DPRK Energy and Energy-Related Trade with China Recent Trends and Implications June 26-27, 2006 DPRK Energy Experts Study Group Meeting Nathaniel Aden

Notable Findings Questions Concerning Energy Trade Data Sources Energy and Fuel Trade Energy-Intensive and Related Goods Trends and Implications Today’s Presentation

Notable findings In 2005, energy and fuels accounted for 26% of official DPRK imports from the PRC, and 23% of exports by value. Whereas the DPRK is a net importer of PRC crude oil and oil products, it has been a net exporter of electricity and coal to China for the past two years. North Korean coal has been sold to China for a price per ton that is 55% lower than the average Chinese import price for coal; likewise, electricity has been sold for an average 52% less per kWh than average PRC electricity imports. However, Chinese coal has been sold to the DPRK for 22% more than average Chinese coal export prices, and oil products have been sold to North Korea for 17% higher than average PRC export prices. The DPRK is increasingly a net importer of energy and energy- intensive products, and a net exporter of natural-resource and labor- intensive products.

What is the value and quantity of energy and fuels trade between North Korea and China? How does each country price energy and fuels exports relative to other trading partners? What is the energy- and labor-embodiment of DPRK-PRC trade? What do trade data indicate about the domestic energy situation? This presentation will address four questions on DPRK energy trade with China

Direct DPRK data are elusive North Korean trade data are covered in the UN International Commodity Trade Database and on a fairly detailed level in Chinese Customs Statistics Yearbooks. In order to examine the relationship between the DPRK and the PRC, this presentation reviews data compiled by the China Customs Bureau. Trade value data are in current dollars according to current official exchange rates.

Energy and fuels has been a consistent portion of DPRK-PRC trade

In 2005, energy and fuels was the single largest official DPRK-PRC trade category DPRK ImportsDPRK Exports CommodityValue (million $)CommodityValue (million $) 1 Energy and Fuels $ 286Energy & Fuels $ 112 2Meat $ 104Fish and Seafood $ 92 3Machinery $ 77Ores, Slag, Ash $ 92 4Electrical Machinery $ 57Iron and Steel $ 72 5Plastic $ 52Woven Apparel $ 58 6Cereals $ 50Wood $ 15 7Iron and Steel $ 35Zinc & Articles Thereof $ 11 8Manmade Filament, Fabric $ 29Misc. Grain, Seed, Fruit $ 7 9Vehicles, Not Railway $ 28Knit Apparel $ 5 10Iron/Steel Products $ 25Edible Fruit and Nuts $ 5

Crude imports were overshadowed by more than 2.8 million tons of coal exports

But crude oil is more valuable… (imports) (exports)

…and North Korea’s sporadic oil imports have continued unabated

On the other hand, coal exports surged with prices, while imports have diminished

Sporadic exports of DPRK electricity have grown more sustained.

North Korean exports of electricity and coal have grown at “friendship prices”

But Chinese coal and oil product have been sold at top dollar

…and the DPRK lost its controlled price of $127/ton PRC crude oil in February 1998

Transportation equipment moves on a one-way street between the PRC and the DPRK

In trade with the PRC, DPRK exports became more labor-intensive and imports more energy-intensive

DPRK-PRC trade deficit surged to its highest point in 2005 ($588 million), while the value of the energy-trade deficit rose to its highest point after 1995 ($173 million), offset perhaps by coal exports. Inelasticity of DPRK crude oil import demand to prices may indicate low discretionary usage. Expanding coal and electricity exports may reflect surplus capacity, or desperation for hard currency Asymmetrical energy export pricing suggests an unbalanced alliance Increasing energy-embodied imports may reflect undeveloped industry-integrated energy capacity (e.g., steel or aluminum production capacity) These ‘mirror statistics’ have implications for DPRK energy and bilateral relations

For more information, please contact: Nathaniel Aden Thank you!