"Element Dilemma"... Helpless Against China's Pushout Bomb Despite Domestic Production Defects

Import Amounts Still Fluctuate Depending on the Scale of Supply from China

Although the government is exploring various measures to stabilize the supply of urea, including domestic production, the influence of Chinese products remains dominant in the market. Since importing is more cost-competitive than domestic production, concerns persist that the industry could be hit by China’s “push-out” strategy.

Looking at the monthly import value of industrial urea compiled by the Korea International Trade Association on the 22nd, the share of Chinese products fluctuated significantly depending on the volume pushed out by China. Even after the government began subsidizing 50% of the price difference in logistics costs in December last year, this trend remained similar to the past. The import share from China, which had blocked exports and caused a domestic urea crisis, decreased to the 10% range in January and February this year, then dropped to 8.6% in March and 1.9% in April, but surged to 57.9% in May and 78.4% in June. Although it somewhat decreased in July (58.7%) and August (26.6%), it rebounded to 36.9% last month.

Urea solution sold at the mart. Photo by Jo Yongjun jun21@

An industry insider explained, "One reason China controls urea exports is the sharp increase in fertilizer demand during the spring season. After this period, exports increase, and exporters adjust the pace, so the impact on the domestic market is significant."

Urea, a compound of carbon dioxide and ammonia dissolved in water to make urea solution, is used in various industries including vehicles to reduce exhaust gas pollutants. However, due to its low cost and simple process, direct domestic production is less economical compared to cheap Chinese products, and Lotte Fine Chemical (formerly Samsung Fine Chemical) ceased domestic urea production in 2011.

The government plans to announce support measures for domestic urea production facilities in the first quarter of next year, but there has been no substantial progress such as selecting production companies so far. An official from the Ministry of Trade, Industry and Energy said, "We are reviewing various matters including stockpile expansion and domestic production," adding, "We are not at the stage of discussing with specific businesses."

A Trade Association official pointed out, "The past production halt was also due to China’s aggressive push-out, leading to difficulties based on market logic," and added, "Since it is impossible to block the most economical Chinese imports under the rationale of stabilization, caution is needed regarding domestic production." An industry insider said, "It is clear that imports are more economical than production," and added, "Whether domestic production proceeds depends on the scale and method of government support."