Supply crisis fears fuel demand spike for urea solutions

Industry

Published: 11 Sep. 2023, 17:51 Updated: 11 Sep. 2023, 18:25

Supply crisis fears fuel demand spike for urea solutions

Bottles of diesel exhaustion fluid made of urea on display at a supermarket in Seoul on Sunday. [NEWS1]

Despite the government’s assurance that there will be no urea shortage in Korea, concerned consumers — wary of a repeat of the supply crisis of two years ago — are scrambling to secure stocks of urea solutions for diesel cars.

China's restriction on urea exports won't cause shortage in Korea, Finance Ministry says

Lotte Fine Chemical had halted sales of its Eurox diesel exhaust fluid (DEF) on its official online shopping mall as of Monday due to surging orders. In a notice on its website, Lotte Fine Chemical said, “Our delivery service capacity is nearing its limit due to a temporary spike in orders.”

Lotte Fine Chemical’s Eurox brand represents the largest share of the local DEF market.

However, as the online channel takes up only a minor proportion of total DEF sales and the inventory level remains sufficient, the latest demand hike is not likely to result in a supply disruption like the urea solution shortage crisis two years ago.

The rising concerns were driven by a recent report from Bloomberg that the Chinese government asked fertilizer suppliers to halt urea exports following price hikes in the country, suggesting that the export suspension may result in supply disruptions.

While the Chinese authorities have not implemented official restrictive measures on urea exports, the country's urea supplier announced in September that it would cut the export volume to secure a stable domestic supply amid recent price increases.

Urea is a chemical compound used for producing fertilizer and DEF for diesel engines. China is the world's largest urea supplier. In late 2021, China's export curbs on urea solutions led to a massive supply shortage in Korea, taking a toll on diesel car and truck drivers.

Following the report, the government issued statements on Friday, assuring that there will be no disruption in urea supply, whether it be for fertilizers or DEFs.

According to the Ministry of Trade, Industry and Energy, Korea currently has about two months’ worth of urea solutions for DEF and has secured other import channels from Southeast Asia and the Middle East.

However, Korea is still highly dependent on China for DEF supplies despite the shortage crisis in 2021, which remains a risk. While China accounts for only 17.4 percent of Korea’s total imports of agricultural urea products for fertilizers, the figure stands at 90.2 percent for manufacturing and automotive urea products.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]