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Urea shortage threatens South Korea’s transport, energy industries

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November 9, 2021

By Sangmi Cha and Heekyong Yang

SEOUL (Reuters) – South Korea is flying a military oil tanker to Australia this week to airlift 27,000 litres of urea solution, used in diesel vehicles and factories to cut emissions, amid a dire shortage threatening to stall commercial transport and industries.

Approximately two million diesel vehicles, mostly cargo trucks, are required by government to use the additive, according to industry experts.

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Diesel vehicle drivers have started panic buying urea after key supplier China last month tightened exports for its domestic market. Nearly 97% of South Korea’s urea imports came from China between January and September, trade ministry said.

“I drove about 70 kilometres to a gas station to just get urea solution for my truck and there were long lines of vehicles and my turn didn’t come, so I just left empty handed,” Lee Byung-ki, 63, told Reuters, adding he would not be able to continue working from Wednesday unless he found some urea.

The shortage is threatening to halt delivery trucks carrying gasoline and other fuels to local gas stations, an official from one of South Korea’s major refiners said.

“If gas stations do not manage to receive sufficient amount of fuel, it could attribute to jump to logistical cost across almost all industries, which eventually could burden consumers – price increases in ordinary consumer goods.”

But the shortage could have an even greater impact on South Korea’s industrial sector, which is also mandated to use urea to cut pollution or stop production.

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Of the 835,000 tonnes of urea imported in 2020, 34.7% was for industrial use, 9.8% for cars and the rest used to make fertilisers in agriculture, environment ministry said.

A major urea supplier in the country said it had not been able to import urea material from China since mid October, which had resulted in a drop in the operation rate of its urea solution production line in South Korea.

The industrial urea inventory, which keeps factories running, is already low, a source from the manufacturing industry told Reuters.

“What we could do to alleviate the urea shortage for factory operation is to ask the government to relax these environmental regulations to make it through this.”

AUTOMAKERS WORRIED

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If the urea shortage persists the auto sector, which already faces a semiconductor shortage and price hikes in raw materials, would find it difficult to get parts from suppliers, said Lee Hang-koo, an executive adviser at Korea Automotive Technology Institute.

“It could end up keeping South Korean automakers’ factories abroad from manufacturing vehicles as much as they would like to because their auto parts suppliers would not be able to deliver their parts to export ports to ship their products,” he said.

President Moon Jae-in tried to calm public fear on Tuesday, saying at a cabinet meeting there was no need for “excessive concern” and help was on the way.

The government has released urea stockpile from the public sector to areas in urgent need and said there will be a temporary release from military stockpiles.

Defence Minister Suh Wook on Tuesday said in a parliamentary committee meeting the military plans to release around half the stockpile of 445 tonnes of the automotive urea solutions to civilians as a loan.

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South Korea secured 200 tonnes of mass urea from Vietnam this week and is in consultation with other nations for up to 10,000 tonnes, enough to make about 30,000 tonnes of the diesel exhaust fluid. The Defence Ministry on Tuesday said the first batch of supply from Australia had been secured.

In 2015 South Korea made it mandatory for diesel cars to use urea solutions to control emissions, which now impacts 40% of registered vehicles.

Diesel vehicles made since 2015 must be fitted with a so-called selective catalytic reduction (SCR) systems that requires injection of urea solutions that help scrub nitrogen oxide (NOx) from diesel exhaust causing air pollution.

Without the urea solution passenger cars do not start and trucks can only travel up to 20 kmh (12 mph), forcing some desperate drivers to try and rig their vehicles or use urea emulators to trick the SCR system, local media reported.

(Reporting by Sangmi Cha, Heekyong Yang; Editing by Michael Perry)

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Yen shines, Aussie sags as Powell turns hawk despite Omicron uncertainty

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December 1, 2021

By Kevin Buckland

(Reuters) – The safe-haven yen held steady on Wednesday, while the risk-sensitive Australian dollar languished near a one-year low after Federal Reserve Chair Jerome Powell signalled a faster taper of stimulus despite the risks around the Omicron COVID-19 variant.

Investors fear that hasty monetary tightening could choke off the nascent economic recovery, with little still known about Omicron’s potential to evade current vaccine protection or how deadly it might be.

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“Investors are staying cautious,” said Shusuke Yamada, chief Japan FX strategist at Bank of America-Merrill Lynch.

“It’s very difficult to make a judgement about the impact of Omicron when we don’t have a lot of information.”

Global markets fell sharply on Tuesday after the head of drugmaker Moderna said existing COVID-19 vaccines would be less effective against the new variant, although BioNTech’s chief executive struck a cautiously positive note, saying the vaccine it makes with Pfizer would likely offer strong protection against severe disease from Omicron.

The Aussie weakened 0.12% to $0.71245 after dipping as low as $0.7063 of Tuesday for the first time since Nov. 3, 2020. The New Zealand dollar was largely flat at $0.68195 after also touching the lowest since early November of last year at $0.6773 in the previous session.

The greenback ticked 0.09% higher to 113.26 yen, but still within sight of an overnight low of 112.535, a level not seen since Oct. 11.

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Powell said in testimony to Congress on Tuesday that Fed officials will discuss at their Dec. 14-15 policy meeting whether to end bond purchases a few months earlier than had been anticipated. The Fed chief finally did an about face on a long-held contention that inflation would be “transitory.”

