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Ignoring AdBlue – why is there still a price problem?

For a year, AdBlue supplies have been a major issue for transport companies. With supplies now high and the prices still not coming down, ATN looks at how operators can experience AdBlue relief as soon as possible.

It’s the unresolved issue that still bubbles away behind current fuel price and supply chain problems. Ever since late last year, AdBlue levels in Australia have been low, causing prices to rise for operators wanting to continue using the sustainable resource.

With the sole Australian manufacturing location in Incitec Pivot’s Gibson Island urea plant confirmed to be closing for good at the end of this year after initially threatening to do so at the start of 2022, AdBlue supplies are set to once again plummet. The federal government has given no mention of this looming problem, as industry and science minister Ed Husic told the Australian Trucking Association (ATA) in July that there is now an oversupply of the resource.

Federal departments have also launched investigations into the current AdBlue market in Australia. Despite this action, National Road Transport Association (NatRoad) CEO Warren Clark has heard nothing from the new federal government.

“The only thing we have heard is from suppliers, who have said they are working to guarantee supply through peak periods to avoid any more problems,” Clark told ATN. “I praise the government and suppliers for that.

“However, we need to look supply chain sovereignty and how we can ensure our supply chain isn’t impacted when the Gibson Island plant closes at the end of the year.”

Clark says he has had it confirmed by Incitec Pivot itself that the plant will follow its scheduled close at the end of 2022. In Incitec Pivot’s annual report, it says it is on track to close in line with the federal government’s schedule.

In the meantime, word coming out of the plant suggests it has been manufacturing double the amount of AdBlue to ensure there is now an oversupply of the resource. Despite this, Australian operators say the price of AdBlue is yet to come down from its high level.

“It’s a really good question as to why the price hasn’t changed yet,” Clark says. “We’re supposed to have an oversupply of AdBlue in our market, so why has the price remained so high?”

The most likely option for future AdBlue supply is back into overseas imports. The previous system used both Gibson Island and China imports to maintain AdBlue levels, until international conflicts caused China to stop exporting urea to Australia. While China continues to build its tensions with Taiwan, Clark says Australia must quickly develop a plan that doesn’t solely rely on China supplying AdBlue to the nation.

“There’s absolutely nothing in the pipeline at the moment,” Clark says. “It’s crucial for it to be manufactured onshore to guarantee our supply chain so we don’t rely on it having to come in.

“We saw recent fluctuations based on price and demand where AdBlue prices doubled what it was a year ago. We need to have it produced in the country to smooth it over.”

Clark admits that the recent moves from the federal government to invest future sources of urea is a positive sign. He’s now imploring the government to devise a public approach to locally manufacturing AdBlue to ensure there are no future supply issues.

“The government has done some good work, but it needs to now look closer at the issue,” Clark says. “The fact is we have something that has currently doubled in price in the past year, now we have an oversupply and there’s no price decrease.


RELATED ARTICLE: ATA praises positive AdBlue action


“It’s about making AdBlue a more secure supply and manufacturing chain in our country to drop the price.”

It’s more than just associations who are raising their voices on the issue. RMIT University supply chain and logistics expert Vinh Thai is kept a careful eye on the status of AdBlue supplies in Australia over the past year. He is as surprised as everyone else that the price of the resource is yet to drop.

“We’re seeing this price problem too as an ongoing issue in Europe,” Thai told ATN. “It’s always about the balance between supply and demand, and while the demand is ongoing the industry remains under pressure to get this substance in while there are import and export limitations in place in critical European countries like Russia.

“In countries like Italy and France, there’s a cut off on urea productions by at least half, so that creates pressure on the supply chain and keeps the price high.”

 

Thai has previously spoken of the need for the federal government to take a double-pronged approach to securing the future of AdBlue supplies in Australia. In Thai’s idea, Australia will establish an onshore manufacturing plant similar to Gibson Island for permanent operations while also striking deals with neighbouring countries such as India, Vietnam and Indonesia.

In what is known as ‘friend-sourcing’, Thai says Australia could work with these nearby nations to provide a safer guarantee of AdBlue supply in future.

“In terms of shipping distance and lead times, these three countries should be considered,” Thai says. “Unless we see this approach coming soon, I don’t see how the price and supply issue can be relieved any time soon.”

Thai has more methods to drop the price of AdBlue. He says another way of building domestic capability is to provide government subsidies into the agricultural sector to allow these companies to manufacture AdBlue alongside fertiliser.

“AdBlue is a critical product for Australia,” Thai says. “There’s a domino effect of AdBlue that extends beyond the transport sector.

“It the supply breaks down, the lack of AdBlue means there’ll be legal consequences for a lack of the resource when it comes to operating with reduced emissions.”

Clark and Thai may have differing viewpoints on the current AdBlue issue. Clark is in the thick of it, liaising with transport companies to fight for reduced AdBlue prices, while Thai is looking at how to resolve it from an external position.

They both agree that the federal government must act quickly to devise a plan that secures the future of AdBlue supplies in Australia.

“Winter is coming in Europe, so the demand will soar, and it’ll put import constraints on Australia, so we must act now,” Thai says.

Clark says: “It’s a commercial arrangement now, so we can’t push through that and force people to manufacture it.

“What we’ll push hard on is ensuring our supply chain isn’t interrupted and that there’s a plan going forward for Australia.”

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