South Korean DEF shortage sparks government response

The South Korean government has taken steps to counter a shortage of diesel exhaust fluid (DEF), using diplomatic channels to procure international shipments as well as managing domestic supply through new fines on stockpiling and a suspension of charges for vehicle tampering.

Regional embassies have contacted producers to request urgent shipment by air and sea, including urea producers in Russia, southeast Asia and the Middle East.

This includes a reported 27,000 litres of DEF being flown by military aircraft from Australia this week, according to local media sources.

A special task force has been set up to procure 10,000t (9.2mn l) of DEF for urgent shipment from various countries, local sources said.

Argus saw a supply request from a South Korean importer for 10,000-30,000 l/week of DEF priced on fob terms to Incheon airport or ex-warehouse, sold on advance payment terms.

UK-based AUS-40 dissolving equipment maker ECOUREA said it is prepared to donate 20,000 l of DEF from its neighbouring operations in Asia to help South Korea's emergency services during the shortage, if the government wishes to contact them. The company also said it is prepared to work with South Korean firms to supply automotive-grade urea sourced from its network in Europe and Russia, shipped in containers.

To manage domestic supply, the government has also banned the stockpiling of DEF and automotive-grade urea, effective from today until the end of the year. Any company holding over 110pc of its average monthly sales will be fined up to 100mn won ($84,000), or face prison terms of up to three years, local sources said.

The land, infrastructure and transport ministry said yesterday that it will suspend checks on illegal tampering of emissions reduction systems in diesel vehicles until the DEF shortage is resolved. There have historically been very low levels of tampering in South Korea, estimated by Argus to be less than 10pc in 2020, compared with over 40pc of vehicles in Brazil.

The DEF shortage has been caused by new urea export restrictions from China, South Korea's main supplier of automotive-grade urea, that took effect on 15 October. Chinese automotive-grade urea imports are estimated to have supplied over 95pc of South Korean DEF demand in 2020, for instance, Argus estimates. And this has been the case since all new diesel trucks have required DEF since 2014, with a small portion of these vehicles using DEF before this date.

There are equally concerns about securing Russian automotive-grade urea supply, with several containers reportedly en route to South Korea, after new limits were set last week on urea exports with effect from 1 December.

Argus estimates that the South Korean DEF-consuming vehicle fleet will total 2.6mn diesel vehicles by the end of December, including 2.3mn cars and vans, 180,000 buses, 80,000 trucks and 48,000 units of non-road equipment. This fleet is estimated to have consumed close to 250mn l of DEF this year, equivalent to 88,000t of urea.

By Alex Wood