Powell expressed confidence that the impact from Omicron will be far less than in the spring of 2020, when the pandemic erupted.

In response, traders wound up interest rate hike expectations, with money markets now almost fully priced for tightening at the June meeting.

Powell’s testimony continues later Wednesday.

“Powell’s unexpectedly hawkish tone overnight, essentially asserting that inflation risk has primacy over growth/Omicron risks, should leave the (dollar index) forging ahead,” Westpac strategists wrote in a client note.

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The index, which measures the dollar against six major peers, traded at 95.921 after sliding to 95.544 on Tuesday for the first time since Nov. 18, weighed down largely by an unwinding of bearish bets on the euro, the most heavily weighted component in the basket.

Westpac recommends buying dips in the index down to the mid-95 level.

The single currency slipped 0.04% to $1.1331, down from a two-week high of $1.1387 overnight.

Sterling traded not far from an 11-month low of $1.31945 reached overnight, last changing hands at $1.32955.

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

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OPEC+ begins two days of talks amid oil rout

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December 1, 2021

LONDON (Reuters) – OPEC and its allies begin two days of meetings on Wednesday to decide whether to release more oil into the market or restrain supply amid an oil price rout and fears the Omicron coronavirus variant could weaken global energy demand.

Oil prices fell to near $70 a barrel on Tuesday from as high as $86 in October, posting their biggest monthly decline since the outset of the pandemic, as the new variant raised fears of a supply glut.

For November, Brent fell by 16.4%, while WTI fell 20.8%, the biggest monthly fall since March 2020.

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“The threat to oil demand is genuine,” said Louise Dickson, senior oil markets analyst at Rystad Energy. “Another wave of lockdowns could result in up to 3 million bpd (barrels per day) of oil demand lost in the first quarter of 2022.”

Also pressuring prices, Federal Reserve Chair Jerome Powell said the U.S. central bank likely will discuss speeding its reduction of bond purchases amid a strong economy and expectations that a surge in inflation will persist.

The Organization of the Petroleum Exporting Countries (OPEC) will meet on Wednesday after 1300 GMT, followed by a meeting on Thursday of OPEC+, which groups OPEC with allies including Russia.

Several OPEC+ ministers, including from Russia and Saudi Arabia, have said there was no need for a knee-jerk reaction from the group.

But some analysts have suggested OPEC+ might put plans to add 400,000 barrels per day (bpd) to supply in January on hold.

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The group was already weighing the effects of last week’s announcement by the United States and other countries to release emergency crude reserves to temper energy prices.

OPEC+ has been gradually winding down record supply cuts of 10 million bpd implemented last year and currently has some 3.8 million bpd of reductions still in place.

The increase in OPEC’s oil output in November has again undershot the rise planned under a deal with allies, a Reuters survey found.

(Reporting by OPEC team, writing by Dmitry Zhdannikov, editing by Richard Pullin)

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New York accuses Amazon of backsliding over worker safety, seeks monitor

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December 1, 2021

By Jonathan Stempel

NEW YORK (Reuters) -New York state’s attorney general on Tuesday asked a state judge to appoint a monitor to oversee worker safety at an Amazon.com Inc fulfillment center in New York City, citing the retailer’s alleged rollbacks of COVID-19 safety measures that were “already inadequate.”

Letitia James, the attorney general, also wants a court order requiring the rehiring of Christian Smalls, who Amazon fired for allegedly violating a paid quarantine by leading a March 2020 protest over conditions at the Staten Island facility.

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James, a Democrat running to become New York governor, sued https://www.reuters.com/article/us-amazon-com-complaint/new-york-attorney-general-sues-amazon-over-covid-19-shortfalls-idUSKBN2AH0C2 Amazon in February in a New York state court in Manhattan over its safety protocols for thousands of workers at the Staten Island facility and a distribution center in the New York City borough of Queens.

She said Amazon is valuing profit over safety and “acting as if the pandemic is over” by rolling back safety protocols even as the Omicron variant https://www.reuters.com/business/healthcare-pharmaceuticals/omicron-variant-could-outcompete-delta-south-african-disease-expert-says-2021-11-30 of the COVID-19 virus threatens to increase transmission rates.

The alleged rollbacks include making the Staten Island facility “mask-optional” for vaccinated workers while not requiring masks for unvaccinated workers, and failing to enforce social distancing.

In her motion for a preliminary injunction, James said the proposed monitor would oversee upgraded cleaning, hygiene and social distancing procedures.

“While case rates, hospitalizations, and deaths rise, Amazon rescinds protections and packs in more workers for its holiday rush,” James said in her motion. “Amazon’s ongoing – and worsening – failure to protect workers must be halted.”

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Amazon said in a statement it has taken a “comprehensive approach” to COVID-19 safety.

“It’s disappointing that the Attorney General is seeking to politicize the pandemic by asking for ’emergency’ relief now despite having filed this lawsuit nine months ago,” Amazon said.

The Seattle-based company is appealing a judge’s refusal in October to dismiss James’ lawsuit.

Amazon on Nov. 15 reached a separate settlement with California https://www.reuters.com/legal/government/amazon-settles-california-claims-it-concealed-covid-19-cases-workers-2021-11-15 over claims it violated a state “right-to-know” law by concealing from warehouse workers and local health agencies the numbers of workers being infected with COVID-19.

(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis and Stephen Coates)

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