According to industry sources, Integer Research, in August 2008:
- • Diesel Exhaust Fluid (AdBlue in Europe) prices have increased by a modest amount in Europe during 2008:
- – AdBlue prices delivered to customer yards in different formats increased by about
$0.30-$0.50 per gallon, or 15-30%, during 2008 to June. There were no increases during 2007.
- – AdBlue prices at retail pumps at truck stops have increased by a smaller amount, around 5-10%. Retails pumps are an increasingly important supply choice for customers in Europe.
- – Customers in Europe have seen these increases as normal market adjustments given rising energy and commodity costs.
- • A key raw material component of Diesel Exhaust Fluid is urea (Diesel Exhaust Fluid is a 32.5% solution of chemically pure urea in deionized water).
- • Urea prices are driven by global supply and demand, and tend to be volatile. International (and U.S.) urea prices increased by about 160% between July 2007 and July 2008.
- • Urea prices are not the same as AdBlue/Diesel Exhaust Fluid prices. Urea is only one component of the cost of Diesel Exhaust Fluid/AdBlue. The other major cost is storage and distribution. In Europe, AdBlue customers have been protected from the volatility of urea prices by suppliers that have taken a long-term view of the market. We expect to see the same situation in the U.S.
- • There is ample supply of urea in North America to meet the requirements of the Diesel Exhaust Fluid market. Production of urea in North America was 12 million tons in 2007 and imports were 5.8 million tons. World production of urea in 2007 was 159 million tons.
- • Only a minute percentage of urea (2% of the world supply) will be used in on-road applications, thus having minimal impact on pricing .
- • Markets for AdBlue/Diesel Exhaust Fluid around the world are still in early development phases. Integer estimates that world consumption of urea in AdBlue/Diesel Exhaust Fluid in 2007 was less than 0.1% of world urea production. The European market is most developed but is still in the early growth stage.
- • It is therefore clear that AdBlue/Diesel Exhaust Fluid demand has played almost no role in the large increases in international urea prices in recent years. Urea prices have been driven by developments in agriculture, and particularly surging grains prices.
- • Even at market maturity in more than a decade, consumption of urea in Diesel Exhaust Fluid/AdBlue for all diesel vehicles (on-road cars and trucks, off-road vehicles) in developed countries will account for no more than 5% of world urea production. For example, projections indicate that urea used in AdBlue/Diesel Exhaust Fluid for on-road commercial vehicles in Europe, the USA, Canada, Japan, Korea and other smaller developed countries is unlikely to exceed 4-5 million tons per year (or about 2% of world urea production) in 2020. Note: the assumptions made to reach this figure are complex; please contact Integer Research directly for more information.
- • In Europe, total apparent consumption of urea in 2007 was about 12.3 million tons. AdBlue consumption in Europe accounted for about 1% of this total. According to Integer's base-case SCR forecast for Europe, AdBlue consumption for commercial on-road vehicles will reach about 4.4 million tons of AdBlue in 2015 (1.4 million tons of urea).
- • The use of SCR and AdBlue/Diesel Exhaust Fluid in developing countries such as China and India have substantial but uncertain potential - but large-scale AdBlue/Diesel Exhaust Fluid demand is many years away and these countries have substantial urea production assets.
- • AdBlue/Diesel Exhaust Fluid prices are independent of prices for diesel fuel and depend on different market forces. Diesel prices in Europe today in U.S. units are about $7.00-$8.00 per gallon.
- • The relationship between diesel prices and AdBlue/Diesel Exhaust Fluid prices is critical. In June 2008, European AdBlue prices (at fleet yard) were about 30% of the price of diesel, and AdBlue prices at retail pumps were about 50% of the price of diesel. In Europe, diesel prices have increased more quickly than AdBlue prices. For example, average diesel prices in Germany increased 49% between June 2007 and June 2008.
- • If diesel prices increase more quickly than AdBlue/Diesel Exhaust Fluid prices, then the cost advantage to owners of SCR vehicles improves. This has been true in Europe so far:
- • Over 65% of commercial vehicles (more than 4 tons) sold in Europe during H1 2008 used SCR.
- • At current market shares, nearly 80% of all commercial vehicles sold in North America will be SCR in 2010.
- • North American urea producers such as Yara, Terra, Agrium, PotashCorp, CF Industries and others have production facilities with capacity far in excess of Diesel Exhaust Fluid requirements for all vehicle types in all future scenarios. These companies are expected to be committed to providing a reliable supply of Diesel Exhaust Fluid, meeting all the international quality standards.
- • In the view of Integer Research, the use of SCR together with other engine measures such as exhaust gas recirculation (EGR), is the only current feasible technology to meet EPA 2010 and Euro 6 emissions standards at the tailpipe without significant losses in efficiency.
- • Additional capacity is in progress to accommodate growth in cars, trucks and power plant network expansion.
- • Large producers and suppliers are aggressively engaged in creating this infrastructure.
- • Diesel Exhaust Fluid supplies for passenger cars and light-duty trucks will be available through dealerships in late 2008.
NOTE: Short tons rather than metric tons have been used throughout this compilation of facts. Apparent consumption is production plus imports less exports.