S.Korean drivers panic buy urea after China tightens supply

Trucks wait in a line to get urea at a service area in Pyeongtaek, South Korea, November 4, 2021. Yonhap via REUTERS

SEOUL, Nov 5 (Reuters) - South Korean drivers are panic buying urea, an additive used in diesel vehicles to reduce emissions, after China tightened exports, prompting the president's office to set up a taskforce on Friday to negotiate supplies from producer states like China.

Diesel cars represent 40% of registered motor vehicles in South Korea as of August, government data showed, after South Korea in 2015 made it mandatory for diesel cars to use urea solutions to control emissions.

South Korea is heavily reliant on China for urea. About 97% of imports came from China between January and September, according to the trade ministry, up about 8% from a year ago.

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China's customs announcement last month of inspection certificates to ship fertiliser and related materials like urea, a type of nitrogen mainly used as a fertiliser in agriculture, was considered a de facto ban on exports to assure supplies in its domestic market.

China's Zhengzhou urea futures fall on export inspections after hitting record highs

Prices of industrial urea in South Korea jumped more than 80% to $483 per tonnes in September from October 2020, said the trade ministry.

A barrel of urea solution that used to cost 10,000 won ($8.45) per 10 litre was now traded at as much as 120,000 won on online second-hand markets, local media reports said.

Desperate South Korean drivers looking for urea solutions, also known as diesel exhaust fluid, were sharing locations of gas stations that still had inventory, while those who had stocked up ahead were selling at steep markups.

Local broadcasters featured gas stations that put up signs that read "Urea solution SOLD OUT".

“I cannot move out my SUV... picnics can be cancelled, it's okay. But what if container trucks, fire engines, ambulances have to stop?” a diesel trader told Reuters.

“For my SUV, I can fill 15-20 litres of additive in one shot and can run 3,000-5,000 kilometres. But heavy duty vehicles consume more,” he said, adding this could mean a bigger problem in the heavy trucking sector. “It could decrease diesel consumption nationwide, if the situation goes worse.”

South Korea's presidential office on Friday set up a taskforce to ensure adequate supply of urea and initiate diplomatic consultation with producer countries like China, Park Soo-hyun, the presidential press secretary said in a statement.

Diversifying supply will not be easy as South Korea has become far too dependent on China, an official at a major South Korean urea suppliers told Reuters.

"We have signed contracts with Russia in October and it is only going to arrive in January. Yet again they are only about 10% of what we used to get from China," the official said. Inventory is likely to be depleted after November, he added.

($1 = 1,184.0900 won)

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Reporting by Sangmi Cha, Heekyong Yang; Additional reporting by Samanta Koustav in Singapore and Emily Chow in Shanghai; Editing by Michael Perry and Toby Chopra

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