China won’t buy any more North Korean coal this year
The economic noose is being tightened around North Korea’s neck after the pariah regime ignored a United Nations resolution by testing a missile last week.
On Saturday North Korea’s largest trading partner, China, reacted to the Feb. 12 test of a long-range ballistic missile by announcing a ban on coal from the rogue nation till the end of 2017.
CNN reported that the decision by the China’s Ministry of Commerce, issued jointly with the country’s customs agency, was made to comply with a UN Security Council resolution that China helped draft and pass in November. Resolution 321 imposed tough sanctions estimated to cost North Korea over $800 million a year, after it carried out its fifth nuclear test in September. Along with restricting the export of coal, the resolution also targets non-ferrous metals, statues and other luxury items like tapestries.
China’s import ban on North Korean coal was supposed to be lifted in January but the missile test has meant that Beijing’s coal ban will continue.
Under the resolution, the dictatorship’s export of coking coal – all of which goes to China – would be limited to 7.5 million tonnes this year, down nearly two thirds from the 2016 tally. But Beijing has in the past ignored some UN sanctions on the basis that it would hurt the civilian population of North Korea.
The DPRK has been under UN sanctions since 2006 over its nuclear and ballistic missile tests.
Grounding coal shipments to China is bound to hurt the North Korean economy, which relies on coal sales to generate hard currency to pursue, among other things, its nuclear and missile programs. However according to CNN the restrictions have a “silver lining”, in that more electricity is now available to North Korea’s population than previously – a fact that is evident by more lights on the Pyongyang skyline. The news network also quotes Ri Gi Song, a North Korean economist, saying that the coal export ban will not slow down North Korea’s defense program, which has nuclear at its core.
If China does honour its coal import ban on North Korea for the rest of the year, it could affect the price of coking coal, which has fallen sharply of late.
Metallurgical coal is down more than $150 below its multi-year high of $308.80 per tonne hit in November.
Yet despite the pullback met coal is still trading at more than double multi-year lows reached this time last year. Coking coal averaged $143 a tonne in 2016 (about the same as it did in 2013). Consensus forecast is for the price to average about the same in 2017.