AdBlue is a compound that is well known to the Australian fuel and heavy vehicles industry given the critical role this product plays in ensuring compliance of Australia’s modern heavy-duty vehicles (i.e. trucks) with Australia’s vehicle emission laws.

But in the last week, general community awareness of this compound has increased with the heavy-duty vehicle industry raising the alarm about the potential threat to freight operations as we approach the busy Christmas period.

“Unfortunately, and probably as a result of a lack of general knowledge about this product, much of this media is only partly correct, and has created a degree of alarm that has contributed to panic buying by freight operators and immediate concern in the broader community”, said ACAPMA CEO Mark McKenzie.

So let’s start with the basics!

AdBlue is not used in the combustion process of diesel engines. It is neither a fuel nor fuel additive. Rather, AdBlue is a liquid compound that is sprayed into the exhaust catalyst after the combustion process. The requirement for AdBlue is essential for the effective operation of the Selective Catalytic Reduction (SCR) systems and is sprayed in the exhaust to bring tailpipe emissions (particularly Oxides of Nitrogen) into line with the requirements of Australian Heavy Duty Vehicle emissions laws.

Given the essential role AdBlue plays in emissions compliance, the on-board electronic control systems of these vehicles – which are applied to many trucks manufactured after 2008 and nearly all manufactured after 2011 – restricts the operation of these vehicles when AdBlue is not present on the vehicle. The effective impact of this restriction is to limit the operating speed of the vehicle to a slow speed allowing return to base operation, but effectively rendering the vehicle useless for delivery of freight services.

In the main, AdBlue is used in on-road vehicles that are subject to more stringent emission standards than diesel engines used in stationary power generation, construction sites and in agricultural machinery.

The current AdBlue shortage in Australia has been created by a decision made by the Chinese Government in early November to cease export of automotive grade of Urea (automotive grade is what is required for AdBlue production, while agricultural grade which is used in fertiliser is not suitable to create AdBlue despite some media commentary implying that agricultural grade is a solution to the current pressures). With Australia’s AdBlue producers sourcing an estimated 80% of its automotive grade of urea from China, the Chinese decision has created an obvious and significant impact on AdBlue supplies.

It is worth noting, however, that the shortage is a global market issue for AdBlue suppliers that was first identified in Europe back in June and which was allegedly caused by a steep increase in the cost of natural gas, a key component in the production for European AdBlue producers – who, in response, decided to reduce production volumes.

The decision of the European manufacturers of AdBlue had a “contagion effect” across the globe as the European freight industry sought out other international markets to secure alternative supply. The net effect of this was to significantly increase the tension between demand and supply internationally for AdBlue, with many economies seeking to protect their freight industry from the adverse consequences of an AdBlue shortage.  Many suggest that this issue of sovereign economic protection was what prompted the Chinese decision to cease exports.

At the start of November, Australia’s in-country supply was estimated to be around 3 months at ‘business-as-usual’ consumption levels, but the Australian AdBlue suppliers advised fuel companies (Marketers and Distributors) of the risk of a looming shortage and reduced the volume of deliveries to the network. As fuel businesses notified their customers about the supply contraction and possible shortage, knowledge of the risk grew to the point of the issue becoming public last week.

During November, ACAPMA’s Distributor members started to report that their fleet customers were becoming increasingly nervous about AdBlue supply beyond Christmas and were putting pressure on these businesses to secure additional supply.

“At the time, ACAPMA also notified the Federal Government of the potential risk, advising that the issue was not immediate in nature but needed to be addressed quickly to ensure continuity of supply beyond February 2021”, said Mark.

“As an industry, however, fuel distribution businesses have sought to reassure customers about the near-term supply (i.e. period leading to Christmas and into January).  Unfortunately, the rather alarmist claims made by road freight industry bodies and others, has increased and intensified pressure on our members”, added Mark.

While some stakeholders have advised that it is possible to operate an SCR equipped vehicle without AdBlue – by essentially ‘tricking’ the system by using ‘mineralised water’ in place of AdBlue – the Truck Industry Council (the peak body representing heavy duty vehicle manufacturers in this country) have stated that this is not the case.

The Truck Industry Council has indicated that, apart from the obvious issue of illegal emissions operation, any tampering with the SCR system or on-board computer control system would most likely result in the total destruction of the catalyst – thereby requiring replacement of an expensive vehicle component and potentially leading to a demand for replacement catalysts that could not be supported by existing global supply.

So, the issue looks to be a tricky one that will require examination of all possible solutions – from seeking reinstatement of supply from China, to looking at alternative sources of supply (including trying to stand up new domestic production), and even exploring further any potential vehicle-related fixes.

“Within this context, the announcement by Minister Taylor (Federal Minister for Industry, Energy and Emissions Reduction) yesterday that a national Task Force is being established to address this issue is very welcome”, said Mark.

At the request of the Prime Minister, Minister for Industry, Energy and Emissions Reduction Angus Taylor with the Department for Industry, Science, Energy and Resources will now lead a coordinated, whole-of-government effort to ensure reliable and ongoing supply of AdBlue in close cooperation with industry.

Minister Taylor has announced the Taskforce will be led by James Fazzino, Chair of Manufacturing Australia and former CEO of Incitec Pivot, along with Andrew Liveris, former Chairman and CEO of The Dow Chemical Company and Director at Saudi Aramco, and Dr Cathy Foley, Australia’s Chief Scientist. Additional industry members will be confirmed in due course.

The Taskforce will work across government and with industry to develop solutions to any potential future supply constraints. Options being explored include alternative international supply options for automotive grade urea, bolstering local manufacturing capabilities and technical options at the vehicle level.

The Government is working with the Australian Competition and Consumer Commission (ACCC) and industry on whether an authorisation is needed to allow Australian diesel exhaust fluid producers to share information.

In the meantime, Minister Taylor called for calm by saying that “businesses and consumers buying additional stocks is unnecessary and unhelpful, and urged industry to continue operating as per usual and maintain normal levels of AdBlue.”

A copy of the Minster’s Statement can be found here

“This is clearly an important issue and one that ACAPMA will continue to quietly focus on in terms of member, industry and government engagement”, concluded Mark.