A couple of years ago, most Australians had never heard of AdBlue.

The diesel fuel additive was readily available and deliveries of goods to supermarkets, stores and homes were running smoothly.

But when China banned the export of AdBlue ingredient urea in mid-2021, it sparked a global shortage of AdBlue and concerns that Australia’s diesel-powered trucking fleet would be grounded, halting deliveries at a time when much of the country was in the midst of Covid-related lockdowns.

AdBlue is a urea-based diesel exhaust fluid that acts as an anti-pollutant in diesel engines and is vital to the freight and logistics sector for meeting emissions standards.

Along with being an essential ingredient for AdBlue, urea is also a key component of fertiliser and China banned urea exports in a bid to keep fertiliser costs down. However, with the Asian nation supplying 80 per cent of Australia’s urea, the Chinese export ban threatened to have a devastating impact on Australia’s road transport sector.

While the worst of the crisis has passed and supplies have been secured for the time being, industry and government are working to ensure the nation has enough AdBlue for the future.

In December the government said Australia currently had normal stocks of AdBlue and was working with industry to understand current global pressures in the urea market and any implications this may have on the supply of diesel exhaust fluid in Australia, also known as AdBlue.

“I can assure Australians that the government is working to ensure we do not face any shortages. We are pursuing a range of measures to address global pressures in the urea market. We will keep our trucks running and Australian motorists on the road,” Minister for Industry, Energy and Emissions Reduction Angus Taylor said at the time.

He urged motorists and trucking companies to operate as they usually would and not to hoard supplies of the additive.

AdBlue at the pump in Brisbane.

Chemicals and storage group DGL Group manufactures AdBlue in Australia following its acquisition of Queensland-based AUSblue last October.

Simon Henry, who owns 57.3 per cent of the company, says he worked closely with the federal government to secure supplies of urea from Indonesia around Christmas time.

“We worked with them around the clock on solving the problem and getting the stuff out of Indonesia. I don’t want to sound political but they saved Australia’s bacon. They really did focus on it,” he says.

While there isn’t currently a shortage of urea, he says it is selling for record prices.

“The price is highly elevated. You’ve got to be on your game to get it and to ship it. You’ve got to have the capital to buy it. You’ve got to be able to write a cheque out for $10 million to buy stock,” he says.

At one stage before Christmas it was under a dollar a kilo. And now, most of it sits around a $1.50 to $2, he says.

A major factor in the elevated prices is the far away Russian invasion of the Ukraine. Natural gas is needed to manufacture ammonia, which is in turn used to make urea. With the Eastern European conflict pushing up gas prices, the prices of ammonia and urea have also risen.

Additionally, Russia is a major wheat exporter and with trade sanctions in place, global markets are seeking wheat from other locations, which is increasing demand for fertiliser and hence urea.

“They all want fertiliser. They don’t care what they pay for it. They just want it. The price of fertiliser in Europe has gone up 500 per cent. It all comes out of natural gas, so the market’s in complete chaos,” he says.

In fact, Henry points out that for the first time, agricultural grade urea is selling for a higher price than technical grade urea, which is used for manufacturing AdBlue.

Before he acquired AUSblue, Henry worked closely with the previous owners to ensure they had sufficient urea stockpiles to meet demand. “We spent millions and millions of dollars on it, but now we can resell that urea at a higher price if we wanted to. I couldn’t predict Ukraine, of course, but I predicted that turmoil would continue and I predicted that China was a sitting duck for Covid,” he says.

Filling the AdBlue tank on a truck.
Filling the AdBlue tank on a truck.

The AdBlue shortage adds to pressure on trucking companies, but their biggest problems are the high price of diesel, the shortage of drivers and the limited supplies of trucks, Henry says.

Associate Professor Flavio Macau, who lectures on supply chain management and global logistics at Edith Cowan University in WA, says urea supplies are stable at the moment and Australia has adequate stocks for the coming months.

However, he sees risks in the future.

In December, the federal government gave fertiliser manufacturer Incitec Pivot a $29.4m grant to ramp up the production of refined urea needed to avoid a trucking crisis.

While this is helping to alleviate the crisis in the short-term, Incitec Pivot is still planning to shut the plant later this year. It said it would reluctantly cease manufacturing at its Brisbane-based Gibson Island plant at the end of December 2022 after “exhaustive efforts were unable to secure an affordable long-term gas supply from Australian gas producers”.

However, the company recently announced a partnership with Fortescue Future Industries to conduct a feasibility study into industrial-scale manufacturing of green ammonia conversion from renewable hydrogen at Gibson Island, potentially creating a low-carbon future for the plant.

There are currently three green field urea projects in Australia – Leigh Creek project in South Australia, a project on the Burrup Peninsula in WA and Project Haber in northern Western Australia.

“So we have three big projects. If any of them eventuate, there will come a moment in time where Australia will shift quickly from an importer to an exporter. The question is will any of these projects eventuate,” Macau says.

If the supply squeeze intensifies again and Australia is unable to get enough AdBlue, the government has two options, Macau says. One is to modify diesel trucks so they can operate without the additive and increase pollution, and the other is to ground the trucking fleet.

Extracted in full from: Ensuring vital additive’s supply to keep trucks on the road | The Australian