To comply with anti-pollution regulations, modern diesel engines need an additive made up of urea and water – an aqueous solution. There is a supply crisis that can end up having serious complications for anyone who uses diesel engines in industrial applications.
Those of you who have had a diesel car or van for a few years will have to worry about having enough additive AdBlue -or similar- in a separate tank. This additive is used to neutralize nitrogen oxides in the exhaust and thus pollute less. If the AdBlue runs out, the engine will no longer start again until it is topped up.
For individuals this is not a big problem, sometimes the tank holds from one service to another, and if it runs out, a small bottle is enough to continue circulating. But truck and bus operators have higher consumptions of this additiveTherefore, a possible shortage is very problematic.
As a result of the pandemic, we have seen several disruptions in the supply of raw materials and finished goods such as masks, bicycles, microchips, video consoles, etc. It is also happening with the urea, the main chemical compound for the production of aqueous urea solution and other products such as agricultural fertilizers.
The problem comes from Russia and China
On the one hand we have Russia, the main producer of urea, which uses the natural gas as an input. The rise in the price of this resource therefore affects urea production. In fact, in October we told you that the most important European producers stopped manufacturing the additive due to the rise in prices.
On the other hand we have China, the second largest producer in the world, which has problems limiting the use of coal-fired power plants so as not to pass pollution, so there are energy restrictions. These restrictions have led to massive blackouts. It also affects urea production, so exports have been limited so as not to affect domestic consumption and agriculture.
With 100 tons of urea, about 325,000 liters of aqueous urea solution can be produced
To an export restriction we have to add the Incremental cost of ocean freight, so transporting by ship is much more expensive. The combination of both effects produces an increasing shortage of urea, which automatically produces an increase in international prices of 60-70% in just one year.
Some urea deficiency alerts
Early november South Korea it was cornered by the lack of urea that came from China, its main supplier, so it agreed with Vietnam to import 200 tons of urea. The South Koreans have ended up getting around the problem of urea shortage with an agreement signed with Indonesia, 120,000 tons a year for three years.
More or less in the antipodes, from Australia worrying news is also coming. A representative of the National Road Transport Association of the country said on ABC that in February the stocks of this additive could run out and cause modern trucks to stand still, potentially having a collapsing effect on their economy.
The world economy cannot remain in isolation, so sooner or later these problems will spreadWhat a fall in dominoes, if the producing countries fail to keep supplies at pre-crisis levels. And the worst of all is not that the diesel engines end up stopping -which also-, it is the impact on agriculture.
Large-scale agriculture cannot be understood without the use of fertilizers, and urea is a fundamental component. If the aurea rises, the cost of fertilizers increases, and therefore the cost of food production. At least in Spain, many farmers protest to produce losing money, and this may be the final auction for them; they will have to pass the prices on to the intermediaries and these to the consumer.
Once again we see how our lifestyle was sustained by the illusion of a stable and indefinite supply of certain raw materials. This time it’s urea. There is the alternative of producing it from hydrogen and not natural gas, but the change would take years and huge investments. Definitely, this crisis can explode in our faces in 2022.
It is not particularly difficult for individuals to have a couple of extra bottles of AdBlue to cope with a one-off supply crisis, but transport companies do not find it easy to hoard large quantities. And hoarding only exacerbates the problem, so many will be tempted to bypass SCR systems to avoid consuming urea, which is plain and simple illegal.