Global Times.
Global Times special correspondent in South Korea Zhang Yue Global Times reporter Ni Hao] The topic of "urea shortage" continues to heat up in South Korea. South Korea** said that the General Administration of Customs of China suspended the customs clearance process for Chinese companies to export urea solution to South Korea on November 30, and South Korean companies and officials were sensitive to this reaction. According to Korean media reports, on December 1, South Korea held an emergency meeting on the import of urea solution, which was presided over by the Ministry of Industry, Trade and Energy's industrial chain policy officer, and attended by the heads of relevant departments such as the Ministry of Planning and Finance. On the 4th, South Korea** held another interdepartmental meeting. On the same day, South Korea** said that China's measures were caused by domestic tensions and had nothing to do with political factors. However, South Korea's anxiety has not dissipated, and they are still reminding on the 5th that more than 90% of the industrial urea solution is imported from China, and the measures to diversify imports have proved to be ineffective.
On the 4th, an empty barrel of AdBlue solution for vehicles at a gas station in South Korea. (Visual China).
Why is South Korea nervous?
The application of urea solution in the automobile industry is mainly reflected in two aspects: one is as the main component of automobile exhaust purifier, and the other is as the main component of automobile engine coolant. For diesel vehicles such as trucks and buses, urea solution is one of the essential raw materials for consumables. Yonhap News Agency said that South Korea's dependence on China is as high as about 90% for industrial urea solutions, mainly for automotive adhere.
A number of Korean media mentioned in reports on the 5th that in 2021, South Korea had a "urea shortage" that lasted for more than a month due to China's urea export control. According to the data of South Korea at that time, there were about 10 million diesel vehicles in South Korea, of which about 4 million needed to use AdBlue solution, and about half of them were trucks. The shortage of AdBlue solutions has had a significant impact on the logistics industry. According to some analysts, if the transportation of goods is interrupted, there will be serious chaos in the production of steel, cement, automobiles and other manufacturing industries. Worse still, it could lead to problems in the production and supply of electricity.
From January to October this year, South Korea imported a total of 290,000 tons of urea for automotive and industrial use, with an amount of 1$2.8 billion, equivalent to $400 per tonne. South Korea's "North Korea" said on the 5th that after the crisis 2 years ago, South Korea said that it had sought alternative imports such as Qatar and Vietnam, but the company reported that this is equivalent to what can be bought in the supermarket in the community, but consumers pay to take a taxi to buy it from afar. In the supermarket in the community, you can still buy things that are slightly cheaper or similar to **, but after paying the taxi fare (logistics fee), it is more expensive. Eventually, businesses turned to China again. According to the report of "Han Min**", South Korea also had a company that produced urea, but due to a lack of competitiveness, it was discontinued around the first decade of this century.
China adjusts exports due to the ** problem
Choi Nam-ho, spokesman for the South Korean Ministry of Industry, Trade and Energy, said at a press conference on the 4th that after confirming with diplomatic institutions and enterprises in China and other channels, China's postponement of the export customs clearance process of AdBlue solution to South Korea is caused by domestic tension and has nothing to do with political factors.
During the interview, a person familiar with the matter told the "Global Times" reporter on the 5th that the adjustment of urea export policy is by no means out of political considerations, and is completely based on the guarantee of supply in the domestic market. On November 17, the China Nitrogen Fertilizer Industry Association issued an initiative on nitrogen fertilizer enterprises to protect the domestic first-class enterprises, mentioning that China's nitrogen fertilizer market has fluctuated greatly recently, and the sustainable and healthy operation of the industry is facing certain risks.
People familiar with the matter believe that it is now in the stage of spring plowing and fertilizer preparation next year, and the "stable price and guaranteed supply" of chemical fertilizers is becoming more and more important in the context of food security. The person told the "Global Times" reporter that China's adjustment of urea exports is based on the perspective of its own grain production and is an adjustment to the global market. He believes that China has a population of 1.4 billion, and compared with the rest of the world, ensuring domestic food security production is obviously a higher priority.
Xu Xiaoyun, an analyst at Jinlianchuang Fertilizer, told the Global Times on the 5th that since mid-June this year, urea has begun to grow rapidly, with a cumulative increase of about 30% by the end of July. The sudden increase in China's urea exports and the reduction of domestic inventories stimulated further growth in the month. Xu Xiaoyun believes that if exports are allowed to continue to expand, urea will be pushed up further, and it will inevitably affect the domestic market in the end. A market correction in China is necessary.
The news of China's adjustment of urea exports has been reported in September, and Bloomberg quoted sources at the time as saying that in order to maintain the stability of China's fertilizer market and protect the domestic market, China has asked some major urea exporters to suspend new export agreements in early September. China's major fertilizer exporter, China Agricultural Group Holdings, said on its official website on September 2 that it would take the initiative to reduce the number of urea exports and strive to maintain stability. CNOOC also urged its subsidiaries on September 4 to prioritize domestic urea** ahead of the autumn planting season.
China and the ROK maintain communication
According to a report by South Korea**, the stock of AdBlue solution for vehicles in South Korea can be used for 3 months. South Korea** is also importing urea from Vietnam, Japan and other countries. However, considering the "butterfly effect" of 2021 due to the shortage of urea, which almost paralyzed South Korea's domestic logistics, the South Korean side is closely monitoring the situation.
South Korea also said that the South Korean Embassy in China has sent an official letter to the General Administration of Customs of China, the Ministry of Commerce and China on the 1st, actively seeking the assistance of relevant Chinese departments to ensure that urea that has completed the quarantine of goods at China Customs but has not yet been loaded can be successfully cleared. The ROK side also raised the need to stabilize the urea ** chain through diplomatic channels such as the fifth joint committee meeting of the China-ROK FTA held in Beijing on December 4. At the regular press conference held on the same day, spokesman Wang Wenbin revealed that the relevant departments of China and South Korea have maintained communication on this.
Yonhap News Agency reported on the 5th, citing sources, that after South Korea expressed concern about urea, the Chinese side said that it hoped that the two countries could continue to smoothly promote the cooperation of the first chain, and would seek solutions to the problems raised by the South Korean side. According to the report, China and South Korea agreed to set up a new department-level consultation mechanism between industrial departments to discuss the plan to stabilize and control the ** chain of urea solution and other items, which will be launched as early as this month.
Xu Xiaoyun told the Global Times that urea involves a huge chemical industry chain, and not all countries have such an industrial base. For South Korea, the current status quo can only rely on overseas **, and "China's large output, and the shipping distance is close, the cost is low, South Korea's last urea crisis finally relied on China to solve".
The above-mentioned people familiar with the matter told the Global Times that China's export adjustment is global-oriented, and only South Korea has expressed a high degree of sensitivity to this.