Renovations at Elite Hot Springs Appear on Hold Due to Economic Pressures

 

While Kim Jong Un was busy issuing orders to reconstruct the city of Samjiyon, to build kilometers of beachfront resorts in Wonsan, and constructing a new hot springs facility in Yangdok, he wasn’t going to neglect Onpho in the process.

Nestled in a valley a few kilometers northwest of the city of Kyongsong in North Hamgyong Province, the Onpho Holiday Camp, a hot springs resort, has been popular among the country’s elite for decades.

The original facilities at the Onpho hot springs resort as seen on Sept. 29, 2017. 

 

It is one of the oldest and largest such facilities in the country and has been visited by each generation of the Kim family. It is so popular to the elites that a secured villa complex was built next to the general spa area and a special “leadership train station” was added around 2010 to allow for speedy and secure transportation to the relaxing hot springs and mountain air that flows down into the valley.

However, during Kim Jong Un’s visit to Onpho in July 2018, he lamented “its very bad condition, saying bathtubs for hot spring therapy are dirty, gloomy and unsanitary for their poor management.”

By October, Google Earth images revealed that the resort was being renovated as temporary worker’s housing was visible as well as the land being cleared for new buildings.

Initial work activity at the resort in October 2018, with various temporary structure like worker’s huts and workshops visible.

 

After that initial activity, construction slowed down and little had been accomplished five months later in March 2019. That lull quickly changed as by September, at least fourteen buildings were under construction in the main resort area and a dozen multifamily housing structures were also being constructed across the river for employees of the spa.

During Kim Jong Un’s 2018 visit he mentioned that the bad condition of Onpho would “commit a sin” by drawing criticism from the people in a place that was so important to Kim Il Sung and Kim Jong Il. Testifying to Onpho’s importance, it has an entire park and monument dedicated to the “exploits of the great leaders” with regard to the establishment of the resort.

The historic importance of the resort was commented on by the Korean Central News Agency back in 2015 when they stated that Kim Il Sung had visited the natural hot springs at Onpho as early as 1946 and ordered it be turned into a holiday camp. He then visited and gave “field guidance” a further twenty times, followed by visits by Kim Jong Il including one trip in 2008 after the area had been hit by flooding.

Kim Jong Un has made it a key feature of his rule to (attempt to) improve international and domestic tourism by spending hundreds of millions of dollars – perhaps a billion or more in total – constructing numerous tourism related facilities across the country including a $35 million ski resort, converting the Wonsan-Kalma area into a major tourist region (which included an estimated $200 million reconstruction of the Kalma International Airport), and more recently, discussing the need to modernize the Mt. Kumgang Tourist Zone that was opened as a joint project with South Korea back in 1998.

All of this, of course, despite the fact that North Korea doesn’t have hordes of foreign visitors to fill up those thousands of hotel rooms now available nor does it have a strong enough domestic economy to sustain all of the resorts with predominately local tourists.

However, the fact that Onpho plays a role in the Kim family personality cult and that it has been a longstanding feature the state could point to as evidence of Kim Il Sung’s love for the people, it makes sense that Kim Jong Un would want to renovate such a place that had become dilapidated.

Unfortunately for the regime, economic pressures don’t care about prestige projects and there has been very little new construction during all of 2020 as late as July.

The combination of existing economic problems and the added pressures relating to the COVID-19 pandemic have caused considerable difficulties for the country. As a reflection of this, it was reported by DailyNK on April 23 that the regime sent out a jointly signed document by the Cabinet and Central Committee of the Korean Worker’s Party decreasing the number of “national construction projects” from fifteen to just five.

While the report didn’t say what those fifteen projects were, two of the remaining ones are undoubtedly the Pyongyang General Hospital and the Tanchon Hydroelectric Project. Both have experienced funding and material shortages, with Kim Jong Un lashing out at officials over mismanagement regarding the hospital’s construction.

Onpho may be an ideologically important site but it isn’t fundamental to the country’s health or electricity needs, so the lack of construction this year may well be a reflection of economic problems and the April “joint decision document” cutting back on less practical projects.

The one area inside the large resort complex that hasn’t seen any renovation, somewhat conspicuously, is the leadership villa compound adjacent to the main spa facilities. This walled compound contains a primary palace building and six smaller villas.

The villa compound at Onpho.

 

After Kim Jong Un came to power, he wasted no time making improvements to a number of leadership residences including the addition of runways (such as at Hyesan and Changsong), he completely rebuilt villas within the “Forbidden City” district in central Pyongyang, and he undertook multiple changes to the Kim family primary Ryongsong Residence complex.

Nonetheless, what can be seen from commercial imagery does show substantial changes occurring at the holiday camp area. In addition to the hotel buildings (each around seven-stories tall) and new personnel housing, three unidentified but large buildings are also under construction. Located on the banks of the river, the three buildings have a combined footprint of approximately 6,814 square meters and are each multistory buildings.

