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| Dozens of cargo trucks are lined up on a road leading to a gas station nearby Gwangyang Port in South Jeolla Province, on the first day of the 200,000 liters of supply of diesel exhaust fluid (DEF), also known as 'urea water,' urgently secured by the government, Thursday. The government has restricted daily sales of DEF, needed by diesel-powered vehicles, 10 liters for sedans and 30 liters for cargo trucks, as emergency measures to cope with urea water shortage. Yonhap |
By Kim Bo-eun
The government has managed to address a shortage of diesel exhaust fluid (DEF), also called "urea water," by securing several months' supply of its raw material constituent from China, but the case is ringing alarm bells for possible scenarios related to other imported items for which Korea has a high dependency on the neighboring country.
Korea grappled with the shortage in recent weeks, as China cut exports of urea ― the main DEF "ingredient" ― last month, amid a power crisis triggered by a shortage in coal supplies there. Local industries depending on the solution faced a dire situation, given the Korea imports 97.6 percent of its urea needs from China.
While Korea has managed to secure three months' supply from China, the government has more important fundamental tasks to take care of in light of the DEF incident ― diversifying sources of key imported items.
Data for the first three quarters of this year shows one third of items Korea imports have more than an 80 percent dependency on a certain country. According to the Korea International Trade Association, 3,941 out of 12,586 imported items had a minimum 80 percent dependency on one particular country. A total of 1,850 items have at least an 80 percent dependency on imports from China. This is followed by 503 items that are mostly imported from the U.S. and 438 that are mostly brought in from Japan.
Korea also relies 100 percent on China for magnesium ingot, which is used in producing parts that go into automobile chassis and aircraft, 94.7 percent for imports of tungsten oxide that is used to make semiconductors, 83.5 percent for lithium hydroxide, a key material in secondary batteries, and 86.2 percent for neodymium magnets that are used in disk drives and magnetic fasteners.
Following the DEF shortage, concerns are growing over the possibility that another shortage crisis may develop due to circumstances concerning China, given the heavy dependency on it for multiple items.
While the latest incident was caused by internal supply circumstances, Korea could face further difficulties that may arise from diplomatic friction with the world's No. 2 economy.
Korea already experienced damage after the government decided to deploy the U.S. Terminal High Altitude Area Defense (THAAD) antimissile system here in 2016. Korean businesses both here and in China suffered as tourists stopped visiting, and movements to boycott purchases from Korean companies took place.
While the THAAD issue is somewhat different in nature from the latest crisis, views are that Korea's positioning in the conflict between the world's two greatest economies creates grounds for China to exert greater influence, which could lead to damages for Korea.
Chinese media criticized Korea over the DEF incident, stating it has failed in localizing the supply of key materials. This could serve as a lesson for Korea to strengthen local sourcing. Korea emerged with greater localization of high-tech parts, materials and equipment after Japan imposed restrictions on key items to Korea in 2019.
While it is impossible for Korea to produce all key materials here, what it can do to avoid being exposed to greater risk is diversify imports to lower the heavy dependency on a particular country.
This is a key task for Korea to prevent damage that could arise from the need of crucial items, especially with its high dependency on imports from China.
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