Although a growing proximity between US President Trump and North Korean Leader Kim is important to deescalate political tension in the Pacific, their alliance could potentially leave 29 Panamaxes unemployed, while providing employment to only 11 Supramaxes, according to latest research by global shipping consultancy Drewry.
Between 2011-2016, North Korea emerged as China’s third largest coal trade partner. In 2016, North Korea’s coal exports to China exceeded 22 million tonnes.
Relations between North Korea and the US deteriorated in 2016, after Korea’s fourth nuclear test and the US enforced trade sanctions on every country trading with North Korea.
The US barred all ships from coming to US ports if they visited North Korea before entering the US. The restriction was also imposed on any vessel engaged in ship-to-ship transfer with North Korean ships. The EU followed with its own range of restrictions, including a ban on any investment in North Korea. Finally the UN Security Council imposed a ban of any trade with North Korea, a ban that China had to follow.
As result North Korea’s coal exports fell from more than 22 million tonnes in 2016 to less than 5 million tonnes in 2017 and most of the trade in 2017 was prior to the UN ban. So far in 2018, there have not been any coal exports from North Korea and China has replaced North Korean with Australian coal, which has added to tonne miles, and helped Panamax and Capesize employment in 2017 and 2018.
As President Trump extends a feather of friendship to North Korean leader Kim, there is a chance that restrictions will be relaxed thereby paving the way for a resumption of North Korea – China coal trades. If China starts trading with North Korea, which is very likely to happen when US relaxes its restrictions, the coal currently supplied by Australia will most likely come back to North Korea bringing average haulage length down from 4,004 NM between Australia and China, to 538 NM between North Korea and China; which reduces net tonne-mile by 77.8 billion,
…explains Rahul Sharan, Lead Research Analyst, Dry Bulk, Drewry.
North Korea-China coal trade could provide employment to 11 Supramaxes annually; but this will be at the cost of employment of 29 Panamaxes that Australia-China coal trade is currently providing every year.
