DEF Suppliers Prepare for New Market in 2010

October 06, 2009

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There is at least one growth business in transportation these days - the companies that manufacture and distribute diesel exhaust fluid are gearing for uphill as the deadline nears for the Environmental Protection Agency's new emission standard.

Starting next year, most new trucks will need DEF to comply with the standard, and at the recent OPIS Fleet Fueling Conference in Atlanta suppliers were showing their products and explaining what carriers and truckstops need to know.
Also on hand at the event were experts discussing fuel management issues such as purchasing, efficiency and ultra-low sulfur diesel.

The DEF business will grow, but it is not going to be a latter-day Gold Rush. In fact, the general sentiment among suppliers and distributors at the conference was that there are so many unknowns right now that it would be a mistake to do much forecasting.

Given the state of the economy and uncertainty about how many new trucks carriers will buy next year, it is not clear how quickly demand for DEF will grow.

It will take another five years at least before most trucks are using DEF, said John Lounsbury, director of marketing for Terra Environmental Technologies, one of the world's largest manufacturers of DEF.

That relatively slow rate of growth will dictate the basic economic decisions of the business: the cost per gallon of DEF, the method of distribution and details of purchasing and dispensing, said Lounsbury and others.

The cost of DEF begins with production - it's made from natural gas, from which ammonia is synthesized, converted to urea and mixed with ultra pure water. This element of the cost depends on the price of natural gas, processing expenses and the market for other uses of urea, such as fertilizer.

Another DEF supplier, Chad Dombroski of Air1, cautioned carriers and distributors not to take the production process lightly. DEF cannot be made from plain old urea, he said. It requires a higher grade of urea than is used for fertilizer or emissions control in smokestacks, which in turns requires a significant investment in processing capability.

Lounsbury noted, for example, that Terra Environmental Technologies has spent $100 million developing control systems to make DEF for the European market.

Dombroski also said that while high-quality DEF can be made by dissolving dry urea, one should not think that this is an easy thing to do. "Blending is an exact process, and setting up your own dissolving plant can be relatively costly," he said.

Purity is key. Poor quality DEF, or DEF that has been mishandled, can introduce impurities that will clog filters and possibly lead to a reduction of engine power.

Lounsbury suggested that distributors, including truckstops, and end users check for American Petroleum Institute Certification as proof that the DEF was made to International Organization for Standardization specs. An API Diesel Exhaust Fluid Certification Mark indicates that the DEF meets ISO and engine manufacturer standards - important for warranty purposes.

"You could be ISO compliant without the certification but OEMs will require certification for warranty," Lounsbury said.

Right now, because DEF volume is low, the cost of distribution exceeds production costs by two or three times, Lounsbury said. He expects that expense to come down as demand grows.

Initially, distribution will be handled by truck manufacturers, who must sell SCR trucks with a tank full of DEF and ensure that dealers have a supply of DEF on hand. At the same time, truckstops and other fleet fueling facilities are choosing from a variety of distribution and dispensing options, ranging from two-gallon vented bottles to 275-gallon totes to large above-ground tanks that will be refilled by bulk tankers. In the long run, high-volume sites probably will opt for underground storage, but Lounsbury said that could take a while.

To preserve the purity of the DEF, the storage vessel needs to be either high-density polyethylene or stainless steel. Non-ferrous metals and alloys can leach impurities into the fluid.

"It's not what urea does to the equipment, it's what the equipment does to urea," said Steve Childers, general manager of the dispending company Spatco DEF.

Look for more coverage of the OPIS meeting in the next issue of HDT.

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