The Chinese partner has reportedly pulled out of North Korea's Musan Mine, Asia's largest open-air iron mine with an estimated reserve of 3 billion tons of ore.
The Chinese apparently baulked at a price increase of more than 20 percent demanded by the North, although international iron ore prices are plummeting in the wake of the global recession. They won 50-year extraction rights for the mine in 2005.
A smelter in the Chinese province of Jilin near the border with North Korea and operated by Tianchi Industry and Trade, the Chinese partner to the Musan Mine, closed down in September, according to a source in Yanbian on Tuesday. The smelter used to process iron ore extracted at the mine.
The source added, "There's been no progress in the implementation of plans to lay a railway line and a slurry pipeline between Nanping and Musan."
Tianchi Industry and Trade turned down the North's demand, saying it makes hardly any profit as is given wages for North Korean workers and transportation costs.
Tianchi, a private trading company based in Yanbian, has served as a conduit for iron ore produced at the Musan Mine to the Chinese market since the early 1990s. It obtained the extraction rights to the mine in 2005 after concluding a trilateral joint-venture contract with Tonghua Iron and Steel, a Chinese state-run iron and steel mill, and [North] Korea Ferrous Metals Export and Import Corporation.
Tianchi hired North Korean workers and extracted 1 to 1.5 million tons of iron ore at Musan every year, which it supplied to Tonghua and other companies.
But the first cracks in the deal appeared in 2009, and iron ore production had been intermittent since then and stopped completely this year.
The Jilin provincial government has also been hit because it already laid a 41.68 km railway line leading to the border town of Nanping since November last year.