Australia has revealed its stocks of a crucial product amid a global shortage which could take thousands of vehicles off the road.
Australia has five weeks’ worth of a crucial product on hand, the government has revealed, as it seeks to soothe fears of a shortage which could conceivably pull thousands of vehicles off the road.
The chemical compound urea is 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.
The world is currently facing a shortage of urea.
Key industries warn that without it, the stability of Australia’s supply chain could be up in the air, and trucks could be unable to transport essential items such as fresh food to supermarkets.
After strong calls from the transport and agriculture industries, the federal government today revealed the details of Australia’s situation.
It said there are currently more 15 million litres of AdBlue on hand, equivalent to almost five weeks of business-as-usual demand.
Multiple shipments of refined urea are currently on their way to Australia, it has been announced, and those are expected to provide more than two weeks of additional supply to the market.
These supplies would take us to February, which is the sort of time frame the transport industry suspected was on the cards. It has raised concerns about the uncertain supply after that time.
After labelling a roundtable with government and industry on Wednesday “disappointing”, the Australian Trucking Association demanded the government take immediate action to guarantee supply in order for truckies to “continue delivering the groceries on every supermarket shelf and Australia’s exports to our ports”.
“The supply of AdBlue is just as important as the supply of fuel,” the association’s chair David Smith said.
“We need transparency about the stocks of material that are in Australia and the ability of suppliers to deliver the AdBlue we need throughout the first half of 2022.
“We are already seeing suppliers restricting orders or raising prices.”
Industry, Energy and Emissions Reduction Minister Angus Taylor, who is now going to oversee the issue but was not involved in the roundtable, urged the industry to operate as normal on Thursday afternoon.
Mr Taylor said buying additional stocks would be unnecessary and unhelpful.
“We are quickly and actively working to ensure supply chains of both refined urea and AdBlue are secure so that industry can have certainty about their operations,” he said.
“I can assure Australians that the government is working to ensure we do not face any shortages.
“We are pursuing a range of measures to address global pressures in the urea market. We will keep our trucks running and Australian motorists on the road.”
Mr Taylor also announced a new AdBlue Taskforce.
The big supermarkets were reluctant to comment on the shortage when contacted on Thursday and directed news.com.au to transport providers Linfox and Toll, but those companies also declined to comment.
Woolworths did say it was monitoring the situation closely with its transport providers, and the Australian Logistics Council said the country’s current stocks were being managed by suppliers who were “working to ensure reasonable access for all”.
Why a shortage of urea matters
Don Watson Transport chief executive Lyndon Watson told Big Rigs either the government would have to “magic up” some AdBlue from somewhere in the next couple of months or trucks would have to be allowed to run without it.
“As soon as it gets out there that the AdBlue (shortage) isn’t just going to stop all the trucks, it’s also going to stop all the shelves being restocked, their servos being restocked, everyone’s going to go, ‘I really should fill up my tank and fill up my toilet paper.’ And everything is going to go in a day,” Mr Watson said.
“It’s not going to deplete over the course of a couple of weeks, or months. The population will skin it dry in a day.”
Rocky’s Own Transport chief executive Bryan Smith said in some vehicles you can turn off the systems that require AdBlue, and in some you cannot.
“If the shortage got bad it could have a potentially significant impact on the freight industry,” Mr Smith said.
“It’s a bit of a sad state of affairs that we’ve finished up with. I think there’s two to three manufacturers of the product. Incitec being one the larger ones.”
Incitec Pivot announced last month it would stop its manufacturing operations at its main urea plant in Brisbane by the end of next year.
China, which previously supplied 80 per cent of Australia’s urea supplies, recently halted exports to boost supplies domestically.
South Korea, a country which was hugely reliant on China’s urea imports, reached an agreement with Indonesia this week to receive around 120,000 tons of urea per year over the next three years.
David Leaney, an international supply chain management lecturer at Australian National University, told news.com.au on Wednesday that Indonesia would be a great match for Australia for the same reasons it was a great match for South Korea.
Why the shortage could be an opportunity for Australia
Chemical and biomolecular engineering expert Professor Jun Huang says it is in Australia’s best interest to manufacturer urea on its own shores.
He said the current processes used to produce urea, such as in China and Indonesia, rely on fossil fuels, which is unsustainable given expectations to reduce emissions and meet climate goals.
China began lowering its urea output while cracking down on high-energy consuming projects this year, and Prof Huang said Indonesia may have a problem in the future too.
“If we put more investment and the government strongly supports green ammonia and green hydrogen production then we’ll be able to produce green urea,” Prof Huang told news.com.au.
“This is a good opportunity for Australia because we are one of the first countries to carry out green ammonia and hydrogen energy.”
Prof Huang said short-term importation of urea from Indonesia could be a solution for Australia, but not in the long-term.
“This will be a global issue and if we are able to build up green urea it will be great for Australian business and industry,” he said.