Urea shortage threatens South Korea’s transport, energy industries

By Sangmi Cha and Heekyong Yang

SEOUL (Reuters) – South Korea is flying a military oil tanker to Australia this week to airlift 27,000 litres of urea solution, used in diesel vehicles and factories to cut emissions, amid a dire shortage threatening to stall commercial transport and industries.

Approximately two million diesel vehicles, mostly cargo trucks, are required by government to use the additive, according to industry experts.

Diesel vehicle drivers have started panic buying urea after key supplier China last month tightened exports for its domestic market. Nearly 97% of South Korea’s urea imports came from China between January and September, trade ministry said.

“I drove about 70 kilometres to a gas station to just get urea solution for my truck and there were long lines of vehicles and my turn didn’t come, so I just left empty handed,” Lee Byung-ki, 63, told Reuters, adding he would not be able to continue working from Wednesday unless he found some urea.

The shortage is threatening to halt delivery trucks carrying gasoline and other fuels to local gas stations, an official from one of South Korea’s major refiners said.

“If gas stations do not manage to receive sufficient amount of fuel, it could attribute to jump to logistical cost across almost all industries, which eventually could burden consumers – price increases in ordinary consumer goods.”

But the shortage could have an even greater impact on South Korea’s industrial sector, which is also mandated to use urea to cut pollution or stop production.

Of the 835,000 tonnes of urea imported in 2020, 34.7% was for industrial use, 9.8% for cars and the rest used to make fertilisers in agriculture, environment ministry said.

A major urea supplier in the country said it had not been able to import urea material from China since mid October, which had resulted in a drop in the operation rate of its urea solution production line in South Korea.

The industrial urea inventory, which keeps factories running, is already low, a source from the manufacturing industry told Reuters.

“What we could do to alleviate the urea shortage for factory operation is to ask the government to relax these environmental regulations to make it through this.”

AUTOMAKERS WORRIED

If the urea shortage persists the auto sector, which already faces a semiconductor shortage and price hikes in raw materials, would find it difficult to get parts from suppliers, said Lee Hang-koo, an executive adviser at Korea Automotive Technology Institute.

“It could end up keeping South Korean automakers’ factories abroad from manufacturing vehicles as much as they would like to because their auto parts suppliers would not be able to deliver their parts to export ports to ship their products,” he said.

President Moon Jae-in tried to calm public fear on Tuesday, saying at a cabinet meeting there was no need for “excessive concern” and help was on the way.

The government has released urea stockpile from the public sector to areas in urgent need and said there will be a temporary release from military stockpiles.

Defence Minister Suh Wook on Tuesday said in a parliamentary committee meeting the military plans to release around half the stockpile of 445 tonnes of the automotive urea solutions to civilians as a loan.

South Korea secured 200 tonnes of mass urea from Vietnam this week and is in consultation with other nations for up to 10,000 tonnes, enough to make about 30,000 tonnes of the diesel exhaust fluid. The Defence Ministry on Tuesday said the first batch of supply from Australia had been secured.

In 2015 South Korea made it mandatory for diesel cars to use urea solutions to control emissions, which now impacts 40% of registered vehicles.

Diesel vehicles made since 2015 must be fitted with a so-called selective catalytic reduction (SCR) systems that requires injection of urea solutions that help scrub nitrogen oxide (NOx) from diesel exhaust causing air pollution.

Without the urea solution passenger cars do not start and trucks can only travel up to 20 kmh (12 mph), forcing some desperate drivers to try and rig their vehicles or use urea emulators to trick the SCR system, local media reported.

(Reporting by Sangmi Cha, Heekyong Yang; Editing by Michael Perry)

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