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[Editorial] Diversify import sources

Transport crisis due to China’s urea export curb looming large

Diesel vehicles, including trucks and buses, are at risk of stopping across the country. This is largely attributable to China’s abrupt urea export curb since Oct. 11. South Korea depends on China for 97 percent of its urea imports. Due to the shortage of urea, the price of diesel exhaust fluid has already risen tenfold.

Urea is the main component of diesel exhaust fluid, a solution that is injected into the exhaust stream of a diesel engine using a process called selective catalytic reduction. This reduces emissions of harmful gases such as nitrogen oxide.

The government made it mandatory in 2015 to attach SCR systems to diesel vehicles. Those vehicles will not start unless the fluid is replenished in time.

SCR systems are attached to about 2 million of the nation’s 3.3 million diesel freight vehicles. Of some 50,000 buses on regular routes nationwide, 20,000 use diesel and require the urea solution to operate.

The government said after a meeting on the shortage on Sunday that it will import 20,000 liters of urea solution from Australia this week, while trying to keep in diplomatic contact with China to ensure quick customs clearance for urea shipped under existing import contracts. Hoarding urea and urea solution will be punished. However, it is unclear if these stopgap measures can ease concerns over transport paralysis. Domestic industries’ urea inventory is expected to run out late this month.

China is restricting urea exports due to a shortage of coal, from which urea is extracted. Beijing banned coal imports from Australia in October last year after Australia supported growing calls for an international inquiry into China’s handling of the coronavirus pandemic. Beijing is unlikely to ease its urea export restrictions anytime soon: Urea is also a key component of nitrogen fertilizer, and China depends greatly on coal both for fertilizer and electric power generation.

The cause of the domestic urea shortage is simple: excessive dependence on China. This is understandable to some degree, considering China’s geographic proximity and its long-standing trade ties with Korea. But excessive dependence has a fatal flaw. Once China’s supply hits a snag, Korea is left with few alternative sources. The current urea shortage has once again jolted the nation to the perils of overdependence on a single import source.

The problem is, similar shortages of other raw materials can happen anytime. According to the Korea International Trade Association, Korea imported a total of 12,586 items over the January-to-September period, and for 3,941 (31.3 percent) of them, dependence on certain countries exceeded 80 percent. Korea imported 1,850 of the 3,941 items from China, 503 from the US and 438 from Japan. Korea is severely biased toward China. It depended excessively on China for imports of other materials as well, with that dependence reaching 100 percent for magnesium ingots, 94.7 percent for tungsten oxide and 86.2 percent for permanent neodymium magnets.

To lessen the risk, Korea must diversify its import sources for raw materials. Above all, it is urgent to reduce dependence on those countries likely to use export controls as a diplomatic or trade weapon. If tension between Washington and Beijing escalates further, Korea cannot but face a growing China risk.

As for materials with serious consequences for the national economy, the government needs to deal with supply chain issues from a national security perspective. It must consider domestic production of materials, even if it is not price-competitive. Extracting urea from coal is not high technology. Quite a few Korean companies used to produce the chemical substance at home, but all of them closed their operations about 10 years ago because they could not compete with imports from China. The government needs to support domestic producers to help them maintain their price competitiveness if needed.

The urea shortage did not happen in a day. A year has passed since China banned coal imports from Australia. Korea could have foreseen the urea crisis to some extent. However, it sat on its hands and started work only when pressed for time. This time, without fail, Korea must find ways to reduce its import dependence on China, among other countries, for major parts and materials. Otherwise, it will face such a crisis again.

By Korea Herald (