Lesson from the supply crisis
Take long-term measures to secure key items
South Korea barely avoided an impending logistical disruption amid a severe shortage of Diesel Exhaust Fluid (DEF), also known as “urea water,” used to reduce vehicle emissions diesel. The government said on Wednesday it had secured a three-month stockpile of urea, the main constituent of DEF, by importing 200 tonnes from Vietnam and 18,700 tonnes from China. It also brought 27,000 liters of finished urea water from Australia.
On Thursday, the Moon Jae-in administration announced a plan to cut tariffs and put in place emergency controls on the production and distribution of urea water to alleviate the current supply shortage. It also decided to allow drivers of diesel trucks and passenger cars to purchase up to 30 liters and 10 liters of DEF, respectively, at a time to avoid hoarding. These steps are necessary, but are not a definitive answer to fixing the problem once and for all.
Above all, the government must take more comprehensive and fundamental steps to ensure a stable supply of DEF. The supply crunch erupted after China began restricting exports of fertilizers and related materials, including urea, in mid-October. China enforced the restriction as part of efforts to address a shortage of coal, a key source of urea, as it banned imports of coal from Australia, a strong ally of the United States, apparently in due to diplomatic wrangling over the origin of the COVID-19 pandemic and other issues.
Korea could experience similar material and product shortages unless it establishes more stable supply chains without too much dependence on a single country. There are growing fears that Beijing will “arm” strategic materials and goods to force other countries like South Korea, another powerful ally of the United States, to side with the Asian giant in its growing rivalry with the United States. United States.
This is why the Korean government and businesses must reduce their heavy reliance on China. Over 80% of imports of 1,850 materials and products imported to Korea come from China. About 97 percent of urea imports come from China. We also depend on the neighboring country for 99% of our manganese imports and 90% of our graphite imports. In fact, many Korean companies import different materials and parts from China to produce their main export items such as semiconductor and electric vehicle batteries. As such, another tightening in supply can occur at any time, unless Korea diversifies its import sources.
However, it is still questionable whether the country can prevent a recurrence. The Moon administration is criticized for failing to prevent the urea shortage. It only showed its incompetence by failing to foresee such a tightening of supply and to take swift action. Its slow response to China’s restriction on urea exports added fuel to the fire, forcing truck drivers to wait in long lines to buy a bottle of urea water. We must not forget a lesson from Japan’s 2019 export restrictions on key materials for Korean semiconductor and display companies in apparent retaliation for an unfavorable court ruling on the issue of forced labor in time of war.