DEF market starting out lower than expected

Arlington, Va.-Industry participants are lowering their expectations for the 2010 diesel exhaust fluid market, which was pegged for starters as high as 60 million gallons, because of the impact of the recession and the uncertainty of truck owners. “DEF demand might hit 30 million or 40 million gallons in 2010,” predicted Dan Gilligan, president of the Petroleum Marketers Association of America. “If trucking companies advance-order the 2009 models without SCR – we’ve seen from past behavior they are leery of new technology and try to buy up existing inventory – the demand may be delayed until 2011.” Others in the industry agree. Rich Moskowitz, vice president of the American Trucking Association, cautioned that the new truck numbers for 2009 were down significantly and there hasn’t been a significant pre-buy in anticipation of the new 2010 engines and their associated price premiums. “But even in a bad year, 90,000 trucks will be purchased,” Moskowitz offered. “There will be demand for DEF, though maybe not as robust as initially estimated.” He added that the 2010 trucks with SCR, which sell at a $9,000 premium, promise more fuel efficiency, which may increase demand, since the fuel savings could help recoup that investment over time, depending on the price of DEF and diesel fuel and the number of miles traveled. Airgas, with its AiRx DEF handled through its specialty products division, is also expecting that the DEF market will be substantially smaller than projected by the Engine Manufacturers Assn. last year “We expect DEF demand to mirror recovery in the transportation industry, which continues to operate at below-normal volumes,” stated Jodi Crawford, Airgas DEF business development manager. “Industry analysts predict recovery in this segment to begin in mid-2010 with no substantial growth until 2011-2012.” Still, Crawford noted, early adopters of SCR technology soon will begin accepting delivery of SCR engines, signifying the beginning of this emerging market. Airgas currently has trailers dedicated to DEF transportation and is growing the infrastructure to supply the market. “We are making progress in rolling out our DEF infrastructure in three ways: expanding our warehouse network for packaged product, adding bulk storage capability to our national footprint, and supplying our own fleet with DEF,” she reported. Airgas declined to name its DEF suppliers.