Archive for the ‘Statistics’ Category

Some brief thoughts about North Korea’s food situation, late June 2021

Wednesday, June 23rd, 2021

By Benjamin Katzeff Silberstein

By all accounts, the current food situation in North Korea appears difficult. It’s a crucially important topic that I unfortunately have not had much time to follow over the past few weeks. A few brief thoughts:

First, it’s important to keep in mind when hearing phrases such as “worst in a decade” that North Korea went through an actual famine in the 1990s and early 2000s. So that the food situation has gotten better over the last decade, while the country was arguably still rebounding from the famine, should not come as a surprise.

Second, it’s difficult to tell precisely how bad things are. Food production estimates, though only approximations, paint a picture of relative shortage compared to the past few years, but still not near disaster levels. North Korean authorities and international organs often sound the alarm bell over looming disasters, while little follow-up is done about what actually happened in the end. Anyone remember the famine warnings in early 2019, by the state and some foreign analysts alike? It’s impossible to tell how representative this report by Daily NK is, but if it’s true, the government is failing to stabilize prices because consumers choose not to buy rice in bulk for cheaper but lower quality from state-owned stores. If the country was approaching a genuine famine, this likely wouldn’t be the case.

Third, all this said, things do seem difficult. Bill Brown outlines in an excellent and thorough report here some of the alarming signs: relatively major fluctuations in both exchange rates and food prices. Although price levels aren’t at levels never seen before, fluctuations like this are relatively unusual. I suspect much of it is driven by future expectations of shortages based on information suggesting that the state will not open the border to China for trade within the foreseeable future.

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March, 2021: what to make of the rise in North Korea-China trade?

Tuesday, April 20th, 2021

By: Benjamin Katzeff Silberstein

According to Chinese customs data, Chinese exports to North Korea increased by 400 times in March, compared to the combined shipments in January and February of this year. As South China Morning Post reports:

Trade between China and North Korea grew to a six-month high in March, figures from Chinese customs show in the latest sign that the two neighbours are easing border restrictions amid tensions with the United States.

Exports from China to North Korea jumped from a paltry US$3,000 in February to US$12.98 million in March, according to Chinese customs data released on Sunday.

That was nearly 400 times more than the US$33,000 combined shipment of January and February, and was the highest by value since September, when China recorded outbound shipments valued at US$18.88 million to the isolated neighbour. Pyongyang imposed strict controls on goods transport ahead of the 75th anniversary of the founding of the ruling Workers’ Party in October.

According to Chinese customs, China imported US$1.308 million of North Korean goods in March, compared with US$1.75 million in February.

(Source: Laura Zhou (and Reuters), “China-North Korea trade jumps after pandemic slump but sanctions curb business with Pyongyang,” South China Morning Post, April 19th, 2021.)

What to make of this?

It could, of course, be the start of a trend reversal from the past year’s catastrophically low trade figures. Perhaps the North Korean government has begun to let up on border restrictions. In the past few weeks, news reports have said that China plans on restarting trade and open the new bridge between Sinuiju and Dandong. NK News has found evidence of new disinfection centers for goods on the North Korean side in April. The Russian ambassador to North Korea also recently said in an interview that trade will restart soon.

At the same time, I’m not sure these figures themselves give evidence of resumed trade. They could be a mere glitch in the data caused by a change in accounting routines or the like. Just look at the reported figure for Chinese exports to North Korea in February: $3,000. It simply isn’t realistic. Perhaps a portion of that month’s trade was recorded instead for March for reasons related to payments or contracts. China, moreover, ships much more goods to North Korea than what’s officially recorded as “trade”.

As so often, we will simply have to wait and see. When Chinese data is published on the specific items traded, we should also get a better sense of what this trade upswing really means.

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March 2021: North Korea’s skyrocketing corn prices

Tuesday, March 9th, 2021

By: Benjamin Katzeff Silberstein

Given the self-imposed border lockdown North Korea is under at the moment, the recent rise in food prices should come as no surprise. The precise factors are difficult to pin down, but whatever they are, there is some serious cause for concern.

The main reason is the rapid rise in the price of corn as of late. One Daily NK-source in North Korea attributes it to large-scale state purchases of corn for snacks manufacturing in honor of Kim Jong-il’s birthday on February 16th.

