In response to the growing risks associated with supply chains, South Korea is taking significant steps to bolster the management of essential items vital to major industries and daily life. The Ministry of Economy and Finance announced the establishment of a comprehensive government-wide commission dedicated to supply chain management.
This move is part of South Korea’s strategy to reduce dependence on foreign nations, especially China, and ensure more stable supply chains for crucial items. The initiative follows the recent passage of the Supply Chain Stabilization Act by the National Assembly, which calls for the creation of a commission responsible for deliberating on and adjusting relevant plans, as well as operating an early warning system.
The Supply Chain Stabilization Act will come into effect six months after its promulgation. “We’ve observed increasing risk factors in supply chains related to our major industries and people’s lives, such as urea, ammonium phosphate, and graphite,” noted Finance Minister Choo Kyung-ho during a ministerial meeting on supply chain management, the first of its kind under President Yoon Suk Yeol’s government.
“The new law is expected to enhance our responses to supply chain risks and resilience. The government will outline detailed plans by June,” Minister Choo added.
This newly envisioned commission will be led by the finance minister and will comprise relevant ministries, institutions, as well as experts in the fields of economy and security. Its primary task will be to develop comprehensive plans to enhance supply chain stability, with periodic reviews every three years.
The government is planning to designate approximately 200 key raw materials and items as “economic security items.” Support for their stable introduction, production, and stock management will be provided through subsidies and other policy measures.
South Korea has been actively working to manage critical item supplies meticulously and diversify import channels, given past disruptions in the supply of major items. A recent example involved China suspending customs procedures for urea shipments to South Korea, citing domestic supply constraints, which raised concerns about a recurrence of the urea supply crisis experienced in 2021.
However, as of now, South Korea faces no urgent issues regarding the supply and market prices of urea and urea solution. The country maintains a sufficient urea inventory for 4.3 months, with companies recently entering into contracts with suppliers from countries other than China. Over 90 percent of local gas stations have ample urea solution stocks, according to the ministry.
The government has decided to extend the tariff-rate quota system on urea, which was initially set to expire this year. It will also offer support for a portion of the shipping expenses to alleviate the burdens on importers. “The government will continue close consultations with China through various dialogue channels to facilitate the swift resumption of customs procedures,” stated Minister Choo, further indicating a review of establishing domestic urea production facilities.
Urea is a crucial substance used to reduce emissions in diesel cars and manufacture agricultural fertilizers.
As South Korea takes these proactive measures to strengthen its supply chains, it aims to ensure greater stability and self-reliance in the face of potential disruptions. The establishment of the government-wide commission marks a significant step toward achieving these goals.