Can-do Adblue deal dodging Chinese ban
Australia is almost fully self sufficient in producing AdBlue – a key ingredient in powering diesel engines – smashing China’s stranglehold on the product.
Australia is steaming towards becoming fully self-sufficient in producing AdBlue – a key ingredient in powering the nation’s diesel-fuelled truck fleet – and smashing China’s stranglehold on the additive.
Domestically produced AdBlue has soared 800 per cent this month, representing 75 per cent of Australia’s needs, thanks to a deal struck between the Morrison government and Incitec Pivot. But production is confined to Incitec’s Brisbane factory, which is set to close by the end of the year, raising questions about Australia’s longer-term AdBlue supply.
For now, Incitec is producing each week more than three million litres of the additive – which sharply reduces exhaust emissions – at its ammonia plant on Gibson Island. The company normally produces about 450,000 litres a week – slightly more than 10 per cent of Australia’s demand.
Energy Minister Angus Taylor said the Incitec deal – which involved the government almost $30m into Gibson Island – was temporary and the government was working to secure additional supply from international and other domestic producers.
“Temporarily securing our local capabilities through Incitec Pivot has been complemented by the government’s ongoing work to secure additional international supplies and our work with industry to manage stock supplies nationally,” Mr Taylor said.
“Other local AdBlue manufacturers continue to play an important role in the supply chain through production and distribution, with the government assisting these businesses by facilitating commercial supplies from overseas through our diplomatic network.”
The need to bolster local productions stems from China blocking urea exports – Adblue’s key ingredient – sparking a global shortage of the additive in an apparent attempt to drive down its fertiliser prices.
And given Canberra’s trade tensions with China – which has led to Beijing banning a raft of imports from beef and barley to wine and lobster – it was unlikely Australia would be on the top of the distribution list once China resumed exporting AdBlue.
If the Morrison government did not secure a deal with Incitec to dramatically increase local production, Australia risked running out of AdBlue next month. This would have crippled a large portion of the nation’s trucking fleet, compounding a Covid-fuelled crunch across the country’s food supply chain.
The government began working closely with AdBlue manufacturers, fuel retailers, and transport and logistics bodies late last year through the National Coordination Mechanism, to replenish out-of-stock sites.
Mr Taylor said these efforts have managed to “largely overcome many localised stock-outs at priority sites across the country”, including the Hume Highway, the Riverina and NSW’s south coast.
“I thank Incitec Pivot for stepping up as we work together to keep our trucks fuelled and Australian diesel motorists on the road,” Mr Taylor said.
“The company has already ramped up production to over three million litres per week and this milestone is great news. While Australia currently has sufficient volumes of AdBlue to meet its needs, this local production will help restore normal national stock levels.”
Mr Taylor urged trucking companies to not stockpile the product. “To ensure stocks can be replenished across the country, I continue to encourage industry to purchase stocks only when needed and at normal levels.”
Listed petroleum giant Ampol said it would “work with government to review purchase limits in place across the industry as we move forward”.
Incitec Pivot chief executive Jeanne Johns said staff were working 24-7 at Gibson Island to produce more than three million litres of AdBlue a week.
“To achieve this milestone safely in record time is a fantastic achievement. I’m incredibly proud of our team who have worked tirelessly over the Christmas and New Year period to help address a national shortage of this critical product,” Ms Johns said.
“The hard work will continue as we aim to further increase production of AdBlue at Gibson Island in the coming weeks and months to meet Australia’s needs.”
Ms Johns said the three million litre milestone follows the commissioning and completion of production and distribution facilities, with the company’s AdBlue terminal in Brisbane capable of loading the equivalent of three B Double trucks per hour for distribution.
Last week at an investor briefing, Ms Johns said the AdBlue crisis hadn’t been able to sway the company’s thinking toward the Gibson Island plant. At the time of the announcement of its closure last November Incitec said it was unable to secure affordable feedstock gas for the plant.
“The anticipation is that the global supply chain will resume over time but fundamentally we run out of gas at the end of this year and we will have no capability of manufacturing AdBlue at that point,” she told an investor briefing on Thursday.
“At this point the difficult decision made last year remains in place and we’re progressing along those lines based on the current market conditions.”
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