The article makes clear, however, that this is only a partial explanation. Indeed, looking at the price index, it’s clear that the rise started long before February. On November 15th last year, the average price for a kilo of corn was 1350 won. On February 23rd this year, the average price was 3137 won. That’s a rise of 135 percent in a relatively short period of time. Prices of corn have often risen in the beginning part of the year, but not by this much.

Average corn prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

Looking at individual cities, the rise is even more staggering. In Hyesan, where food prices tend to be higher in general, corn prices rose from 1450 won/kilo on November 15th last year to 3620/kilo on February 23rd. That’s an increase of 150 percent in only a few months.

Corn prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

Why is this a concerning development for corn prices specifically?

First, corn is, in the North Korean context, rice’s less desired sibling. Corn always makes up a significant part of the diet for a big proportion of the North Korean population. However, when food becomes more scarce, people switch over a larger portion of their diets to corn, since it gives more food for the same amount of money. So a rise in corn prices may be a signal of growing scarcity overall.

Second, even if a large proportion of the rise was indeed caused by increasing state purchases, this is also a troubling indicator for the state of the North Korean market for food. If state procurement for snacks manufacturing for one single day can impact prices so much, this suggests a market under considerable stress and volatility to begin with.

At the same time, rice prices have remained conspicuously low and stabile. Rice prices in the last observation in the price index are around their seasonal normal. I’d be careful to assume too much based on this, however. Rice prices are lower right now than around the same time last year. This may – and I want to stress how little we know for certain – indicate that they are in fact lower not because supply is stabile, but because demand is lower. More consumers switching over their consumption to cheaper foods such as corn would put downward pressure on rice prices.

Average rice prices in Pyongyang, Sinuiju and Hyesan, from 2015 and onward. Graph by NKEconWatch, data source: Daily NK.

The current situation will only be possible to fully evaluate in a few weeks when we have more data points available. Suffice to say for now that, with all the caveats about the trappings of data from North Korea, the situation looks concerning.

Update March 16th, 2021: DailyNK recently published more info about the corn price situation, reporting that prices have stabilized in much of the country. Still, 3,000 KWP/kg, reported in “other inland regions” (than Hyesan), is high. It’s more than double the average price reported in Daily NK’s price index around one year ago.

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China delivers oil to North Korea, stabilizing fuel prices

Tuesday, March 2nd, 2021

Benjamin Katzeff Silberstein

On the supply side, fuel prices in North Korea are largely a factor of deliveries from China, as I have shown in a 38 North report. Daily NK confirmed this pattern in a dispatch last month:

Oil prices in North Korea plummeted late last month after climbing at the start of the year. North Korea has reportedly been receiving supplies of oil from China as the two nations show signs of growing closer.

The price of diesel was KPW 3,500 in Pyongyang, KPW 6,000 in Sinuiju and KPW 6,300 in Hyesan as of Jan. 25. This was respectively 56%, 24% and 23% less than it was on Jan. 11, as determined by Daily NK.

The price of oil, on which North Korea completely depends on imports, fluctuates relatively wildly depending on supply. Even so, this was a 23-56% fall in just two weeks.

Particularly in the case of Pyongyang, the price of diesel fell to KPW 3,500, the first time it has done so since 2011, a decade ago.

Gasoline prices fell relatively less than diesel. Gasoline was KPW 10,000 a kilogram in Pyongyang, KPW 11,000 in Sinuiju and KPW 12,000 in Hyesan as of Jan. 11. As of Jan. 25, it was KPW 6,700 in Pyongyang, KPW 11,000 in Sinuiju and KPW 11,100 in Hyesan.

As in the case with diesel, the price drop for gasoline was most pronounced in Pyongyang, where prices fell 33% from Jan. 11.

In Hyesan, however, gasoline prices fell just 7.5% from two weeks earlier, and in Sinuiju they did not change at all.

Diesel prices fell more than gasoline prices because the new supplies from China reportedly focused on diesel.

According to a source, diesel accounted for a large share of the imports smuggled into North Korea by way of illegal transhipment in international waters from ships leaving the Chinese port of Dalian in Liaoning Province.

The source claims North Korea has smuggled oil from China “countless times” since the middle of last month.

Prices fell most precipitously in Pyongyang seemingly because the capital received not only the first supplies but also the most.

(Source and full article: Jang Seul Gi, “North Korea appears to have received supplies of oil from China,” Daily NK, February 4th, 2021.)

