Late last year, the Chinese Government banned the export of urea, a naturally occurring chemical component that is used in both fertiliser and as a vital anti-pollution additive for diesel fuel named AdBlue.
At the time, around 80% of Australia’s urea had been imported from China, which has the world’s richest supply.
However, China banned the chemical’s export in order to lower fertiliser prices domestically.
China’s ban of urea has potentially devastating implications for Australia’s agricultural and freight transport industries, and therefore the Australian economy. As explained by Australian Trucking Association chair David Smith:
“They wanted to retain their urea themselves to hold the price of urea in China … to make it cheaper for their farmers,” Mr Smith told RN Breakfast.
“(But they) left Australia swinging, basically”…
As a result, the price of urea has gone up more than 400 per cent since January, and the price of AdBlue has more than doubled in the last two months…
Queensland cattle farmer Matt Ferguson-Tait was equally concerned:
“If we run out of urea, not only will we not be able to grow cattle, we will not be able to grow food, we will not be able to grow grain or anything like that, but even if we could, we can’t move it because we can’t turn a wheel in a truck because we have no AdBlue”…
“It’s more terrifying than any Covid headline, I can tell you.”
Australia temporarily averted disaster last year when the former Morrison Government granted fertiliser juggernaut Incitec Pivot $29.4 million to produce extra supplies of AdBlue.
However, Incitec Pivot has announced that it would cease AdBlue production at its Gibson Island facility in Brisbane at the end of 2022, which will yet again leave Australia’s agricultural and freight transport industries dangerously exposed:
“The issue for us is if we don’t have a local plant producing high-grade urea for use in AdBlue, we will face the same situation [as last year] come December this year, because urea is used in fertiliser as well … and we’re seeing globally with food supply issues, it has a knock-on effect with higher demand for fertiliser”, [Road Freight NSW CEO Simon O’Hara said].
So what has China’s decision to ban urea exports got to do with Australian gas? First of all, the Gibson Island plant is closing because Aussie gas is too expensive.
Australia is the world’s biggest LNG exporter at the same time as East Coast domestic gas supplies are experiencing an acute shortage and East Coast gas prices have soared to nosebleed levels.
71% of eastern gas exports went to China in 2021-22:
Both Chinese state-owned enterprises, CNOOC and Sinopec, are equity partners in two of three LNG export facilities, making them card-carrying members of the east coast gas export cartel.
Every single household and business east of WA is now subsidising the foreign-0wned, tax-free, China-beholden gas cartel to the tune of $50bn in annualised energy costs. In turn, Australian gas is effectively subsidising Chinese industry and its war machine, while Australian households and businesses are ruthlessly squeezed with higher costs.
In turn, Australian inflation will be pushed higher, which will prompt more aggressive rate hikes from the Reserve Bank.
And, like urea, it will hollow out Australian industry and make the economy ever more dependent upon Chinese, even as the geopolitical environment deteriorates.
The solution is for the Albanese Government to do to gas exactly what the Chinese Government did to urea: impose East Coast reservation to ensure a plentiful and low cost supply of gas to domestic household and industrial users. Alternatively, apply super profits taxes or export levies to achieve a similar result.
Anyone still screaming “sovereign risk” needs to ask themselves: “Why is it okay for China to reserve urea, but not okay for Australia to reserve gas?”.