Australia strikes local urea deal amid AdBlue shortage

There’s a big question lingering over an important deal Australia has made to manufacture a crucial product amid a global shortage.

The federal government has struck a deal to manufacture a crucial product on Australian shores amid a global shortage, but when it will actually happen remains unclear.

The world is currently facing a shortage of urea, a key ingredient found in AdBlue, which is injected into the exhaust systems of modern diesel vehicles to reduce emissions, and is also a large component in fertiliser.

Transport and agriculture industries warn that without it, trucks could be unable to transport essential items such as fresh food to supermarkets.

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

Industry, Energy and Emissions Reduction Minister Angus Taylor, who is overseeing the issue, announced on Monday the government had struck a deal with local fertiliser manufacturer Incitec Pivot.

It comes after reports of AdBlue prices surging and limits being put on how much customers can buy in Australia.

Mr Taylor said under the agreement, Incitec Pivot will rapidly design, trial and on completion of successful tests, scale-up manufacturing of significant quantities of Technical Grade Granular Urea, a critical component of AdBlue.

He said Incitec Pivot will supply quantities as needed by current suppliers.

But Incitec Pivot would not say when it would be able to scale-up urea production for AdBlue, following trials and tests, when contacted by news.com.au on Monday.

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Minister Angus Taylor has announced Australia’s new deal to combat a global shortage of urea. Picture: NCA NewsWire / Martin Ollman

In a statement, the company said it had committed to undertake a manufacturing assessment to produce technical grade urea and expand AdBlue production at its Gibson Island plant in Brisbane.

“We’re very pleased our domestic manufacturing expertise can be mobilised and we’re

working together with the Federal Government to expand supply of this critical material that

we all rely on to keep Australia moving,” Incitec Pivot chief executive Jeanne Johns said.

The company said it was working quickly to build additional storage capacity, with the support of key partners including IOR.

Last month, Incitec Pivot had announced it would stop its manufacturing operations at its Gibson Island plant by the end of next year.

The company, which supplies around 10 per cent of the Australian market for AdBlue, said it was unable to secure long term, affordable gas supply. It said the remaining 90 per cent of the Australian AdBlue market is reliant on imports of technical grade urea.

news.com.au understands industry groups are also seeking information on how soon the urea and AdBlue will be able to be produced.

The government is holding a meeting with industry stakeholders on Monday afternoon.

Mr Taylor said the deal would ensure supply chain disruptions globally don’t impact Australia.

“Australia currently has adequate stocks of AdBlue stock on hand, but this agreement with Incitec Pivot will enable domestic production of TGU or supply of an AdBlue product to domestic manufacturers to ensure current supply chain disruptions don’t impact on Australian businesses,” Mr Taylor said.

“The ramping up of production by Incitec Pivot will be done without impacting agricultural fertiliser supply to local farmers or disrupting local distribution chains for AdBlue.”

AdBlue is used in modern diesel engines to control nitrogen oxide pollutants including in trucks, large passenger buses, mining equipment and agricultural vehicles.

After strong calls from the transport and agriculture industries, the federal government revealed the details of Australia’s AdBlue stocks on December 10.

It said at the time there were currently more 15 million litres of AdBlue on hand, equivalent to almost five weeks of business-as-usual demand.

The industry was concerned about Australia securing supplies of the product after this time.

The government also announced on Monday, Australia had secured 5000 tonnes of refined urea from Indonesia in January, which is expected to make an additional month’s supply of AdBlue.

News.com.au understands there are also talks with the Middle East.

The government said it had been working with manufacturers and shipping companies to ensure shipments of urea and AdBlue that are already on their way to Australia get priority for loading and delivery.

“Shipping companies have been helpful in prioritising the loading of a number of containers coming through Singapore to ensure that supplies arrive in Australia as soon as possible,” Mr Taylor said.