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Fertilizer factory shutdown and goods shortages

Monday, February 8th, 2021

Benjamin Katzeff Silberstein

KITA has a new briefing paper out about some developments relating to North Korea’s domestic economy and external trade. If true, the shutdown of the Namhung Youth Chemical Complex (청년화학연합기업소) is one of several examples of how the border shutdown due to Covid-19 is hurting basic industries through a shortage of spare parts. Goods such as cooking oil are also reportedly in short supply on the markets, and local government incomes from market stall fees are also reportedly dropping. As always with this sort of information, none of it is fully confirmed.

You can find the report here (in Korean), below is an excerpt from a summary by Nikkei:

The Namhung Youth Chemical Complex, north of Pyongyang, produces fertilizer and coal gas using anthracite mined in the area. North Korean leader Kim Jong Un visited the site in 2013.

High-pressure valves and jet sprays at the complex have become too worn for continued use, according to reports the Korea International Trade Association received from North Korea in January. Without replacement parts, it is unclear when the plant can resume work.

The suspension hinders North Korea’s push to lift its meager agricultural output. Kim last year ordered a boost in fertilizer production and attended a completion ceremony for a separate fertilizer plant. Coal gas also serves as a valuable industrial energy source for the country, which faces an oil embargo in response to its nuclear and missile testing.

[…]

The resulting shortages also have struck North Korea’s jangmadang informal markets, which have flourished under Kim’s tenure. At one market in the city of Pyongsong, the volume of available flour and cooking oil has halved. Many stalls that used to sell Chinese-made apparel and appliances have shut down as well.

The slowdown of the jangmadang is eating into the coffers of North Korea’s regional authorities. South Pyongan Province, home of the Namhung plant, made about half as much from overseeing these markets in the last quarter of 2020 as in the year-ago period, heavily impacting provincial spending, the KITA report says.

(Source: Yosuke Onchi, “Key North Korea factory shuts down from COVID-19 parts shortage,” Nikkei Asia, February 8th, 2021.)

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North Korea’s economic growth in 2019

Monday, December 28th, 2020

By Benjamin Katzeff Silberstein

‘Tis the season for South Korean government estimates on North Korea’s economic growth… Maeil Business News

The North Korean economy grew for the first time in three years in 2019 following a sharp contraction in the previous two years, but its per capita income gap with South Korea widened further, the South Korean government data found.

According to a report released by Statistics Korea on Monday, the nominal gross domestic production (GDP) in North Korea rose 0.4 percent last year from the previous year to 35.3 trillion won ($32.2 billion). The growth came after the economy had shrunk 3.5 percent in 2017 and 4.1 percent in 2018 due to the poor crop yields and strengthened international sanctions.

South Korea’s nominal GDP in 2019 was 1,919 trillion won, 54 times greater than that of the North.

The statistics bureau said the increased output from construction, agriculture, forestry and fisheries and service sectors contributed to the overall economic growth of the reclusive regime.

North Korea’s per capita gross national income (GNI) was 1.41 million won last year, losing 20,000 won from 2018. It was one twenty-seventh of South Korea’s 37.44 million won. The per capita income gap between South and North Korea widened from 21 times in 2009, 23 times in 2015 and 26 times in 2018.

Crop yields in North Korea came at 4.64 million tons in 2019, higher than 4.38 million tons in the South. But the North’s rice output was 2.24 million tons, about 60 percent of that of the South.

Coal production increased 11.8 percent on year to 20.21 million tons last year.

North Korea’s trade volume totaled $3.24 billion in 2019, up 14.1 percent from the previous year when its trade shriveled 48.8 percent due to the United Nation’s sanctions.

Watches and watch components that are not subject to the sanctions accounted for the biggest share of 17.8 percent of its total exports, up 57.9 percent from the previous year.

Its biggest imports were mineral fuel and oil that took up 11.7 percent. Amid food shortage, grain imports soared 242 percent on year.

(Source: Choi Mira, “North Korean economy grows for first time in 3 years, per capita income falls in 2019,” Maeil Business News, December 28th, 2020.)

A few thoughts:

First of all, these are estimates based on models, not on rigorously gathered statistical data. That is not to criticize the statistical authorities that compile these figures, but it must be mentioned. These may well be the best estimates out there.

Second, a 0.4% growth is not much, especially considering the steep economic fall North Korea went through in the preceding years. News headlines tend to blow these figures up way beyond proportion.

