Not long ago, South Korea claimed that due to China's suspension of export of urea for vehicles, South Korea, which is highly dependent on China in this field, is at risk of a "urea shortage". It is reported that the Yoon Suk-yeol government has contacted China on this matter and hopes to seek help from the Chinese side. The latest news shows that there seems to be progress in this matter, and China may be ready to lend a helping hand this time.
[There is a risk of "urea shortage" in Korea recently]
According to Korean media news, on December 18, China and South Korea held the first meeting of the production and supply chain hotline and the fourth meeting of the cooperation and coordination mechanism of the industrial park. The two sides focused on the issue of supply chain cooperation and decided to activate the industrial chain supply chain hotline to strengthen cooperation between the two countries in this regard. In particular, the South Korean media noted that the two countries decided to work together to solve problems of common concern, such as urea supply.
The reason why the South Korean side is particularly concerned about the supply of urea may be related to what happened before. According to South Korean media reports, the General Administration of Customs of China suspended the export of urea solution from Chinese companies to South Korea at the end of November. This matter is of great concern to South Korea, because it will directly affect South Korea's logistics and other fields. And at the end of 2021, a similar incident occurred, and South Korea was able to weather the storm that time, in large part because the government of former President Moon Jae-in took active action and enlisted China's help.
And as before, the South Korean side also approached the Chinese side this time. The Yoon Suk-yeol administration has convened internal meetings to discuss concrete solutions to the problem, and on the other hand, it has reached out to China to express its concerns to the Chinese side. In fact, the measures that South Korea can take to deal with this problem are actually relatively limited. Some analysts pointed out that in the first 10 months of this year, South Korea spent nearly $130 million to import 290,000 tons of urea for vehicles and production. South Korea imports more than 90% of its industrial urea from China. South Korea has not been unprepared to change this situation, and plans to take measures such as in-house production and diversification of imports, but the actual situation is very different from what the South Korean side envisioned.
[South Korea's urea imports are highly dependent on China]
Let's start with the issue of in-house production. In fact, there used to be urea companies in South Korea, but they shut down around 2010. The most important reason for this is the lack of competitiveness. The importance of urea is undeniable, but that doesn't mean there is much economic benefit to South Korea from producing it in-house. Neither the South Korean government nor South Korean companies are willing to put too much effort into this area because they can't make money, so although the South Korean government has proposed this initiative, it has not been done in the end.
The second is the issue of import diversification. After the last "urea shortage" in South Korea, the South Korean government at that time said that it could expand import channels and go to Vietnam, Qatar and other countries for help. However, many South Korean companies have a rather unoptimistic view of this move. They said that China is right on South Korea's doorstep, and that it is not only very convenient for Korean companies to import urea in China, but also very low-cost. If Korean companies go to other countries to buy urea, they will not be able to cover the cost of shipping alone.
It can be seen that under various practical factors, China is not only the best choice, but also one of the few options for South Korea to solve the risk of "urea shortage". Judging from the latest news, China and South Korea have been in contact on this issue, which may mean that China will help this time as it did two years ago.
[South Korea wants to solve the risk of "urea shortage", and it can't avoid China]
As a matter of fact, some people in South Korea have some emotions and speculations about China's suspension of the export of urea for vehicles. Yonhap News Agency mentioned that the South Korean government previously believed that this move was a measure by China to unofficially restrict urea exports. However, some industry insiders pointed out that China's adjustment of urea exports is based on the consideration of ensuring domestic supply, and is by no means for political purposes. Since June this year, urea prices have risen rapidly, exports have surged, and domestic inventories have continued to decrease. If it does not take corresponding measures, China will be affected, so it is necessary for China to adjust in this area.
In September, China had already informed some major urea exporters not to sign new export agreements for the time being, and several major companies had publicly stated that they would give priority to ensuring domestic urea supply. On November 17, the China Nitrogen Fertilizer Industry Association also mentioned that it would prioritize ensuring domestic supply to deal with possible risks. All these facts show that there is a real reason for China to temporarily suspend urea exports, not for political purposes.
In this case, some people in South Korea need to recognize the facts and correct their mentality. Some scholars have pointed out that some South Koreans have a "heart disease" toward China, and whenever something happens, they unconsciously lean on the so-called "political goals." In order to solve this problem, the ROK side still needs to establish an objective and rational understanding of China and re-examine the importance of cooperation with China.