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Addressing a shortage of urea

PARK SUNG-HOON
The author is a Beijing correspondent of the JoongAng Ilbo.

China’s export restriction on urea has hit Korea hard. After the price of diesel exhaust fluid doubled, panic-buying followed. Some worry that even firetrucks could stop running.

It all began with Notice No. 81 of the General Administration of Customs (GAC) of China. The one-line directive stated that export inspections would be conducted on 29 items related to chemical fertilizers. As urea is included on the list, the Indian fertilizer market, which makes up 75 percent of China’s urea exports as of September, was directly hit.

As Korea accounts for 7 percent of Chinese exports, or over 500,000 tons between January to September 2021, the local diesel exhaust fluid market was rocked. While most experts attribute it to China’s strategic suspension of exports due to coal shortages, the Chinese authorities have never mentioned a reason directly. The attention is on whether China will resume exporting urea.

The atmosphere in China confirmed through the Korean Embassy in Beijing is somewhat different from how you may feel in Korea. When the embassy asked the GAC about the shortage, it said it did not ban urea exports. The embassy explained that according to customs, the customs procedure will be normalized once the inspection results come out. In other words, it is just a matter of time before things return to normal, according to the Korean embassy. Inspections usually last for 14 working days. The inspection on exports began on Oct. 15, so it will be revealed next week at the latest whether exports will resume or not.

Of course, questions remain over how China’s explanation should be interpreted. Just as Beijing did with the Thaad crisis, the possibility of China using the regulation to practically restrict exports cannot be ruled out. Another source knowledgeable in Korea-China trade said that the GAC will proceed with customs clearance on urea exports weighing less than 50 tons first.

The urea crisis reminds me of Japan’s export ban on key semiconductor parts in 2019. While China does not seem to intentionally target certain countries, Korean people solely took the damage from the suspended exports of irreplaceable items.

Hong Chang-pyo, Kotra’s regional chief in China, made a notable point. “It is necessary to identify items with excessively high import dependency on certain countries. When Korea suffers damage from export restrictions, there should be a database ready to quickly search for alternate supply channels.”