You may never have heard of it, but this chemical is on the world’s shortage list and can have a major impact on supply chains.
Urea shortages are already being felt in various parts of the world, including India, South Korea and Australia.
The first ones who are feeling it are farmers and truck drivers , but problems with the supply of this product can have an effect on all consumers.
Here we explain why.
What is it
It is a chemical compound found in urine, among other places.
That particular urea is generated in the liver.
But urea is also produced industrially for different uses, mainly as a fertilizer.
And also as a key ingredient in a diesel car product needed to reduce polluting emissions .
The main raw material to obtain this compound is the gas , which through a chemical process is first converted into ammonia and then dehydrated to form urea.
What is happening
Urea is one of the most popular fertilizers and global fertilizer prices have soared this year to levels not seen in more than a decade, according to the World Bank.
There are several factors that explain this unprecedented price increase.
First, it is driven by the high cost of energy , especially gas, an essential feedstock for fertilizer production.
In addition, according to the World Bank, the increase in the prices of thermal coal in China caused a rationing of electricity use in some provinces and forced fertilizer factories to reduce production.
And in response to this, China and Russia, two of the main fertilizer producers in the world, imposed restrictions on the export of fertilizer products, something that was seen as a measure to cool prices and guarantee domestic supply.
On the other hand, we must take into account the impact of Hurricane Ida in August on the coast of Louisiana, United States, which hindered the production of natural gas and caused the suspension of the activity of the chemical plants in the area, increasing the shortage of fertilizers on the market.
In this sense, the World Bank also highlights the impact of Western sanctions against Belarus , since that country is a producer of a key ingredient for another fertilizer, potash.
Agriculture and food prices
One of the places in the world where the increase in prices and scarcity of urea is being felt the most is India.
The Asian country is the main importer of urea , an essential product to feed its huge agricultural sector, which employs about 60% of the country’s workforce and represents 15% of the economy.
India imports around 30% of around 35 million tonnes of annual urea consumption and now its farmers fear their livelihoods are at risk.
Ultimately, this will have an impact on food prices , warns the World Bank.
“High fertilizer prices could put inflationary pressures on food prices, compounding concerns about food security at a time when the COVID-19 pandemic and climate change make access to food more difficult.”
Supply chains threatened
The increase in the price of this chemical component is not only being noticed in agriculture.
Urea is also key to producing diesel exhaust fluid , a solution used to reduce emissions in cars that use that fuel.
Its use in trucks is mandatory in some countries, such as South Korea and Australia , and that is affecting the supply chains of both countries.
South Korean truckers are already suffering from urea shortages, and Seoul this week asked Russia for its cooperation in securing supplies.
For his part, Warren Clark, director of the Australian National Road Transport Association, told news.com.au that the supply chain is under “extreme pressure” .
Australia imported 80% of its urea needs from China.
“Without breaking the law, we will potentially run out of the chemical around February of next year, but we think it could be sooner,” Clark said.
“We saw empty supermarket shelves during the pandemic, and this could be much worse.”
