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Last year Kevin Stahler wrote a blog post arguing that North Korean anthracite coal exports were in decline, victim of Chinese policies to reduce coal imports, both for environmental reasons and as a way to protect domestic coal producers. (Coal is one of those industries that appears to be successful universally in securing protection.)
Then, earlier this year, Jong Kyu Lee wrote a paper for the KDI Journal of Economic Policy arguing that North Korea’s anthracite coal exports to China are largely a function of the level of Chinese steel production and import prices. In Lee’s analysis, Chinese electricity production, general economic conditions, its own coal exports, and UN sanctions had no discernible effect. (Sanctions appeared to boost North Korean coal exports to China in some cases, a possible example of Steph Haggard’s argument that one effect of sanctions is simply to steer North Korean trade toward partners least conscientious about imposing sanctions.) Using differencing reasoning, Lee reached the same bottom line as Stahler: the future the Chinese steel industry was dim, and, by extension, so was the future of the North Korean coal industry.
This past Sunday Alessandro Vitelli at Bloomberg reported that North Korean anthracite coal exports to China jumped 25 percent in the first five months of this year. What gives?
The answer appears to be a factor that neither Stahler nor Lee really took into account: export supply capacity in Vietnam, North Korea’s main rival in the Chinese market. Growth of the Vietnamese power sector means that Vietnam is on a trajectory to become a net importer of anthracite coal. Vietnamese coal exports to China dropped a whopping 91 percent in the first five months of the year. North Korea stepped into the breach.
What is less clear is whether this is anything more than a temporary reprieve. As Vitelli observes, anthracite coal prices in the Chinese market fell 12 percent through the first five months of the year. So while Vietnam’s withdrawal from the Chinese market has temporarily boosted North Korea’s fortunes, the long-run prognosis remains uncertain.
