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North Korea

China moved to halt North Korea iron ore trade ‘before sanctions’

Beijing stopped issuing permits to import North Korean ore several weeks ago, sources say, as efforts increase to rein in Pyongyang’s missile programme

PUBLISHED : Tuesday, 15 August, 2017, 9:50am
UPDATED : Tuesday, 22 August, 2017, 5:33pm

China was pressuring its iron ore traders to stop buying the commodity from North Korea even before a United Nations Security Council vote this month to ban the trade as punishment for Pyongyang’s missile tests, two traders said.

The UN Security Council unanimously passed a resolution on August 6 banning North Korea’s exports of coal, iron, iron ore, lead, lead ore and seafood in a bid to choke off a third of Pyongyang’s US$3 billion annual export revenue.

The US-drafted resolution to crack down on major commodity exports was aimed as punishment for intercontinental ballistic missile tests in July and is due to take effect in early September.

But a veteran trader based at the port of Rizhao who deals in coking coal and anthracite and a Beijing-based iron ore trader with a company that handles North Korean iron ore said the government stopped issuing permits to bring in iron ore several weeks ago.

Both declined to be identified as they are not authorised to speak to the media.

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The first source said authorities began the halt about two weeks ago and the second trader said it was enforced about 20 days ago.

The reason for the move, which was not publicly announced, was not clear, but it suggests Beijing was taking a tougher stance on trading with its northern neighbour even before the UN sanctions were announced.

The crackdown on North Korean iron ore exports is unlikely to cause big ructions on the global market and mills in the world’s top steel producer are likely to find alternative supplies.

But cutting off more of its major commodity exports is likely to tighten the screws on Pyongyang’s access to cash.

Beijing on Monday issued an official ban on the imports effective from the following day as it moved to implement the sanctions.

China’s commerce ministry declined to comment on the clampdown before the sanctions vote, referring to its statement on the official ban on Monday.

China suspended purchases in February of North Korean coal, its neighbour’s primary export, in a drastic step to punish Pyongyang for an intermediate-range ballistic missile test. Since March, customs data has shown no coal cargoes have arrived from North Korea in the world’s top user of the fuel.

“I do think China is committed to implementing the measures,” said Zhao Tong, a fellow at the nuclear policy programme at the Carnegie-Tsinghua Centre for Global Policy in Beijing.

“There’s always a possibility of smugglers, but I think the government and state-owned companies and lawful private sector business will generally implement the government’s orders.”

North Korea was ranked 18th among China’s foreign iron ore suppliers last year, although volumes have jumped this year.

Imports were up an annual 60.3 per cent at 1.34 million tonnes worth an estimated US$68 million in the January to June period.

That almost surpasses 2016’s total of 1.64 million tonnes, worth an estimated US$90 million. But it was a fraction of the more than one billion tonnes of the steelmaking ingredient that China imported last year.

Iron ore cargoes from North Korea usually sell for about 100 yuan (US$15) a tonne less than those from top suppliers, Australia and Brazil, a third China-based trader who handles iron ore but is not involved in North Korean business said.

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It is usually in concentrate form with relatively high iron content of 60 to 63 per cent, he said.

A senior customs officer at the port of Rizhao in Shandong province, a major hub for iron ore imports, told importers and traders assembled at a gathering last week not to import iron ore from North Korea and stressed the risks of doing business with the country given the bans on trade, the trader said.

He attended the meeting and witnessed the speech and said he believed the comments reflected a broader nationwide message from government.

“The customs officer said traders and importers have to pay more attention to the risks,” the trader said after the meeting.