Five Years After the Urea Water Crisis... Still Slow to Respond to Supply Chain Risks

[Maritime Supply Chain Emergency]
EWS Development Accelerated Last Year
Pilot Operation to Begin in Second Half of This Year
Prolonged Conflict Requires Ongoing Management

When Israel launched concentrated strikes on more than 100 locations, including Iran's nuclear facilities, in June last year and the confrontation between the two nations escalated to the brink of all-out war, the global energy and shipping markets responded immediately. Brent crude oil prices surged by 6.9% in a single day, and the charter rate for very large crude carriers soared by 47%. At the time, when Iran openly mentioned the possibility of blockading the Strait of Hormuz, market fears spread even more rapidly.

If this strait, which accounts for 11% of global maritime trade and 34% of seaborne crude oil exports, were to be blocked, South Korea—which depends on the Middle East for 63% of its crude oil imports—would face a direct blow, with disruptions to the transport of 18 to 20 million barrels of crude oil per day. At that time, the Korea Ocean Business Corporation (KOBC) activated an emergency response system four days after the clash, emphasizing, "We will prepare for even the worst-case scenario."

‘Initial Response’ Remains Unchanged from a Year Ago

The problem is that even after a year, the level of completion of the response system has not improved significantly. The Ministry of Economy and Finance, separate from the KOBC’s effort to build a maritime supply chain platform, will pilot a government-wide supply chain early warning computerized system (EWS) in the second half of this year. Although the move is essentially the resumption of a project that was halted due to a fire at the National Information Resources Service Data Center last September, it also reflects a sense of crisis that the establishment of an early warning system can no longer be delayed, given the prolonged risk of a Hormuz blockade and growing supply chain instability from the Middle East.

Looking at the history of the EWS, it becomes clear just how consistently reactive the government’s supply chain response has been. The system was introduced in response to the 2021 urea water crisis. As China tightened inspections on urea exports, concerns about a shortage of automotive urea water and logistical chaos became reality. In reaction, the government launched a manual inspection-based alert system covering over 4,000 items. However, since it relied on manual input by each ministry and fragmented information sharing, problems continued to arise regarding its ability to detect and analyze warning signs in real time. Subsequently, the lack of real-time analysis capabilities and limitations in inter-ministerial information sharing highlighted the need for computerization. It was only in July last year—four years after the urea water crisis—that a kickoff meeting was held with 19 relevant ministries to launch the development of a computerized platform.

‘Too Little, Too Late’ EWS... Halted by Fire and Hindered by Budget Cuts

Although there were plans to integrate supply chain data scattered across government ministries and cover even private sector and international policy trends, the project came to a halt again just two months after its launch due to the data center fire. This year, the related budget was also slashed to just 492 million won, down from 1.874 billion won last year—a quarter of the previous amount. An official from the Ministry of Economy and Finance explained, "Much of the supply chain information is highly confidential, so a considerable amount of time is needed for training ministry staff, initial data entry, and checking and correcting errors."

Experts point out that supply chain risks in the current era—where the scale of conflict itself is different—should be treated not as short-term variables but as a ‘structural threat’ that requires constant management. Analysis by the Korea Institute for International Economic Policy (KIEP) also found that supply chain risks do not return to pre-crisis levels but instead persist and accumulate. According to EWS analysis as of December last year, among approximately 9,200 imported HS10 items, 1,745 (18.9%) newly entered the warning list, 2,391 (25.9%) saw their risk levels surge, and 1,630 (17.6%) were newly classified as high-risk.

Every month, 20–25% of all imported items either showed new warning signs or experienced a sharp increase in existing risks. While high-risk items related to the Middle East represent only a subset of the total, they include crucial materials for the energy, semiconductor, and secondary battery industries—such as crude oil, nickel, refined copper, and iodine—so the shock could quickly spread throughout the industrial sector. Jeong Hyungon, senior research fellow at KIEP, warned, "Supply chain risks do not disappear but accumulate in the form of costs, and if additional shocks occur, they can rapidly escalate."

Two days after an explosion and fire incident occurred on a vessel operated by South Korean shipping company HMM in the Strait of Hormuz, where the United States and Iran clashed, urgent developments are unfolding centered on questions regarding the cause of the accident on the 5th. The photo shows the launching ceremony of the HMM Namu ship held in Guangzhou last September. Photo by Yonhap News Agency

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