Third, 0.4% does sound like a plausible number in many ways. Some of the metrics used to determine it may well be indicative of other things. Take increased coal production, for example. We know with a fair degree of certainty that (illicit) coal exports to China seem to have increased significantly during 2019, as well as during the present year. So an almost 12% increase in production compared to 2018 is not at all difficult to imagine.

So all in all perhaps a small uptick in 2019, but at the same time, from a very low level.

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North Korean coal trade: the questions that really matter

Tuesday, December 8th, 2020

By: Benjamin Katzeff Silberstein

I have long argued, on this blog and elsewhere, that the question of North Korea and economic sanctions is not a binary one. We don’t have either perfect sanctions implementation with complete suppression of trade, or smuggling and trade under the radar, with or without the complicity of the Chinese government, making sanctions on North Korea meaningless. Rather, sanctions were never going to work perfectly to begin with — government measures rarely do. What sanctions do do, however, is to impose high additional costs to anyone trading with North Korea. North Korea would still import and export sanctioned goods to some extent, but reap lower revenues from exports and pay more for imports.

US intelligence claims over the past few months have contained some information that is highly relevant to that end. Ship-to-ship (STS) transfers are complicated and expensive, but it seems that this method of transferring North Korean coal to Chinese buyers has begun to decrease. Wall Street Journal reports (paywall) that direct deliveries to China, through the Ningbo-Zhoushan area, have increased in frequency over the past few months. Chinese ships have also gone directly to North Korea’s Nampo port to fetch coal deliveries.

The UN Panel of Experts noted this trend already in its March 2020 report:

67. Ship-to-ship transfers in the Gulf of Tonkin (see S/2019/691, para. 20) have decreased substantially in favour of increased deliveries to the Ningbo-Zhoushan and Lianyungang port areas in China. The increase reinforces the need for port and customs authorities to heighten scrutiny of vessels and their shipping documentation, and to impound any vessel suspected of transporting prohibited items.

We still don’t know how widespread such trade is, but it significantly lowers the transaction costs of North Korea’s coal trade, and thereby lessens the impact of sanctions on North Korea’s export revenue.

What about proportions?

  • According to the WSJ report and US intel sources, North Korea exported 4.1 million metric tons of coal between January and September 2020.
  • No one knows what North Korea paid, but the WSJ report assumes a price of $80–100 per ton in 2020. This places the value of the exports between $330 and $410 million.
  • Is that a little or a lot? Well, it depends. According to UN Comtrade figures, North Korea exported on average 1.7 million metric tons of coal per month to China in 2015. In contrast, 4.1 million metric tons between January and September gives close to half a million metric tons per month. In April 2016, coal exports totalled 1.53 million metric tons, to the tune of $72.3 million.
  • The WSJ figures place North Korean revenue at $36.6-$45.5 million on average per month for January-September. Using the 2016 April figure as a benchmark, it is absolutely not an insignificant number. At the same time, it is nowhere near — really, less than half by one measure — what North Korea has received for its coal exports in the past.

This by no means gives a perfect representation of the proportions at hand. After all, both 2015 and 2016 were boom years for North Korean coal exports to China. At the same time, judging from this limited data, we should not assume that things are back to normal only because China’s sanctions implementation seems to have begun to taper off. At the moment, it’s also very difficult to tell what proportions of the downturn in trade originates from North Korea’s own, self-imposed border lockdown, and from sanctions respectively.

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Asahi Shimbun: China provided North Korea with substantial amounts of food and fertilizer this year

Wednesday, November 4th, 2020

Benjamin Katzeff Silberstein

In a piece of news that should surprise no one, Asahi Shimbun reports that South Korean government sources say China provided North Korea with 5-600,000 tons of food aid and fertilizer this year. Although it wouldn’t entirely make up for the estimated shortfall, it is still a highly significant contribution:

But several South Korean government sources said China has provided North Korea with between 500,000 and 600,000 tons of food along with the fertilizer this year.

It also sent about 600,000 tons of corn and other types of grain between June and August, according to Chinese sources with inside knowledge of ties with North Korea.

Pyongyang requested more assistance in the aftermath of the summer typhoon damage and Beijing is considering sending an additional 200,000 tons of food, the sources said.

The South Korean sources focused on the volume of fertilizer shipped to North Korea as such assistance is considered highly unusual.

