What is urea, the essential chemical that threatens to further trigger global shortages

You may never have heard of it, but this chemical compound is on the list of products in short supply in the world and can have a significant impact on supply chains.

Urea shortages are already being felt in various parts of the world, including India, South Korea and Australia.

The first to suffer it are the farmers and truckers, but problems with the supply of this product can have an effect on all consumers.

Here we explain why.

What is it

It is a chemical compound found in urine, among other places.

That particular urea is made in the liver.

But urea is also produced industrially for different uses, mainly as fertilizer.

And also as a key ingredient of a diesel car product necessary to reduce polluting emissions.

The main raw material to obtain this compound is gas, which through a chemical process is first converted into ammonia and then dehydrated to form urea.

What is happening

Urea is one of the most popular fertilizers, and world fertilizer prices have soared this year to levels not seen in more than a decade, according to the World Bank.

There are several factors that explain this unprecedented price increase.

First, it is powered by the high cost of energy, especially gas, essential raw material for the production of fertilizer.

• 3 keys that explain why the price of electricity in Europe is breaking records

Also, according to the World Bank, rising prices for thermal coal in China led to rationing of electricity use in some provinces and forced fertilizer factories to cut production.

And in response to this, China and Russia, two of the world’s leading fertilizer producers, imposed export restrictions of fertilizer products, something that was seen as a measure to cool prices and guarantee domestic supply.

• What products are in short supply in the world (and what is the situation in Latin America)

On the other hand, it is necessary to take into account the impact of Hurricane Ida in August on the coast of Louisiana, United States, which hampered the production of natural gas and caused the suspension of the activity of chemical plants in the area, increasing the shortage of fertilizers in the market.

In this sense, the World Bank also highlights the impact of Western sanctions against Belarus, since that country is a producer of a key ingredient for another fertilizer, potash.

Agriculture and food prices

• 3 keys that explain why the price of electricity in Europe is breaking records
• What products are in short supply in the world (and what is the situation in Latin America)

What is happening

Urea is one of the most popular fertilizers, and world fertilizer prices have soared this year to levels not seen in more than a decade, according to the World Bank.

There are several factors that explain this unprecedented price increase.

First, it is powered by the high cost of energy, especially gas, essential raw material for the production of fertilizer.

• 3 keys that explain why the price of electricity in Europe is breaking records

Also, according to the World Bank, rising prices for thermal coal in China led to rationing of electricity use in some provinces and forced fertilizer factories to cut production.

And in response to this, China and Russia, two of the world’s leading fertilizer producers, imposed export restrictions of fertilizer products, something that was seen as a measure to cool prices and guarantee domestic supply.

• What products are in short supply in the world (and what is the situation in Latin America)

On the other hand, it is necessary to take into account the impact of Hurricane Ida in August on the coast of Louisiana, United States, which hampered the production of natural gas and caused the suspension of the activity of chemical plants in the area, increasing the shortage of fertilizers in the market.

In this sense, the World Bank also highlights the impact of Western sanctions against Belarus, since that country is a producer of a key ingredient for another fertilizer, potash.

Agriculture and food prices

One of the places in the world where the increase in prices and shortages of urea is being felt the most is India.

The Asian country is the main importer of urea, an essential product to feed its huge agricultural sector, which employs around 60% of the country’s workforce and represents 15% of the economy.

India imports about 30% of about 35 million tons of annual urea consumption and now its farmers fear that their way of life is at risk.

Ultimately this will have a impact on food prices, alerts the World Bank.

“High fertilizer prices could put inflationary pressures on food prices, compounding concerns about food security at a time when the covid-19 pandemic and climate change make access to food difficult.”

• “The scarcity we are experiencing is just a warning of what will come if we fail to change the economic model”

Threatened supply chains

The increase in the price of this chemical component is not only being noticed in agriculture.

Urea is also key to producing the diesel exhaust fluid, a solution that is used to reduce emissions in cars that use that fuel.

Its use in trucks is mandatory in some countries, such as in South Korea and Australia, and that is affecting the supply chains of both countries.

South Korean truckers are already suffering from urea shortages, and Seoul earlier this week asked Russia for cooperation in securing supplies.

For his part, Warren Clark, director of the Australian National Road Transport Association, told news.com.au that supply chain under “extreme pressure”.

Australia imported 80% of the urea it needs from China.

“Without breaking the law, we will potentially run out of the chemical around February of next year, but we think it could be earlier,” Clark said.

“We saw empty supermarket shelves during the pandemic, and this could be a lot worse.”

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