Indonesia-South Korea urea deal could be a good sign for Australia

The answer to a looming crisis which could affect every Australian may be closer than we think.

Australia is facing a looming crisis, with fears tens of thousands of vehicles could be pulled off the road and our food security be put at risk.

But could the answer to our problems be right on our doorstep?

A shortage of urea is affecting countries across the globe. It’s a key ingredient found in AdBlue – which is injected into the exhaust systems of modern diesel vehicles to reduce emissions – and a large component in fertiliser.

Industry says it’s essential to keep Australia’s supply chains moving.

A shortage of AdBlue could see half of Australia’s truck fleet off the road. Picture: David Swift

China, which previously supplied 80 per cent of Australia’s urea supplies, recently halted exports to boost supplies domestically.

In South Korea, a country which was hugley reliant on China’s urea imports, a truck driver reported travelling 70 kilometres to a gas station just to get urea solution.

“There were long lines of vehicles and my turn didn’t come, so I just left empty-handed,” Lee Byung-ki told Reuters last month.

Now, the country has reached an agreement with Indonesia to receive around 120,000 tons of urea per year over the next three years.

“Indonesia is a nation that can be our stable supplier of urea given its production volume, the level of bilateral economic exchanges and geographical proximity,” Seoul’s industry ministry said, according to local media.

“The two countries agreed to further boost co-operation on the overall supply chains down the road.”

Would Indonesia be a good fit for Australia too?

David Leaney, an International Supply Chain Management lecturer at Australian National University, says Indonesia would be a great match for Australia for the same reasons it was a great match for South Korea.

“We’ve got pretty good trade relations with Indonesia and since they’re one of the world’s biggest suppliers (of urea), it’s a good opportunity to see what we can do in terms of bilateral or multilateral trade arrangements,” he told news.com.au.

“We’ve got good trade relationships with South Korea as well.”

Indonesia could be a good match for Australia to import urea. Picture: AAP / David Crosling

Other big manufacturers of urea include India, Russia, Indonesia, Pakistan and the US. But Mr Leaney says because urea is a cheap commodity for its volume, the closeness of Indonesia has huge appeal.

“What you don’t want is transporting cheap stuff using expensive transport a long way because then transport becomes too higher percentage of the total price you’re paying,” he said.

“We probably wouldn’t buy our urea from Russia, even thought it’s one of the world’s biggest producers, because it’s just too far.”

On Tuesday, concerned industry groups called for a federal task force to address potential AdBlue shortages.

The Victorian Farmers Federation said the shortage was a “wake-up call” for relying on concentrated international supply chains.

“We need to increase our domestic manufacturing capacity to increase Australia’s resilience to international supply chain shocks,” VFF infrastructure and transport committee chair Ryan Milgate said.

Originally published as Indonesia-South Korea urea deal could be a good sign for Australia