Supply holding down DEF prices

An ever-expanding supply base of diesel exhaust fluid or “DEF” is continuing to help prices inch lower in the U.S., while the opposite seems to be occurring in Canada, according to data tracked by global consulting firm Integer Research.

According to Integer’s figures, the average U.S. price of DEF at the pump fell by a penny to $2.75/gal. between December and January, after gaining three cents in each of the previous two months. That may be due in part to the addition of 49 locations between December and January that provide DEF to commercial vehicles, bringing the total number of locations offering bulk DEF at the pump in North America to 396 as of Jan. 27.

“It’s worth noting that while Pilot Flying J and Love’s Travel Stops dominate the DEF pump network in terms of location numbers, an increasing number of independent or smaller operators are adding the facility,” Chris Goodfellow, emissions analyst at Integer, told Fleet Owner – adding that Love’s Travel Stops recently confirmed plans to offer DEF at all of its locations by the end of 2012.

“The price movement at the pump is more reflective of the production costs than the number of pumps in operation, although localized competition does play a factor on a state-by-state basis,” he pointed out. Goodfellow noted that Integer tracked a “softening” in urea pricing last December, which would have lowered DEF production costs.

“It’s possible that in some instances DEF manufacturers have passed this on to the truckstop chains,” Goodfellow added, pointing out that suppliers are making  more capital investments in both the production and logistics network for DEF – including Blue Sky East, which recently announced it would open three new plants this year.

He noted that DEF tote refill prices fell in four of the five major U.S. metropolitan statistical areas or “MSAs” as well (specifically Los Angeles, New York, Cincinnati, and Chicago) with tote refill costs only increasing in Houston. Meanwhile, the price of LTL bulk deliveries of DEF (1,000-4,000 gals.) fell in all five U.S. MSAs, Integer’s numbers indicated.

Goodfellow stressed that while U.S. DEF consumption hasn’t yet reached a level where it could impact urea supply to the agricultural industry or urea pricing, DEF manufacturers are affected by urea price movements and this in turn will affect end users to some extent – particularly around bulk supply.

“These price movements can be caused by a wide range of factors, but agricultural demand plays a big role,” he said.

There was no change in the Canadian DEF pump price, which remained at 80 cents Canadian per liter between December and January – which roughly equates to $3.16/gal. in U.S. dollars – there are only four truck stops offering DEF at the pump, all operated by Pilot Flying J.

“The situation in Canada is slightly different because only Pilot Flying J offers bulk DEF at the pump and it has not changed its price since it opened the first location in October last year,” Goodfellow explained. “However, DEF suppliers are actively involved in discussions with other truck stop operators and we expect additional chains to add bulk DEF pumps during 2012.”

DEF is a liquid solution comprised of 67.5% de-ionized water and 32.5% urea, an ammonia compound, critical to the proper function of selective catalytic reduction (SCR) systems designed to reduce emissions of oxides of nitrogen (NOx) from a truck’s exhaust stream. DEF is sprayed into an SCR-equipped truck’s exhaust stream where it combines with a catalyst to break down NOx into nitrogen and water. Without DEF, then, SCR systems can’t reduce NOx emissions.

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