A looming shortage of diesel exhaust fluid AdBlue has underscored the need for Australia to start taking sovereign capability seriously, according to Victoria’s leading transport group, which warns domestic supply chains are vulnerable to several more disruptions.
The Victorian Transport Association (VTA), representing over 800 logistics and transport businesses, says trucks around Australia could “grind to a halt” by mid-February if more international supplies aren’t secured.
The potential crisis has exposed the vulnerabilities of Australia’s logistics systems and globally dependent domestic supply chains, according to VTA chief executive Peter Anderson.
“This is a really an indicator of where Australia is going within its own supply chains. And we’re in a desperate state, so to speak,” he told InnovationAus.
Despite government assurances stock levels are within normal limits, the VTA is reporting truck operators are now being gouged on AdBlue prices and some regional areas are struggling to secure it all.
The 119-year-old industry association is calling on the federal government to go beyond the “knee jerk” task force it established last week to address the local impacts of a global shortage of urea, the chemical compound needed to make AdBlue.
AdBlue is used in around half of Australia’s diesel freight trucks to reduce the carbon particulates released in exhaust gases. The additive is needed to keep emissions within legal limits and the trucks engines are programmed to shut down without it.
Australia has relied almost entirely on China to import urea, but a global shortage led to the country capping its exports to protect its own domestic prices.
China’s decision to restrict urea exports, and a similar one from fellow major supplier Russia, has sent shockwaves around the world.
Mr Anderson said the disruption is emblematic of a bigger problem in Australia, and several similar risks to the freight industry are emerging, including a looming shortage of pallets.
“AdBlue is just an indicator – It’s just a KPI. It’s just another issue within our domestic supply chains that are reliant on global supply chains to ensure the continuity. And this is where sovereign risk comes into it. This is where Australia is in a position of vulnerability.”
The VTA argues not enough attention has been paid to Australia’s sovereign risk, and it is past time to have a serious conversation about the consequences of global disruptions, and start planning for when they happen.
“There’s a strategic risk group in Canberra that talk about things such as invasions from another country. There’s not an economics one,” Mr Anderson said.
“We’re not talking about what happens if we don’t get any AdBlue in Australia. There’s no one talking about it.”
In regards to freight and logistics, Mr Anderson said this should start with the elevation of the Transport Portfolio, which currently a part of Infrastructure and Regional Development.
“We realised in COVID that we couldn’t do without it [transport]. So, they let us keep working. They realise we can’t stop transport. But they didn’t want to talk to us. We weren’t around the table.”
The industry is now bracing for an unavoidable stoppage, unless Australia can secure new supplies of urea from the Middle East and Indonesia.
Currently Australia has around seven weeks supply either in the country or en route, according to the federal government, which insists the amount is still within normal stockholding levels but has established an AdBlue taskforce to investigate the issue.
The office of Industry Minister Angus Taylor, who last week established the taskforce, declined to say exactly how much supply remained or whether the government would consider compulsory acquisitions to avoid profiteering.
“We currently have sufficient volume in Australia to meet our needs,” a spokesperson for Mr Taylor told InnovationAus. “We encourage industry operators and customers to continue operating as they normally would, and encourage responsible purchasing behaviour.
“Additional information on enhancing our domestic capabilities and on international progress will be made in due course.”
According to Mr Anderson, the consequences of not securing more supply soon could be dire for the local logistics industry by February.
“If this isn’t fixed by mid-January, then by mid-February the trucks are going to stop. Not maybe — are going to. So, that’s the consequence that we’re looking at here…Unless we’ve got hundreds of thousands of litres on the water right now coming to Australia, we won’t be able to distribute it to the point upon which it can be accessed in time.”
Stocks are already tightening around Australia, according to the transport group, with regional areas hit hardest.
“In regional Victoria we’re starting to see they are unable to get the supplies. We’re starting to see panic buying where instead of buying 1000 litres every two months, [operators] are buying 5000 litres this month.
“They are over ordering [and] the wholesalers are restricting supply … There is what you could call rationing. But more than anything, there is gouging in the price [of AdBlue].
According to Mr Anderson, AdBlue suppliers are now charging up to $2.25 a litre for AdBlue – around five times normal prices.
“The suppliers are telling us ‘don’t worry, don’t panic, we’ve got plenty.’ Yet they’re increasing the price fivefold because of the publicity and the fears that the industry is now expressing.”
Supply needs to be secured now, Mr Anderson said, to allow enough lead time to distribute it to operators across the county. Otherwise trucks will be taken off the road as early as February, he said.
“Without this product, our trucks will slowly grind to a halt. There won’t be a quick fix. It won’t be like turning on a light.”
On Friday, Industry minister Angus Taylor announced the formation of an AdBlue Taskforce comprised of industry leaders and Australia’s chief scientist Cathy Foley to “develop solutions to any potential future supply constraints”.
Options being explored include new international suppliers, more local manufacturing and “technical options at the vehicle level”.
Trucks that use AdBlue can still operate without it but their emissions can be around 40 per cent worse and would exceed mandated levels.
But a temporary increase to emissions allowances and the required adjustments to vehicle computers monitoring AdBlue cause several problems, according to Mr Anderson, who said it would be difficult to enact and to switch back when supplies stabilise.
“All of a sudden you’re in breach of your emissions targets. And secondly, you’re in breach of your [original equipment manufacturer] warranty on your truck.”
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