This file photo shows fuel tank trucks in Seongnam, southern Seoul. (Yonhap)
SEOUL, Nov. 3 (Korea Bizwire) — Supply chain worries loom over the South Korean economy as China has started to impose limits on exports of urea.
Urea water is indispensable in an emissions control system called selective catalytic reduction (SCR).
Vehicles powered by diesel engines are required to be equipped with SCR systems, which are designed to permit nitrogen oxide (NOx) reduction reactions to take place in an oxidizing atmosphere.
Given that diesel trucks account for most of the vehicles in the logistics industry, shipping trouble is inevitable if there is a shortage of urea water.
It is estimated that there are about 2 million diesel trucks equipped with SCR systems, 60 percent of all diesel trucks in the nation.
Recently, China has mandated pre-export inspections of urea water, setting off a shortage of the material.
China has been producing urea water by extracting ammonia from coal, but a shortage of coal due to tensions with Australia seems to have played a part in this decision.
The price of urea water has more than doubled, and hoarding seems to be making the supply chain trouble worse. Some even say under a worst case scenario, a logistics crisis might occur in which the local shipping industry would grind to a halt.
Reportedly, the inventory of urea water stored by domestic companies amounts to enough for about one to two months. More than 80 percent of the domestic urea water market is shared by Lotte Fine Chemical Co. and KG Chemical Co.
Jerry M. Kim (jerry_kim@koreabizwire.com)