North Korean authorities equate one ton of fertilizer to 10 tons of food assistance, a former high-ranking North Korean government official said.

“Due to chronic shortages, fertilizer is highly prized in North Korea,” the official added. “The amount sent this year is equivalent to 5.5 million tons of food, which exceeds the yearly production of food. It was a very unusual level of assistance.”

Although North Korea is no longer in the grips of famine that raged in the late 1990s and claimed countless lives, the U.N. World Food Program has estimated that between 2018 and 2019 about 10 million North Koreans did not have enough to eat.

The situation is believed to be worse this year.

North Korea was plagued by flooding and other damage due to typhoons and torrential rain in summer after near-drought conditions in spring.

A source at a Chinese government-affiliated agency who is well-versed in issues involving North Korean agriculture said that the harvest estimate at planting time was between 3.5 million and 3.8 million tons for a shortfall of about 1.5 million tons.

Rice prices were kept stable through the release of grain stockpiled for emergencies, but the situation without China’s assistance was expected to be dire from next spring.

China’s decision to bail out its unpredictable neighbor may reflect a strategy to keep North Korea in its corner as Beijing’s confrontation with Washington worsens. In this regard, Beijing made a big fuss of its involvement in joining fighting in the Korean War on the 70th anniversary of China’s participation.

“China and North Korea have always shared interests in terms of their view of the United States, but that has strengthened recently,” said a North Korean source. “China is sending a message to the United States through its appeal of a honeymoon period with North Korea.”

With no signs of progress in denuclearization talks with the United States, the easing of economic sanctions against North Korea appears unlikely in the short term.

That suggests North Korea will continue to lean on China for support, analysts said.

“If North Korea receives support from abroad, it will no longer be able to say it is getting by with its own efforts,” said a South Korean expert on the North Korean economy. “But North Korea can continue to save face because China does not announce the assistance levels.”

(Article source: Takeshi Kamiya in Seoul and Yoshikazu Hirai in Shenyang, “China bailout to North Korea: massive food and fertilizer aid,” Asahi Shimbun, November 3rd, 2020.)

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September, 2020: the Latest UN Panel of Experts Report and the North Korean Economy

Tuesday, September 29th, 2020

By: Benjamin Katzeff Silberstein

The latest UN Panel of Experts Report is out. Some points relating to the overall state of the North Korean economy, after a quick read:

  • Ship-to-ship-transfers of fuel (“refined petroleum products”) continue. This is nothing new. Only between January and May 2020, North Korea is estimated to have broken the sanctions-mandated ceiling of 500,000 barrels per year. As I have argued elsewhere, many times, even with STS transfers and other illicit methods to flout sanctions, they are taking a toll on the North Korean economy since they are expensive. North Korea has to compensate sellers for the added risk of smuggling somehow. So sanctions, in this sense, are certainly not without impact.
  • Coal deliveries are also happening via STS and other transportation means. Again, this is not new, and rather, is part of the steady state for North Korea under sanctions. As with oil and fuel products, North Korea must be taking a financial hit to compensate buyers for the added risk of violating sanctions. The report says that coal exports resumed, after a Covid-19-pause, in March of this year.
  • The report does note that illicit tanker deliveries decreased thus far in 2020 as compared to 2019. Whether that means that less fuel was actually supplied is unclear. Indeed, according to the report, the delivery tankers had higher capacity than in the past.
  • Overall, it seems that judging from the PoE estimates, North Korea may not be suffering from fuel shortages at all, on the whole. Of course, we know next to nothing about how the illegally imported fuel is used and distributed within the country. Fuel prices have, however, not really been outside the span of the generally normal (or at times even lower), suggesting that the amounts coming in are roughly similar to normal times.

One quick reflection on the exports issue, particularly of coal and other sanctioned export goods: it’s clear that coal trade is happening, seemingly relatively undisturbed, on a scale that is troubling from a sanctions-implementation perspective. What’s tricky, though, is that we know fairly little about proportions. How much coal is North Korea actually able to sell, and to what prices?

As of now, all we know is that coal is being exported on a substantial scale. From an analytical perspective, that leaves a lot to be desired.

However, it is crucial to note the myriads of ways in which the government is able to at least partially compensate for the loss in export income stemming from sanctions. The report details several of these, including a wide range of cyber crime.

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What explains North Korea’s puzzling price stability?

Friday, July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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