Prudent steps needed to handle key materials crisis
Concerns are growing in Korea over a looming fertilizer shortage, prompted by China’s move to restrict exports of ammonium phosphate, a raw material for chemical fertilizer. The recent attempt caught the nation off guard again, as it followed a move to curb the customs clearance of urea exports. China already limited the exports of the two raw materials two years ago, fanning the prices of domestic fertilizer.
What matters is that China accounts for 95 percent of Korea’s ammonium phosphate imports. Desperate to cope with a growing sense of crisis especially among farmers and relevant industries, the Yoon Suk Yeol government came up with a package of measures designed to secure key materials on a stable basis.
On Monday, economy-related ministers got together and agreed on the need to establish a government-wide commission to effectively manage the supply chains of major items. The government explained that a buying spree of urea that erupted at gas stations began to ease from last week, although it spiked temporarily after China suspended the export clearance.
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said at the ministerial meeting that the government has been expanding the procurement of urea, for instance, and has secured enough of the material to last about 130 days. “We are increasing the state reserve to 12,000 tons, while seeking procurement from third countries.”
Choo vowed to closely check the demand and supply of key materials on a daily basis. He pledged to take steps to thwart the possible hoarding of related products amid the growing sense of anxiety. Comprehensive measures will be taken to prevent potential market disruptions, Choo said.
Eager to assuage the public’s wariness, the government is emphasizing the need to expand imports from countries other than China, such as Morocco and Vietnam. It even vowed efforts to domestically produce the material. Yet despite the administration’s efforts, skepticism lingers.
Two years ago, the government flamboyantly announced a series of measures to tackle the urea issue. Yet, it has largely failed to establish a basis for the stable supply of the material, while Korea’s dependence on China for urea rose from 88 percent to 92 percent during the two-year period.
China, for its part, has been adroitly “weaponizing” essential raw materials. Export restrictions were expanded to gallium and germanium in August and to graphite in October.
In the wake of the Sino-U.S. hegemony conflict coupled with wars in Ukraine and the Middle East, the supply channel risk has become an imminent threat to Korea’s economy.
We should remember that China has been attempting to tame the Yoon administration on both the economic and diplomatic fronts. Yoon has been seeking to hold a summit with his Chinese counterpart Xi Jinping in a bid to find a breakthrough in chilled inter-Korean relations. Improving relations with North Korea and China has also become important for Yoon and the governing People Power Party (PPP) ahead of the forthcoming general elections.
But Beijing has remained lukewarm toward Seoul. Xi virtually refused to meet Yoon on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco in November, although he held summits with U.S. President Joe Biden and Japanese Prime Minister Fumio Kishida.
We should take lessons from the U.S. administration which joined hands with enterprises to draw up supply channel roadmaps one year after the Inflation Reduction Act (IRA) went into effect. In contrast, the National Assembly belatedly passed a related bill on Dec. 8, only two years after the urea crisis erupted.
China deserves criticism for resorting to such export control measures without advance notification or discussions. That constitutes a grave violation of a mutually-beneficial international order and is also a serious betrayal of mutual trust. What is worrying is the Yoon administration’s seemingly subservient attitude of defending China, saying, “there is no political motive” behind Beijing’s export controls.
It is time to fortify negotiating leverage to protect our national interests. For this we need to further combine forces with the U.S. and Japan to squarely handle the seemingly improper trade practices of China.