Google Earth image showing the status of renovations on October 25, 2019.

 

Image dated July 2, 2020 showing only limited construction progress since 2019 except for the apparent completion of the new monument and museum park.

 

Additionally, a new monument area has been constructed that, as of the most recent Google Earth imagery, has two monuments and two buildings that are likely “revolutionary history museums” dedicated to Kim Il Sung and Kim Jong Il. Such monuments and museums are common to ideologically important places and places that have received multiple visits by the leadership. And in true North Korea fashion, this portion seems to be the first new part of Onpho to have been completed; the final landscaping touches being visible by July 2, 2020.

Construction may have been stalled due to unforeseen events, but the addition of Onpho to the long list of recreational facilities that Kim Jong Un has either built or modernized shows that “bread and circuses” are still a central tenet of his regime. From diplomatic maneuvers to testing missiles, to spas and rebuilt towns, every dictator needs a well-rounded legacy to go along with the less-than-voluntary labor it often takes to build these places.

I would like to thank my current Patreon supporters: Amanda O., Anders O., GreatPoppo, Kbechs87, Planefag, Russ Johnson, and Travis Murdock.

--Jacob Bogle 8/20/2020

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History of the Musan Iron Mine

The Musan Iron Mine sits atop one of the largest iron deposits in northeast Asia and has been an integral part of North Korea's industrial base since the country's inception. Exact estimates vary but the open-pit mining complex holds at least 1.5 billion tons of economically viable ore (with total reserves estimated at around 7 billion tons). As such, interest in Musan goes back generations, with the first industrial-scale mining beginning in 1935 during the Japanese occupation. 

Post-famine problems meeting production capacity have had ripple effects across North Korea's economy and its ability to carry out major construction projects.  

Operations at Musan mine. Image source: Wikimapia.

The mine has rarely operated at full capacity but did run relatively smoothly during the first few decades of North Korea's existence. Since the economic collapse of the 1990s and the country's subsequent inability to ensure constant electricity supplies and maintain or replace needed industrial equipment, operating capacity has bounced around from 60% to as low as 30%. 

Pyongyang's COVID-19 mitigation measures have complicated the mine's operations and further limited income from iron ore trading. The long-term effects of these measures on both the mine and the economy as a whole have yet to be fully realized, but until North Korea can improve the mine's output or shift operations to another, more productive mine, the country will be seriously stunted in its ability to continue to engage in large-scale construction projects simultaneously like the Pyongyang General Hospital and Tanchon Hydroelectric Project.

Early history

As noted earlier, industrial mining operations began in 1935 by the Japanese company Mitsubishi Mining Co. The initial operating capacity for processing the ore concentrate was planned to be 500,000 metric tonnes annually. In 1942 that was increased to 1 million tonnes and an even larger plant was under construction in 1945.

From 1940-45, the mine was able to produce 3,838,454 tonnes of ore concentrate at an average iron concentration of 58% elemental iron. Obviously, Japan's loss in World War II and the subsequent division of the Korean Peninsula interrupted mine operations. 

This 1952 geologic map shows the area of iron deposits (darkest regions). From "Mineral Trade Notes", US Bureau of Mines, 1952.

The area of heaviest deposits in this 1952 map covers approx. 247 square hectares (0.97 sq. miles). 

Musan under Kim Il Sung

Nationwide, the mining sector in northern Korea underwent a drastic decline from the end of WWII through to reconstruction after the Korean War. The new North Korea that emerged afterward placed modest goals for mining in their first economic plans. Musan was expected to produce 400,000 tons only by 1956, less than the realized average of 639,000 tons annually from 1940-45.

Under Japan, northern Korea had largely been seen as a source of raw materials. Kim Il Sung sought to address that "colonial lopsidedness" by emphasizing machine productions. After years of interruptions, war, and flooded mines, the need to get Musan (and the whole mining sector) back up was never more important if Kim Il Sung was to realize his goal of turning North Korea into a powerful industrialized country. 

To fulfill plans to produce 6.1 billion won (~$5.08 billion[1]) worth of machinery in 1956, the state would need every kilogram of iron it could find.

The 1960s was a period of substantial economic growth, albeit, not without its problems. Nationally, 1960 saw the production of 3.11 million metric tons of iron ore and steel. That grew to 4 million tonnes in 1964. 

Steel production grew at 13% a year and for the 1971-76 Six-Year Plan, the regime wanted to increase output to 3.8 million tons annually. During this period, Musan was providing at least two-thirds of all iron mined in the country.

The bulk of the ore was sent to steel mills at Chongjin and Kimchaek. At the same time that mining and milling operations were growing, trade in iron and steel was also growing. Throughout the 1960s trade increased from $34 million in 1961 to $56 million in 1969, with 400,000 tons of ore shipped to China in 1966 alone.

