The AdBlue crisis doesn't seem to be abating even as new supplies are set to hit our shores and, as with any crisis, there will be ASX winners and losers.
The clock is ticking as Australia is due to run out of the fluid that limits noxious diesel exhaust within weeks. This could cripple the country's supply chains as trucks and other heavy machinery might not be able to operate without the additive.
ASX shares getting a sales boost
Panic buying is driving sales of AdBlue with Super Retail Group Ltd (ASX: SUL) and Bapcor Ltd (ASX: BAP) surging.
Super Retail owns the Supercheap Auto chain while Bapcor runs Autobarn. Some stores have reportedly run out of stock. Those that still have supplies have imposed customer limits.
Thankfully there have been no reported punch-ups in the aisle like those we saw at Woolworths Group Ltd (ASX: WOW) during the Great Toilet Paper Run – at least not yet.
Running on empty
Australia's largest supplier of AdBlue, DGL Group Ltd (ASX: DGL), has only around six weeks of stock left.
Australia will get a new supply of AdBlue from Indonesia and has approached several Middle Eastern countries to source urea, AdBlue's principal ingredient.
However, the disruption to shipping lines caused by the global pandemic is complicating the picture. Even if Australia can find supply, it may take a while before it gets to our shores.
What is AdBlue and urea?
China, one of the top five largest exporters of urea, has effectively stopped its export to control surging domestic prices.
AdBlue is made by mixing organic compound urea and deionised water. It is essential to cut harmful emissions from diesel engines as it converts nitrogen oxides into nitrogen and water.
The chemical is contained in a separate tank on diesel vehicles. Motorists can fill up on AdBlue at petrol stations like those run by Ampol Ltd (ASX: ALD) and Viva Energy Group Ltd (ASX: VEA). This, of course, assumes that you can find stock as petrol stations are also struggling to find supply.
Other impacts that ASX investors should be wary of
Urea is also used as fertiliser and shortages can impact food security. This is why China is so keen on keeping as much of it as it can to put downward pressure on prices.
At this stage, no one is thinking of the impact on food prices as the AdBlue emergency is stealing the limelight. But perhaps we could soon start hearing about this, especially as inflation fears continue to grip markets — unless demand and supply are brought back into balance.
Experts blame soft commodity prices for the larger than expected demand for urea. Farmers around the world are planting crops to capitalise on higher agricultural prices.
It seems Australia isn't the only country scrambling to find alternative supplies either. This means the price of urea is likely to stay elevated for longer, even though there are alternative fertilisers that farmers could use.
