[Reporter’s Notebook] Leaky Supply Chain... Foreseen Element Water Shortage Crisis

[Sejong=Asia Economy Reporter Kwon Haeyoung] On September 30th, at the Ministry of Trade, Industry and Energy meeting room in the Government Complex Sejong, the Ministry held an emergency meeting chaired by the Vice Minister of Energy to urgently review domestic energy supply and demand trends. It was the point when concerns about energy supply instability began to intensify due to China's power shortage and rising oil and natural gas prices.

The recent urea solution shortage crisis might have been foreseeable when the government started checking domestic energy supply and demand trends about a month ago. Urea, the raw material for urea solution, is produced from coal. China experienced a coal shortage due to halting imports of Australian coal amid diplomatic conflicts and then restricted urea exports as well. Ultimately, the urea solution crisis can be seen as a superficial understanding of the ripple effects of China's coal shortage.

The government's response was criticized for failing to grasp the specific impact on our industries from China's power shortage. Especially, the government's announcement the day before to crack down on hoarding of urea solution put its response under scrutiny.

China's share in the domestic industrial urea supply increased from 88% last year to 97% from January to September this year. In fact, almost all import volumes depend on China. Currently, it is difficult to obtain urea solution even by paying ten times the price. Due to the shortage of urea solution, the maximum speed of freight trucks has dropped to 20 km/h, and truck drivers are stranded, unable to continue their livelihoods.

Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki met with overseas investors in London earlier this month and said that Japan's 2019 export restrictions on materials, parts, and equipment acted as a "vaccine" for the Korean economy. This self-praise came amid the height of the urea solution shortage crisis. The urea solution shortage may just be the beginning. For raw materials with high dependence on China, such as rare earth elements needed for secondary battery manufacturing and raw pharmaceutical ingredients, if China cuts off exports like this time, it can directly strike key domestic industries at any time. The government's supply chain management, which has holes everywhere, still seems to have a long way to go.

This content was produced with the assistance of AI translation services.