Gov't opens urea reserves as shortage looms

Economy

Published: 07 Dec. 2023, 14:10 Updated: 08 Dec. 2023, 10:40

Gov't opens urea reserves as shortage looms

Urea imported from China is stored in Aton Industry's warehouse in Iksan, North Jeolla. [YONHAP]

Korea's procurement agency preemptively released public reserves of urea on Thursday to address a looming shortage of the material.

China is currently pressuring its local suppliers to limit exports of the chemical compound, which is widely used as an additive in diesel cars. The country has not specified the reasoning behind these limits, but some media outlets have characterized them as a form of export control.

Public Procurement Service said that it has distributed 2,000 tons of urea, an amount estimated to cover 10 days of demand in the country. The agency is working to act on the purchase of 6,000 additional tons.

The latest procurement of urea came from Vietnam, as Korea's Lotte Fine Chemical made a contract to purchase 5,000 tons of urea there. The quantity will lengthen the duration of the country's stockpiles, previously estimated to last three months in total, to three months and 21 days.

In a meeting with reporters on Wednesday, Industry Minister Bang Moon-kyu said that the “recent halt is unlikely to become a major challenge for us,” as Korea has “enough supplies of urea, and … can buy them from third nations.” Bang said the government will push to provide financial support to companies who need to buy the chemical compound from exporters other than China.

“Companies have turned to China for its cheap prices and have been reluctant to raise their inventory given huge storage fees and other costs. So, the government needs to set up a system that supports corporate imports of a certain minimum amount of urea in emergency situations to prevent any recurrence of the crisis from two years ago,” said the minister.

Chinese companies will completely restrict urea exports to Korea until next year’s first quarter and limit next year’s total urea exports to around one fifth of the usual amount. The move is expected to hit domestic industries hard, as more than 90 percent of Korea's industrial-grade urea supply comes from China.

China’s online network platform for chemicals and fertilizers announced Tuesday that the country's major fertilizer companies have made the autonomous decision to export a reduced amount of 944,000 tons over next year’s second to fourth quarters and will institute a complete ban until next year’s first quarter.

A Chinese industry researcher had uploaded a post on the network Friday stating that “15 major fertilizer and trading companies including the China National Agricultural Means of Production Group Corporation (CNAMPGC) and Sinochem decided to limit next year’s total [urea] exports to 944,000 tons in a meeting on Nov. 24,” according to Yonhap.

“Recently, rumors emerged that exports will be completely restricted — that exports will not be allowed until the first quarter of next year,” the researcher said. “Currently, at some ports, exports cannot be shipped even with export documentation. Cargo is piled up at ports, and there are even some cases where cargo is retrieved.”

Seoul officials have said the recent blockage appears to have been made due to tight supplies for domestic use in China, not a formal export curb.

Urea is a chemical compound used as a fertilizer and in the making of exhaust fluid for diesel engines. Korea imported more than 90 percent of its industrial-grade urea from China this year, according to data from the Industry Ministry.

Meanwhile, the government has vowed to double the current state inventory of urea for diesel vehicles to 12,000 tons and to release 2,000 tons of the government reserves on Wednesday.

BY KIM JU-YEON [kim.juyeon2@joongang.co.kr]