The DEF Shortage Debate – As Prices Rise will the DEF Supply Remain Steady

There was much talk at the start of 2022 of an impending worldwide DEF shortage that has the potential to severely add to the challenges already facing today's supply chain. So with that said, is a def shortage coming?

What is Diesel Exhaust Fluid (DEF) and How Can It Impact the US Supply Chain?

For the uninitiated, DEF is a mixture of urea (a concentrated mixture of hydrocarbon) and water that is injected into a vehicle's exhaust stream. DEF helps neutralize the nitrous oxide emissions produced by diesel engines by capturing excess fumes. Besides reducing harmful emissions, it also lowers the operating temperature of diesel engines and increases their efficiency.

Diesel exhaust fluid is a critical component of every fuel program, so even regional outages can negatively impact the US trucking industry and supply chain as a whole. But a massive, global DEF shortage has the potential to bring the trucking industry to its knees.

Why Has the Price of DEF Been on the Rise?

While concerns over a shortage of DEF began in 2022, DEF prices began to skyrocket in September 2021. The main reason for the steady price hikes is primarily due to the rising cost of urea, an essential component of DEF fluid.

Urea is created from ammonia, a primary ingredient in fertilizer, and as demand for fertilizer and DEF fluid increases, urea prices also rise. Generally speaking, the cost of urea trends in the $200-$300 range per ton. However, in the third and fourth quarters of 2021, urea prices climbed to a staggering $600/ton.

• Post-pandemic recovery: As the country continues to recover from the pandemic, commodity prices continue to rise across the board. This has driven up the demand and cost of fertilizer, dramatically impacting urea's price.
• China and Russia: While China, another critical urea supplier, has restricted its urea exports, the US has cut off Russian imports due to its ongoing war with Ukraine.
• Europe's energy crisis: Europe is a significant producer of DEF, supplying the US with approximately 10% of its DEF. As they continue to face an energy crisis with skyrocketing natural gas prices, the European supply of DEF will continue to be restricted.

DEF Supply Issues and the Rail Shipping Crisis of 2022

While DEF prices were rising in 2021, the primary factor in creating concern over looming DEF scarcity in 2022 was partly due to railroad staff shortages and reductions in private railcar shipments.

Concerns really started to mount when Shameek Konar, CEO of the largest truck stop operator in the US, Pilot Flying J, was instructed by Union Pacific to reduce deliveries by 26-50% or face a shipment embargo.

During a Surface Transportation Board hearing, Konar stated,

"Of the 300-plus million gallons of DEF Pilot supplies to the industry every year, 74 percent is moved via rail. Union Pacific's restrictions will keep Pilot from keeping many markets adequately supplied with DEF, likely causing shortages that will sideline trucks and reduce trucking capacity. A single railcar carries 21,500 gallons of DEF on average. A single truck generally takes in seven gallons of DEF every time they fill. That implies that a single railcar is basically providing 3,000 trucks worth of DEF fills. Every railcar that gets missed in terms of DEF delivery will reduce trucking potential by 5 million miles."

Is There a DEF Shortage in 2022?

DEF prices soared to record highs in November 2021, and several counties, including Australia and Korea, faced shortages at the end of last year. Yet, the global demand for diesel exhaust fluid continued to rise. Even still, the United States remains confident in its domestic DEF supply.

Is there a DEF shortage in the US? While some supply issues were experienced in the US, it has not become a persistent problem, at least for now. In June of 2022,

Tiffany Wlazlowski Neuman, vice president of public affairs for NATSO, a trade organization that represents America's travel plazas and truck stops, stated, "There is not a shortage of DEF." She went on to say, "However, DEF is moved by rail, and the ongoing supply chain issues affect the availability of rail cars – specifically out West – to transport DEF."

Furthermore, many even claim that concerns over DEF shortages in the US were overblown and misleading, sighting a viral Facebook post that circulated in May of 2022, fueling major concerns over DEF shortages. This post has since been debunked as mostly rumors and misinformation. DEF shortage Reddit forums have also been blamed for overhyping urea supply concerns.

Global Demand for DEF Continues to Rise

Diesel Exhaust Fluid has been required in the United States since 2010 for on-road fleets and since 2015 for off-road fleets. In the US, medium and heavy-duty diesel-powered vehicles must have DEF.

While North America is projected to be the largest regional market, the rest of the globe is following suit. It is estimated that by 2027 the worldwide DEF market will reach $50 billion from USD 34.4 billion in 2020.

Governments worldwide have revised and updated emission standards by introducing new legislation for the automotive industry to follow. Western regions, such as North America and Europe, have enacted new laws, such as the Clean Air Act of the United States, which have stricter standards and a broader scope for emissions.

In the Asian region, China and India have also introduced legislation to counteract air pollution that will place a significant demand on the DEF market. The bottom line is that as more countries prioritize the environment, lower emissions, and clean air, the greater the global demand placed on the diesel exhaust fluid market will become.

Is There a Substitute for DEF Fluid?

The short answer is, no. There are currently no substitutes for diesel exhaust fluid, although there are some anecdotal accounts of truckers successfully using windshield wiper fluid or even water when out of diesel exhaust fluid and in a pinch. However, using anything other than actual DEF in your vehicle will void your warranty at best, and cost thousands of dollars in damages at worst. To be safe, it is recommend to have a reserve container of DEF on hand for any unplanned emergency.

How Can You Protect Yourself from Future Diesel Exhaust Fluid Shortage?

While the US may have avoided the much-feared DEF shortages in 2022, DEF markets will likely remain constrained for the near future and beyond. Continued logistics challenges, rising prices, and global unrest are some factors that can severely hamper DEF supply in a region causing the possible diesel exhaust fluid shortage.

With that said, here are 3 ways you can protect yourself from a potential DEF shortage: