Concerns Over a "Second AdBlue Crisis"... Need to Strengthen Supply Chains Beyond China

Concerns Over China's 'Resource Weaponization'
172 Out of 228 Key Imported Items Are Made in China

On the 4th, a "One-person protest by construction machinery workers urging the government to take responsibility for the urea solution price surge" was held in front of the Government Seoul Office in Jongno-gu, Seoul. Photo by Moon Honam munonam@

The so-called ‘urea solution shortage crisis’ that occurred last year is a representative case that highlighted the importance of securing global supply chains. Due to trade conflicts between Australia and China, exports of urea were restricted, causing the price of urea solution?which had a 97% dependency on China?to surge more than tenfold. As a result, South Korea was hit hard. Nationwide, truck queues formed at gas stations trying to obtain urea solution. To prevent a logistics system paralysis caused by the urea solution shortage, the government hastily deployed military transport aircraft to secure alternative supply routes. This was a harsh lesson on the cost of relying on a single country for essential industrial items.

Concerns about a ‘second urea solution crisis’ due to South Korea’s excessive import dependence on China are closely linked to the worsening global supply chain crisis caused by the Russia-Ukraine conflict and the prolonged lockdown measures in Shanghai, China. Among key goods imported to South Korea from the U.S., China, and Japan, 75% are of Chinese origin. Particularly, items with vulnerable supply chain stability account for an absolute share of 95.4%. Given the ongoing global supply chain disruptions, there are calls to resolve the ‘overconcentration’ on China.

According to the business community on the 1st, a recent report released by the Federation of Korean Industries defined 228 items as ‘key import items requiring management’?these are items with an import dependency rate of over 90%, absolute inferiority in import competitiveness, and whose import value ranks in the top 30%. Of these 228 items, 172 (75.5%) are Chinese-made. Japanese-made items accounted for 32 (14.0%), and U.S.-made items were 24 (10.5%).

China’s dependency on tungsten oxide, used in semiconductors and high-strength steel, is close to 95%, and magnesium ingots essential for automobile production are entirely imported from China. If China imposes export restrictions due to trade disputes with other countries, as it did during the ‘urea solution crisis,’ domestic industries are inevitably at great risk.

In particular, with the recent launch of the Indo-Pacific Economic Framework (IPEF) led by the U.S., concerns have arisen that China could weaponize resources at any time. If economic and diplomatic cooperation with China is not closely maintained, a ‘second urea solution crisis’ could strike the Korean economy again at any time. A business community official said, "Because the dependency on China is so high, the global supply chain crisis is expected to continue. There is concern that China, displeased with Korea’s participation in IPEF, might weaponize resources."

Experts also recommend that the government make policy efforts to resolve this China overconcentration. Professor Choi Nam-seok of Jeonbuk National University pointed out 133 import items vulnerable to global supply chain shocks, including tungsten oxide, manganese, and magnesium, in a report. Among these, 127 items are Chinese-made, practically covering the entire list. Japanese and U.S.-made items numbered only three each.

Professor Choi emphasized, "An early warning management system for key import items should be established, and government response measures should be continuously adjusted in a tailored manner based on field demand." He added, "If supply management of key import items fails, supply crises like the urea solution shortage can occur at any time. A continuous monitoring system must be built, and measures such as import diversification should be taken."

Yoo Hwan-ik, head of the industrial division at the Federation of Korean Industries, also stated, "As the global supply chain crisis worsens, measures to resolve the overconcentration on China for key import items should be prepared through import source diversification and active participation in global supply chain alliances."

Meanwhile, with the launch of the new government, the need for economic cooperation with Japan is also emerging. Since the export restrictions on Japan’s materials, parts, and equipment (SoBuJang) items to Korea caused a roughly 10% decline in bilateral trade, there are calls for both countries to strengthen economic cooperation to reinforce the global supply chain.

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