McKinsey paid $10k a day for AdBlue analysis

Joseph Brookes
Senior Reporter

The federal government is paying a consulting giant nearly $10,000 a day for supply and demand analysis of a critical diesel exhaust fluid but refuses to disclose exactly how much supply remains, with the government saying only that there is “sufficient volumes”.

In December Australia’s transport sector was rocked by a plunge in the availability of AdBlue due to a global shortage of its key ingredient urea.

Transport groups warned their fleets of diesel trucks – which rely on AdBlue to keep their emissions within legal limits — would be taken off the road by February without more supply.

The federal government scrambled to secure more international supplies and paid Australia’s only domestic manufacturer of AdBlue from urea melt, Incitec Pivot, nearly $30 million to ramp up its production.

The measures, along with an omicron economic slowdown, have helped stabilise supplies of AdBlue. But some retailers have retained purchase limits and government continues to advise against buying at levels beyond normal needs.

Transport groups also report supplies have improved but say price gouging of up to five-fold is still occurring and concern remains about how long-term supply will be secured, with Incitec Pivot planning to shut its plant at the end of the year.

AdBlue supplies are stabilising but a long term solution still isn’t clear. Credit: Ryan Smith, Flickr

A few days after Incitec Pivot’s temporary manufacturing increase was subsidised by the government, the Industry department quietly gave consulting giant McKinsey a $319,000 contract  for a month’s work on “supply and demand analysis, forecasting and presentation of data relating to Diesel Exhaust Fluid”.

The McKinsey contract is scheduled to end next week and the department declined to say exactly what it will produce.

“The Department of Industry, Science, Energy and Resources required data modelling and technical expertise on supply chains for Diesel Exhaust Fluid (DEF), to support the Government and industry in addressing DEF supply issues,” a spokesperson for the Department told InnovationAus.

“Given the importance of the DEF issue and the need to resolve as soon as possible, it is important for the department to obtain advice from a consultant with expertise in supply chains and logistics, locally and globally.”

The spokesperson also declined to say what the current level of AdBlue supply is in Australia in either litres or time left under usual consumption.

The government, including Industry minister Angus Taylor, has also established an AdBlue taskforce and have been meeting with industry stakeholders to find a long-term solution. The decision to bring in consultants is understood to have annoyed some of the meetings’ participants.

The Department is also still considering allowing operators to use their vehicles without AdBlue – something which is technically possible but requires adjustments to onboard computers which shut the vehicle down without enough of the diesel exhaust fluid.

Truck manufacturers and importers blasted the idea when it was floated at the meetings last year as a last resort, saying it would endanger drivers’ health and harm the environment.

A spokesperson for Mr Taylor said the current AdBlue manufacturing supply chain is sufficient to meet Australia’s normal needs but industry should purchase stocks “only when needed and at normal levels”.

“Australia currently has sufficient volumes of AdBlue to meet our needs and our decisive action to support Incitec Pivot has seen rapid ramp up of AdBlue production to support additional supply to market. This has seen Incitec move its facility to a 24/7 operation to increase their production of AdBlue, which is now being distributed through the market,” the minister’s spokesperson told InnovationAus.

“Incitec Pivot’s additional production is only one element of Australia’s response to the urea supply disruption. Through the ongoing National Coordination Mechanism (NCM) and supplier meetings, the Government is also continuing to work with other AdBlue manufacturers on ensuring they can access additional international supplies of AdBlue or technical grade urea (TGU), which complements the additional AdBlue supply from Incitec Pivot.”

Do you know more? Contact James Riley via Email.

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