The federal government has “struck an agreement” with Australia’s only manufacturer of a critical diesel exhaust fluid compound to increase its production as a global shortage threatens to take Australian trucks off the road within months.
But the deal won’t change plans to end manufacturing at the company’s Gibson Island plant in Brisbane next year.
Announced Monday by Industry minister Angus Taylor, the agreement will see Australian multinational manufacturer Incitec Pivot increase production at its Brisbane plant to “supply quantities as needed by current suppliers” of AdBlue.
No detail was provided on how much additional AdBlue or its key compound, urea, will be produced or what specific terms had been agreed between the government and the company.
An Incitec Pivot Limited spokesperson said an update on volumes will be available in coming weeks following a manufacturing assessment, but the company is confident it can meet local demand.
“We currently make 10 per cent of Australia’s supply of Adblue. If successful, the [new] manufacturing capability would be adequate to meet Australian market requirements,” the spokesperson told InnovationAus.
The company last month announced plans to shut the Brisbane plant at the end of next year after being “unable to secure an affordable long-term gas supply from Australian gas producers”. Monday’s announcement will not change the decision, the company confirmed.
Currently, the plant produces Australia’s only domestic source of AdBlue from urea melt. The remaining 90 per cent of the Australian AdBlue market is reliant on imports of technical grade urea, according to the company.
The federal government has now secured a deal to increase local production at the Incitec Pivot facility.
“Incitec Pivot will rapidly design, trial and, on completion of successful tests, scale-up manufacturing of significant quantities of Technical Grade Granular Urea (TGU), a critical component of AdBlue.
“Incitec Pivot will supply quantities as needed by current suppliers.”
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.
Key compound urea, which is also used as an agriculture fertiliser, is in short supply around the world. In response major global suppliers China and Russia capped their exports to control domestic prices of the compound.
Australia has relied on Chinese imports for around 80 per cent of its AdBlue supplies, and the current shortage has exposed vulnerabilities in domestic supply chains.
Eleven days ago, the federal government assembled an AdBlue taskforce led by Australia’s chief scientist and businessmen, including the former chief executive of Incitec Pivot, James Fazzino, to investigate the shortage and solutions.
On Monday, Industry minister Angus Taylor said he and the taskforce had “struck an agreement” with manufacturer to increase local production.
“Australia currently has adequate stocks of AdBlue stock on hand, but this agreement with Incitec Pivot will enable domestic production of TGU or supply of an AdBlue product to domestic manufacturers to ensure current supply chain disruptions don’t impact on Australian businesses,” Minister Taylor said in a statement.
“The ramping up of production by Incitec Pivot will be done without impacting agricultural fertiliser supply to local farmers or disrupting local distribution chains for AdBlue.”
Trade minister Dan Tehan said Australia will accept the Indonesian government’s offer to provide 5,000 tonnes of refined urea in January, enough urea to make a month’s worth of AdBlue.
The government has also made representations to Saudi Arabia, the United Arab Emirates, Qatar and Japan for more supply or urea.
Incitec Pivot confirmed in its own statement it would increase production of technical grade urea and expand AdBlue production at its Gibson Island plant in Brisbane after receiving support from the government and Industry department.
As concerns about the shortage grew last week, the company said it would continue supplying existing customers and began exploring ways to increase its production capacity, including talks with the federal government and its taskforce.
In November, Incitec Pivot told investors it plans cease manufacturing at its Brisbane-based Gibson Island plant at the end of December 2022 after “exhaustive efforts were unable to secure an “affordable long-term gas supply from Australian gas producers”.
“We reluctantly made the decision to stop manufacturing at Gibson Island because we couldn’t get affordable feedstock gas supply from the east coast gas market,” the Incitec Pivot Limited spokesperson said.
“We have no current plans to change this decision. We will continue to work with the government on meeting Adblue supply for the Australian market and we thank them for their support.”
Update: This article was updated to include comments from Incitec Pivot Limited.
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