Yara International ASA sees the diesel exhaust fluid (DEF) market, which is beginning to take hold in the U.S., becoming a new multi-billion dollar business. Rolf Isberg, Yara vice president and the man in charge of this development as head of the North America industrial segment, says that Yara expects this segment of its global nitrogen chemicals business to grow on a global basis from today’s 10 percent to 30 percent of total sales over the next decade, with the U.S. market as a major contributor to achieve that growth.
In an interview with Green Markets, Isberg said he expects the two main suppliers in the U.S. to be Yara and Terra Industries Inc., with their respective distribution partners. “Yara has chosen to team up with Mansfield Oil, the largest independent fuel distributor in U.S., with sales and distribution in 49 states and more than $5 billion in revenue. In addition, we also expect competition from a number of smaller distributors like Airgas and Old World Industries. All suppliers have to be certified by the American Petroleum Institute (API). In Europe you have two Pan-European suppliers – Yara with the Air1 concept, and Greenchem. In addition, you have a few more regional suppliers tied up to a single source. Yara is the largest and leading supplier in Europe, with sales in more than 30 European countries.”
In the U.S., he said Yara is currently establishing a nationwide supply concept where it can rely on multiple sources. “LSB out of Cherokee, Ala., is one of our sources. In addition to LSB, we produce and make DEF available at Yara’s own facilities in [the] U.S. and Canada. When the DEF market matures, our experience from other markets clearly shows that a multi-sourcing concept with strong back up solutions will provide customer value and guarantee of supply.
“We are currently negotiating with a number of large fleets and truck stop chains to make our Air1 DEF available to customers and retailers from January 2010,” Isberg continued. “We cannot at this time disclose any names since contracts are not finally signed. As to the rest – the market is about to begin, there are truck inventories to sell, so the first SCR trucks will be on the road in a few months once current inventories are depleted. Fleet owners are starting to look into who will be their supplier. In the beginning, this will only concern a few trucks in their fleet. But obviously, it will become more and more part of their daily routine as time goes by. Most fleets will make the choice of SCR technology as this is the only technology that allows them to meet the requirements of the Clean Air Act, but also brings them fuel efficiency and has a positive impact on their operational costs.
“From Jan 1, 2010, DEF will be available at thousands of locations around the nation,” said Isberg. “Most of the truck OEM’s dealerships, the major truck stop chains like Pilot, Love’s, Flying J, and TA, will have product available from the shelf. In addition, a large number of oil distributors will have product available for delivery to consumers. In the beginning, you will see mostly small packaging, but bulk distribution and bulk dispensers will slowly take over the market in the years to come. According to Integer Research’s quarterly AdBlue and DEF Monitor, U.S. highway consumption of the fluid may grow to 91.1 million gallons (345 million liters) in 2011 and to 160.1 million gallons in 2012 from about 21.6 million gallons next year. In Europe, where it’s called AdBlue, consumption is expected at about 320 million gallons in 2010, according to the London-based researcher. The European market started in 2006.”
As for the pricing of DEF, Isberg said he expects it to be less expensive than diesel fuel. “The final price for customers will also to a large extent depend on where he is located and how large of volumes he will source. Customers should expect that DEF will be more and more cost competitive as infrastructure for distribution and sales are increasing going forward.”
Isberg would not disclose expected sales volumes. “But as I have said before, this market will all start on Jan. 1 and the new DEF industry will be a multibillion-dollar business. Our ambition is to build a few hundred million dollars revenue per year.”
Yara expects to serve the U.S. market both from domestic production and imports. “We are building a flexible supply model so we are able to supply the market at all times,” said Isberg. “This will include imports. All the more, the location of the domestic urea production plants does not match the consumption areas of DEF. We strongly believe our large-scale terminal concept on the East and West Coast will be a very competitive add-on to domestic production. The U.S. market is short on urea and imports are needed to balance the market. Yara is very well positioned and located to capture this growth. Yara has three plants in Europe – Italy, Germany, and Netherlands. Our Sluiskil plant is the largest DEF producing site in the world. Part of this production will be used to supply the U.S. market via the terminals we also use for our fertilizer activities.”
Asked about Yara’s presence in the U.S. SCR market for utilities, Isberg said the company currently supplies American Electric Power (AEP), the largest customer in the U.S. with urea for NOx abatement. “We have the expertise from our European and Asian operations for DeNOx applications towards the stationary market,” he said. “At the moment, we are concentrating on the DEF market for on- and off- road vehicles. We are also positioning ourselves on the maritime segment, which will be needing DeNOx as the U.S. and Canada have applied to the International Maritime Organization