Following China’s ban on urea exports, it is reported that it has also stopped exports of ammonium phosphate. More than 95% of ammonium phosphate, the main raw material for chemical fertilizers and fire extinguisher powder, is imported from China. As China continues to place raw materials on its export restriction list, concerns are growing about China’s future actions and the repercussions of the suspension of raw material exports.
According to Zhongfeiwang, an online platform for the Chinese chemical fertilizer industry, on the 7th, industry analyst Zhao Hongye posted a report the previous day establishing the suspension of ammonium phosphate exports by the Chinese authorities as a fait accompli. “The recent decision by the National Development and Reform Commission to suspend ammonium phosphate exports will not have a significant impact on the market price, as the volume of ammonium phosphate exports is very small,” she said.
Previously, Zhao Hongye wrote a report stating that 15 Chinese urea-related companies agreed to reduce export volume next year. Afterwards, as per his report, it was confirmed that the Chinese authorities had withheld the export of industrial elements that were intended to be exported to Korea. Accordingly, it is expected that ammonium phosphate exports will soon become a reality.
A government official said, “I understand that there has been talk about export controls in China,” and “we are monitoring the progress.” Of the ammonium phosphate imported this year, more than 95% of the total came from China.
It is known that China has decided to suspend ammonium phosphate exports due to a domestic supply shortage. Zhao Hongye, a Chinese chemical fertilizer industry analyst, said in a report posted on the industry’s online platform Zhongfeiwang, “Some regions, such as Sichuan Province, are limiting or suspending ammonium phosphate production due to environmental pollution.” “For this reason, ammonium phosphate in China is currently experiencing a slight supply shortage,” he analyzed.
The government believes that even if ammonium phosphate export controls are implemented, the domestic impact will be small, unlike urea. On the 7th, an official from the Ministry of Agriculture, Food and Rural Affairs said, “About 80,000 tons of ammonium phosphate is used in Korea a year, and the stockpile is about 40,000 tons,” adding, “There is a company in Korea that manufactures more than 40,000 tons per year.” It is possible to respond to China’s export controls by utilizing half a year’s worth of stockpiles and redirecting overseas exports to the domestic market.
The government assessed that shortages of elements like those in 2021 will not occur again. Minister of Trade, Industry and Energy Bang-gyu Bang said, “It is unlikely that it will escalate into a realistic problem because the supply of (urea) is sufficient to a certain extent and it can be imported (from a third country) at an additional 10%.”
However, the industry is expressing concern that unexpected export controls are continuing in China, which accounts for the largest portion of the supply chain of domestic companies. Like urea, it is seriously affected by export controls on raw materials for which it is relatively easy to find import alternatives in countries other than China, but the impact could be even greater in the case of lithium, graphite, gallium, germanium, and rare metals.
In fact, according to the office of Representative Chung Il-young of the Democratic Party of Korea, among the 10 strategic core minerals designated by the Ministry of Trade, Industry and Energy, the dependence on China for lithium, graphite, and five rare metals (neodymium, dysprosium, terbium, cerium, and lanthanum) last year was 64%, 94%, and 50%, respectively. .
Lithium and graphite are essential for the production of anode and cathode materials for secondary batteries, and rare metals such as neodymium are used in permanent magnets that determine the performance of high-performance electric vehicle motors. Seong Tae-yoon, a professor of economics at Yonsei University, said, “It appears that export control measures are being implemented one after another as China’s economic operation itself is showing instability,” adding, “As not only China but the global supply chain system itself is rapidly changing, supply chains that are excessively dependent on specific countries are urgently needed.” He pointed out, “We need to properly inspect and take countermeasures.”
Meanwhile, at the National Assembly on this day, the ‘Framework Act on Supply Chain Stabilization Support for Economic Security’ (Framework Act on Supply Chain), which focuses on establishing a Supply Chain Stabilization Committee as a control tower related to the supply chain in the government, passed the Legislation and Judiciary Committee threshold. It has been one year and two months since it was proposed.
The Framework Act on Supply Chain contains contents that systematize the cycle of supply chain risk detection, risk prevention, and crisis response centered on the Supply Chain Stability Committee to prevent incidents such as the urea crisis that occurred in 2021. It also includes the establishment of a supply chain stabilization fund at the Export-Import Bank of Korea to help companies diversify the countries from which they import raw materials and expand their stockpiles.
However, due to differences of opinion between the ruling and opposition parties over the membership of the new committee, the legislation was delayed and has now passed the Legislative and Judiciary Committee. A government official said, “If it passes the plenary session on the 8th, the law can be implemented from the second half of next year (July-December) through the Cabinet meeting,” and “Since we are already making practical preparations for the urgent supply chain stabilization fund, etc., it will be implemented from July and August of next year.” “We plan to make it possible to actually execute funds,” he said.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.