By the end of the 1971-76 economic plan, prospects for continued growth in mining and steel milling looked good, although the industry was heavily reliant on Soviet help for technical and mechanical assistance and on China for raw materials involved in ore processing and steel production.

Later Operations

Throughout the 1970s and into the 1980s, national iron production continued to grow until its peak in 1985 at 9.8 million tonnes. From there, it declined precipitously reaching a low of 2.9 million tonnes in 1997. This decline coincides with the faltering trade between Soviet Bloc countries and North Korea (largely caused by Soviet attempts at reform and demanding repayments of debt), the eventual collapse of the Soviet Union, and finally, the famine that began in 1994. 

Environmental factors also played a role as floods damaged mines across the country and severely limited their ability to extract minerals. Many mines were completely shut down and those that kept functioning operating at severely decreased capacities, not least because the workforce struggled to keep working in the face of starvation.

Musan Iron Mine as seen from Landsat in 1984.

Musan Iron Mine as seen via Google Earth in 2019.

After reviewing the available information specific to Musan, I don't think the mine has ever recovered its full operating capacity since the 1990s nor has it been able to sustain long-term growth in production. The reasons for this are manifold: electricity supply problems, lack of modern mining equipment (most machines are 40-50 years old and older), the state's insistence on cutting corners regarding safety that leads to delays with each accident, and obviously, ever-tightening international sanctions regimes play a role. 

However, as the two above images show, the mine has very visibly grown between 1984 and 2019 and had tripled in size between 1970 and 2007. The large difference in size from 1952 to the present likely reflects attempts to recover lower quality ore that lies outside of the primary deposit as well as improved geophysical surveys revealing more iron deposits throughout the area.

As noted before, the production rate of Musan fluctuates wildly, with the mine only operating at 30% in 2006. To boost production, North Korea has looked to joint ventures with a number of foreign companies. The largest deal was inked in 2005. The agreement with a consortium including the Chinese Tonghua Iron & Steel (Group) Co. Ltd. would have provided $867 million for a 50-year exploration rights deal. 

The goal of the plan was to increase iron production from less than 3 million tonnes in 2004 to 10 million tonnes in 2010. However, the plan was abruptly canceled in 2009 by North Korea.

Other endeavors to increase investment in the mining and steel industries (which have a mixed track record of success) include negotiations with Global Steel Holdings, Sinosteel Corporation, and a deal with Shougang Tonggang Group managed to yield a $2.2 million investment in a small steel factory.

The overall results of these deals on North Korea's mining industry and on Musan, in particular, have been hard to quantify and various reports coming out of the country tell a story of continual shortages.

More recently, the addition of UN sanctions in 2016 and 2017 (UNSCR 2270 & 2371) prohibited the importation of machinery and the export of minerals like iron. When taken in combination with other sanctions (from the UN, EU, and United States) nearly all forms of legal financial investment in the country have been cut off.

Levels of illicit trade from Musan managed to continue until North Korea closed its borders due to COVID-19, when all forms of trade fell dramatically. However, that trade hasn't been enough to offset either the sanctions or the chronic electricity and infrastructure problems the country has yet to overcome. 

Throughout the problems facing the mine and its workers, the miners continue to push on with their work. While it is primarily mining blocks No. 1 and No. 3 (out of seven blocks) that are kept operational at any given time, there is evidence that the regime is trying to expand those primary blocks and to open new sites along the mountain range in which Musan sits. New mining sites have either been opened or are currently being explored at three different locations along an 8 km line extending north of the main mine.

One such operation occurred in January 2018, when 450,000 cubic meters (approx. 1 million tonnes) of overburden was blasted away to expose more ore. 

Lastly, while Musan lurches between higher levels of activity and near shutdowns, one thing that has remained constant is pollution from the mining, processing, and storage of the ore as well as from the general operational requirements of such a large mine. 

River pollution from North Korea's mining, manufacturing, and electricity sectors has been a longstanding problem, and the Musan Iron Mine has been recognized as a major contributor of pollution along the Tumen watershed.

The water treatment systems along the 8.5 km stretch of the Songchon River that flows by the mine are largely inoperative. This river empties into the Tumen River (which serves as the Sino-DPRK border) and is a source of drinking water for both Musan and all of the Chinese and North Korean towns downriver. Lack of adequate pollution control has caused "significant environmental damage". 

Notes:

1. This is only an approximation based on a nominal rate of $1 USD to 1.2 KPW won between 1961-1974. Source: http://oldsite.nautilus.org/DPRKBriefingBook/economy/DPRKMonetaryHistory.html

I would like to thank my current Patreon supporters: Amanda O., Anders O., GreatPoppo, Kbechs87, Planefag, Russ Johnson, and Travis Murdock.

--Jacob Bogle, 8/12/2020

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