in the deal appeared in 2009, and iron ore production had been intermittent since then and stopped completely this year.

The Jilin provincial government has also been hit because it already laid a 41.68 km railway line leading to the border town of Nanping since November last year.

ORIGINAL POST (2012-9-13): We have already heard about Xiyang. Today the Hankyoreh tells us about problems with the Musan Mine…

Pictured Above (Google Earth): Musan Mine

According to the article:

However, not all business between North Korea and China is rosy. An iron-smelting factory in Helong City, Jilin, that was visited on Sept. 5, had to close its doors. It used to be a place where iron from across the Yalu River was brought from North Korea‘s Musan iron mine and processed. A railroad was expected to run from the two cities by October of last year in order to increase the amount of iron brought into China. But the construction was never completed. A Chinese company called the Yanbian Cheon-ji Industry Trading Company had rights to the Musan mine for fifty years starting in 2005.

There are many guesses as to why this happened: “North Korea was asking for a price increase of 20% while the price of iron has declined in the rest of the world;” “There was trouble between the Chinese government and the new Kim Jong-un regime on negotiating development rights;” “There was a downfall of development due to differences with foreign investors about investing in electrical power.” No one knows clearly what the reason was, and there are still busy trying to figure out what is the real situation.

Here is the original story:
China adjusts to influx of cheap North Korean labor
Hankyoreh
Song Kyung-hwa
2012-9-13

The title of this blog poast comes from a recent study by the North Korea Resource Institute (NKRI). As far as I can tell they do not have a web page (in English anyhow), so I have been unable to obtain the actual report. The results, however, were reported in Yonhap:

The potential value of North Korea’s underground mineral resources is estimated at more than 11 quadrillion won (US$9.7 trillion) as of this year, a report by a private think tank showed Sunday.

The findings are based on the potential value and commercial prices of 18 key minerals in the communist country, the Seoul-based North Korea Resource Institute (NKRI) said.

The figure is much higher than a 7 quadrillion won estimate released by state-run Korea Resources Corp. in 2010, which calculated the value of resources based on 2008 market prices.

“The 4 quadrillion won gap is mainly due to a sharp rise in global prices for raw materials,” Choi Kyung-soo, head of the institute said.

Based on the latest estimates, he said, the value of North Korea’s mineral resources is roughly 21 times larger than those of South Korea, which stand at $456.3 billion for this year.

Choi said the North Korea’s abundance can be attributed to its large reserves of iron ore, coal, limestone and magnesite.

Choi Kyung-soo wote this paper for the Nautilus Institute. Here is my response (or companion piece, rather) to it.

Here are previous posts on mining.

Read the full Yonhap story here:
N. Korea’s mineral resources potentially worth $9.7 tln: report
Yonhap
2012-8-26