Seoul, South Korea - The recent decision by Chinese customs authorities to suspend the shipment of industrial urea to South Korea has sparked concerns about a possible recurrence of urea solution shortages. This development follows a similar situation two years ago, where export restrictions from Beijing led to significant disruptions in South Korea's freight transportation and related industries.
According to Yonhap News Agency, the current situation is a result of China's internal shortage of urea, prompting major Chinese fertilizer producers to halt exports until the end of the first half of next year. This measure is intended to cater to the domestic peak-season demand. The Korean government has reported that the nation's current urea inventory is sufficient for about three months, providing a temporary buffer against immediate shortages.
The reliance of South Korea on China for urea imports is notably high, with 91 percent of its urea needs being sourced from China. Efforts to diversify imports have been made, especially after the export restriction by Beijing two years ago, but significant changes in the dependence levels have not been achieved. Despite attempts to diversify sources, Korean urea importers have frequently turned to China due to the competitive pricing and transportation costs of Chinese urea.
This dependency poses a critical risk to Korea's transportation sector, particularly cargo transportation by diesel trucks, as urea solution is a key component in reducing diesel vehicle exhaust gases. The government's consideration of incentives for importers sourcing from countries other than China highlights the urgency of reducing this dependence.
Furthermore, the editorial highlights Korea's vulnerability to China-related risks in securing not only core minerals but also many intermediate goods. For instance, in the first half of this year, Korea imported 9,308 items for more than $10,000 each, with over 70 percent dependence on China for 2,113 of these items. This includes rare earth minerals, crucial for semiconductor manufacturing, with 79.4 percent imported from China.
The government's strategy involves not only supporting import diversification but also building up stockpiles. Despite the challenges posed by the price competitiveness of Chinese imports, there is a clear need for diplomatic efforts to maintain stable trade relations with China. Concurrently, the National Assembly is urged to support the government's measures to stabilize national supply chains, including processing a related bill that has been stalled due to political strife.