The Managing Director of Formula Chemicals in Sydney where he operates his own in-house fleet of dangerous goods vehicles, Leigh Smart, is also a chemist and sits on the Policy Council.
A former Chairman of Road Freight NSW, he was the winner of the ATA Outstanding Contribution to the Australian Trucking Industry Award in 2019. He is regarded by many in the industry to be an expert on the transportation and manufacture of dangerous goods.
Prime Mover: Is there much difference between agricultural urea and Diesel Emission Fluid (DEF) or AdBlue?
Leigh Smart: There are different grades of chemicals which are basically normal, technical and pharmaceutical grades. The issue with DEF is that manufacturers such as Incitec Pivot Limited (IPL) mainly make agricultural grade urea to go to farms so it’s not of the quality standard required by trucks. The urea used for AdBlue requires stricter manufacturing controls. Agricultural urea is a fairly basic chemical made without a lot of quality control and it can have everything in it from bits of pallet and bits of gravel, most of which doesn’t matter because it’s destined to be spread on the ground. To achieve the technical grade required by DEF there is a challenge to prevent cross contamination between the different types of fertiliser manufactured at the one site and that requires things like dedicated front end loaders, forklifts and trucks because we can’t have contamination of the DEF grade product.
PM: What about water, the other ingredient of DEF?
LS: You can’t just use tap water because it likely contains heavy metals. The sensitive truck AdBlue systems will pick up contaminants which can block injectors or doser pumps and lead to expensive repairs. So the water has to be processed to ensure quality, usually by a process known as reverse osmosis. A problem with DEF is it crystalises if the urea comes out of solution and it can set like concrete. Even if the system is flushed with water there may be still the need to remap the Engine Control Unit.
PM: What sort of implications are there in simply not using AdBlue during this shortage?
LS: We can’t just say we’ll ignore Euro 6 emissions in Australia for a couple of months because we’re short of AdBlue. The trucks’ AdBlue systems can’t be just switched off. It’s not just about volume but concentration as well. The typical ratio of DEF is 32 per cent urea and 68 per cent purified water and a truck’s AdBlue system works on a specific concentration, so if you dilute it 50 per cent you’ll use twice as much.
PM: Given the quality control requirements AdBlue seems straightforward to make but is the market in Australia large enough to justify manufacturing it locally?
LS: It would be nice to have a local manufacturer and not rely upon overseas supply. It’s similar to the fuel situation where we rely on imports. DEF is not hard to make with just the two ingredients being urea and water and it can’t be stuffed up as long as the ingredients are the right grade. Agricultural grade urea is manufactured here in Australia so it’s just another phase to take it from ‘ag’ grade to a DEF grade. The manufacturing plants that are here probably have that capability if the people who own them are willing to spend the money. IPL are spending a lot of money on their plants to make a ‘green’ type of ammonia to use as fertiliser as they want to move away from the old style urea. That will affect the market here when it comes to urea for DEF manufacture. If IPL walk away who’s going to do it?
PM: The Federal Government recently awarded a $29.4 million subsidy to IPL to keep the Gibson Island factory operating until the end of 2022. Does this alleviate the situation?
LS: Almost $30 million for a 12 months’ supply of urea just doesn’t make sense. Why are we giving it to a $6.2 billion company which only supplies around ten per cent of the local market? It’s disappointing because they have indicated the plant at Gibson Island is going to close anyway.
PM: Do you think the government grant will lead to a long-term solution?
LS: Not by doing this. AdBlue is just as essential as diesel to keep trucks on the road. When IPL leave the market in December 2022, we will no longer have an Australian manufacturer of DEF grade urea. Who will then be responsible to manufacture AdBlue and supply enough product in Australia to meet market demands? PM: Do you think the Department of Industry’s $319,000 supply and demand analysis report from McKinsey Consulting will reveal anything new? LS: The Department is still considering allowing operators to use their vehicles without AdBlue, yet the truck manufacturers have already blasted the idea last year. They need to talk with industry and regulators such as the NHVR.
PM: In late December 2021 the Minister for Trade, Dan Tehan, announced he had a significant amount of refined urea coming in from Indonesia. Will that address the short-term shortage?
LS: It was confirmed the Indonesian government was to provide 5,000 tonnes of refined urea in January but how do we turn that into AdBlue unless it goes to another manufacturer?
PM: Are the government’s celebrations premature and should the government be doing more than just reassuring the industry that everything will be OK?
LS: Late in 2021 they formed the AdBlue Task Force with the former CEO of IPL, the former Chairman and CEO of DOW Chemical, and Australia’s Chief Scientist. DOW has never made AdBlue or urea in Australia.
PM: What needs to happen?
LS: The government says it’s all solved but it’s not all solved at all. DEF supply also affects the agricultural industry so when it comes into the seasons where they’ve got to harvest cotton or grain if there’s no AdBlue for the harvesters we’ve got problems. The only way we are going to solve this is to have a long-term local manufacturer and not rely on urea supplies from China. Even if Indonesia is willing to do a deal to supply the right grade of urea we should still have local manufacture. Around 80 per cent of transport operators have ten trucks or less and don’t have the buying power of the majors. If not enough AdBlue is available an operator with three trucks may have to park one. There’s 30 per cent of his business gone but he still has to pay lease payments, registration and the driver. It’s not just COVID affecting supply chains, it’s the shortage of AdBlue as well. The final delivery stages of Rapid Antigen Tests are not delivered on B-doubles, it’s done by light trucks and courier vans which also need AdBlue. Australia needs to start having a conversation about sovereign risk to our supply chain and what we cannot do without as a nation.