"Preventing a Second Urea Solution Crisis"…Government Investigates Entire Supply Chain of Imports

Magnesium and Silicon Also Unstable
South Korea's Import Dependence Rises...Supply Chain Risk Vulnerable

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government has decided to broadly review the risks associated with commonly imported items such as magnesium and silicon, triggered by the supply difficulties of urea originating from China. This is to take preemptive measures such as stockpiling in cooperation with the industry if it is judged that imports may not proceed smoothly due to special circumstances in the trading partner country, like China's recent export controls on urea.

According to the government on the 7th, the Ministry of Trade, Industry and Energy has recently begun an internal comprehensive supply chain inspection of commonly imported items.

The government plans to roughly assess the situation based on importance and consult with the industry if additional measures are necessary. Following Japan's export restrictions two years ago, the government has actively managed supply chains for the three key semiconductor materials?photoresist, fluorine polyimide, and hydrogen fluoride?through domestic production and other means.

It is also intensively managing the supply chains of 35 rare metals, including rare earth elements, which have high industrial demand and fierce global competition for securing supply. However, commonly used items like urea, which small-scale importers have independently imported based on price, have been difficult to manage in the supply chain under normal circumstances. The delay in the government's initial response to the urea shortage has been criticized for this reason.

The government is concerned that the ripple effects of the supply chain shock originating from China may spread to other raw materials.

According to foreign media, as China reduced magnesium production due to power shortages and carbon emission regulations, the price of magnesium soared from 19,000 yuan per ton (approximately 3.52 million KRW) in mid-July this year to as high as 70,000 yuan per ton (approximately 12.97 million KRW) in September.

Magnesium is light and strong, mainly used as a material for automobiles, smartphones, and batteries. It is an essential raw material for producing aluminum alloys used in automobile parts.

The price of aluminum also reached its highest level in 13 years at $3,000 per ton (approximately 3.56 million KRW) as of last month due to production controls by the Chinese government. China is the world's largest aluminum producer.

Silicon, widely used in construction sites and household goods, is also unstable. As production cuts occurred in China, the price of metal silicon, a raw material for silicon, rose from 17,000 yuan per ton (approximately 3.15 million KRW) in early August to 61,000 yuan per ton (approximately 11.3 million KRW) last month.

Although the prices of these raw materials have slightly declined this month, the ongoing power shortages in China mean prices could fluctuate again, and shortages may occur.

The government's recent move is interpreted as an effort to prevent a 'second urea crisis' by stopping the supply shortage from spreading to other imported goods amid the uncertain early resolution of the urea supply difficulties.

Meanwhile, South Korea's high dependence on imports for essential raw materials makes it vulnerable to such supply chain risks.

According to the Korea International Trade Association, among the 12,586 items South Korea imported from January to September this year, 3,941 items (31.3%) had an import dependency of over 80% on specific countries.

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