dailies-editorials (1)
(EDITORIAL from Korea Herald on Nov. 9)
Diversify import sources
Transport crisis due to China's urea export curb looming large
Diesel vehicles including trucks and buses are at the risk of stopping across the country. This is largely attributable to China's abrupt urea export curb since Oct. 11. 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 10 times.
Urea is the main component of a solution of urea and water. The solution, known as diesel exhaust fluid or DEF, is injected by the selective catalytic reduction, or SCR, system into the exhaust stream of a diesel engine to reduce such harmful emission as nitrogen oxide. The government made it mandatory in 2015 to attach SCR to diesel vehicles. SCR-attached diesel cars will not start unless the DEF 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, requiring a urea solution injection.
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 for a quick customs clearance on existing urea import contracts. Hoarding urea and urea solution will be punished. However, it is unclear if these stop-gap measures can ease concerns over transport paralysis. Related domestic industries' urea inventory is estimated to run out late this month.
China's export curb is due to the shortage of coal from which urea is extracted. Beijing banned coal imports from Australia in October last year after Australia supported a growing call for an international inquiry into China's handling of the coronavirus pandemic. Beijing is unlikely to ease its urea export curb soon, considering the shortage of coal. China depends greatly on coal for electric power generation and fertilizers. Urea is also a key material of nitrogen fertilizer.
The cause of the domestic urea shortage is simple. It is excessive dependency on China. This is understandable to some degree, considering China's geographic proximity and its long-standing trade ties with Korea. But an excessive dependence has a fatal flaw. Once China's supply hits a snag, Korea is left with few alternative import sources. The current urea shortage jolts the nation again 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, their rate of 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 the import of other materials as well, with its dependence rate reaching 100 percent for magnesium ingot, 94.7 percent for tungsten oxide and 86.2 percent for permanent neodymium magnet.
To lessen the risk of excessive dependence, it must diversify 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 big consequences to 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 though it is not price-competitive to do so. Extracting urea from coal is not as complicated as high technology. Quite a few Korean companies produced the chemical substance at home, but all of them closed their business about 10 years ago because of a low profitability compared with imports from China. The government needs to support domestic producers if needed to help them maintain their price competitiveness.
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 export control 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 import dependence on China, among others, for major materials and parts. If it fails, it will face such a crisis again.
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