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 the farmers and truckersbut problems with the supply of this product can have an effect on all consumers.
Here we explain why.
What is
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 fertilizer.
And also as a key ingredient of a diesel car product needed for reduce polluting emissions.
The main raw material to obtain this compound is the gaswhich through a chemical process is first converted to 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 energyespecially gas, an essential raw material for the production of fertilizer.
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 world’s leading fertilizer producers, imposed export restrictions of fertilizer products, something that was seen as a measure to cool down prices and guarantee domestic supply.
On the other hand, we must take into account the impact of hurricane ida in August off the coast of Louisiana, United States, which hampered the production of natural gas and caused the activity of chemical plants in the area to be suspended, increasing the shortage of fertilizers in the market.
In this sense, the World Bank also highlights the impact of Western sanctions against Belarussince 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 main importer of ureaessential 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 a impact on food priceswarns 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 the diesel exhaust fluida 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 Australiaand 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 supply chain 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.” (YO)
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
