"Concerns Over a Second Diesel Exhaust Fluid Shortage"... Government: "Will Consult with China Through Diplomatic Channels"

Sudden Suspension of Urea Water Export Customs Clearance by China
Rising Concerns Over Repetition of 2021 Nightmare
Increased Dependence on China for Rare Earths, Gallium, and Germanium
Concentration on Chinese Products Due to Price Competitiveness
Need for Diversification to Stabilize Supply Chains

As Chinese authorities suddenly halted customs clearance for urea solution exports to South Korea, concerns are rising about a recurrence of the "urea solution crisis" that caused major disruption in 2021. Currently, South Korea's dependence on Chinese urea solution has increased to 91%, up from 71% two years ago. Although the government has stated it will continue to negotiate related matters through diplomatic channels with China, there are criticisms that the heavy reliance on China?from rare earth elements to gallium and germanium exports, including urea solution?repeatedly causes supply chain instability.

On the 7th, as the nationwide shortage of urea solution continues, vehicles are refueling diesel at the Seoul Express Bus Terminal in Seocho-gu, Seoul. Photo by Moon Honam munonam@

Urea solution is made from urea as a raw material. It is a product that breaks down nitrogen oxides (NOx) emitted by diesel vehicles into nitrogen and water. It is also used in large factories and power plants to prevent smoke emissions, making it an essential material across all industries such as power generation and transportation. However, South Korea depends mostly on China for urea imports.

On the 4th, a Ministry of Foreign Affairs official said regarding the urea solution crisis, "We have received reports of delays in customs clearance for urea solution exports from China and are holding inspection meetings with relevant ministries. We will continue to negotiate with China to resolve companies' difficulties and stabilize the supply chain." Earlier, the General Administration of Customs of China, equivalent to South Korea’s Korea Customs Service, blocked customs clearance for urea exports from Chinese companies to South Korea. Although export inspections were completed, customs clearance was withheld at the shipping stage, and it is known that some of the companies affected include major domestic corporations.

China’s control over urea exports is interpreted as a result of decreased domestic production. Ambassador Jeong Jae-ho to China said at a press briefing with Beijing correspondents that "On the 17th of last month, the China Nitrogen Fertilizer Supply Association issued a document to its members recommending restraint on exports of nitrogen fertilizers (including urea) and prioritizing domestic supply." This explains that the customs clearance delay was caused by internal factors within China.

Inside and outside the government, there are criticisms that diversification of South Korea’s urea supply sources is difficult due to the low price of Chinese urea. Since urea is a low value-added product and logistics costs are high, domestic companies tend to prefer Chinese products easily, causing the import share to soar and making supply diversification difficult.

On the 10th, a charter bus is parked near Peace Park in Mapo-gu, Seoul, where the shortage of diesel exhaust fluid continues. Photo by Mun Ho-nam munonam@

According to the Korea Customs Service, Chinese products accounted for 91% of total imports from January to October this year. The share of Chinese products dropped to 71% in 2021 and further to 67% in 2022, but this year the proportion of Chinese imports has surged again. Although import sources have diversified to countries like Vietnam and Qatar, logistics costs are higher compared to nearby China, so importers inevitably turn to Chinese products. According to data received by Kim Hoe-jae, a member of the Democratic Party of Korea, from the Ministry of Trade, Industry and Energy titled "2023 First Half Import Amount Status of Items Dependent on Specific Countries," 79.4% of rare earth metal imports, which are essential for semiconductor production, came from China. The dependence on China for gallium and germanium, which China began restricting exports of in August, is as high as 87.6%.

However, unlike two years ago when the Chinese government officially announced export restrictions, this time it stated that "there were no official government measures," and inventories are being maintained stably, so the government believes the nightmare of a urea solution crisis will not be repeated. Nonetheless, there are critical voices that failure to resolve excessive dependence on Chinese products causes chronic supply chain instability. Ambassador Jeong said, "Fundamentally, it is necessary to reduce dependence and uncertainty, and strategic responses are required for this."

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