Fabricio CardosoLead Analyst, EmissionsInteger Research, Ltd.

The Market Outlook forDiesel Exhaust Fluid

The market outlook for Diesel Exhaust FluidFabricio Cardoso Lead Analyst, Emissions Control

Savannah, Nov 18 - 20, 20142014 Fertilizer Outlook & Technology Conference

Source: 

FROM AIR QUALITY STANDARDS TO DEF

The relationship between air quality, emission standards and DEF

Health Environment

PM HC CO NOx

Air Quality Standards

Emission Standards CO2

Climate Change

Greenhouse gas/Fuel Economy

Standards

Source: IntegerPM – particulate matter, HC – hydrocarbons, CO – carbon monoxide, NOx – nitrogen oxide, CO2 – carbon dioxide

NOx and PM levels have been dramatically reduced since the first standards

Source: Integer, EPA, NHTSA

Demand driver: why ammonia/urea?

The combustion

trade-offInjection timing, Exhaust Gas Recirculation

NOx

High temperatures

SCR & alternativesAmmonia or urea reductant

Particulates / soot

Incomplete combustion

Filters

Expensive maintenance

Several aftertreatment technologies are available to reduce NOx levels

Aftertreatment technologies to reduce NOx levels

Ceramic catalyst

(Vanadium, Iron, Copper)

NO, NO2(NOX) from combustion

AUS 32 (urea solution, 32.5 wt%)DEF

N2, H2O

Selective Catalytic Reduction (SCR)

Exhaust Gas Recirculation

EGRLean NOx Trap

LNT

Selective Catalytic Reduction

SCR

The EPA has regulated heavy-duty diesel engine emissions since its inception in 1970, but GHG and fuel economy requirements have just been introduced

Source: Integer, EPA, NHTSA

1998 2002 2007 2010 2013 2014 2017 2020 2021 2025

Mandatory

Fleet-wide CO2 compliance

Voluntary

Phase 1 Phase 2EPA ‘98 EPA ‘04 EPA ’07 EPA ‘10

OEMs circumvent emission standards, EPA introduces strict test procedures and Not-To-Exceed limits

Truck-makers use EGR technology, fuel efficiency drops

Navistar adopts SCR, last OEM to do so.

SCR used by all but one truck OEM. Navistar uses high-flow EGR and credits.

Fleet-wide fuel economy legislation

NOx limit (g/bhp-hr)4.0 2.0 1.2 0.2

If SCR requires ammonia, why urea?

• Ammonia is technically more suitable for use in every application

• However: storing, transporting, dispensing and using ammonia has challenges due to its pungent smell and safety‐related issues

• Urea is therefore used as an ammonia carrier. It must first be converted back to ammonia before it can be used to destroy NOx

• Other options were considered, including aqueous ammonia and ammonium formate and more recently solidly methods for storing ammonia. None have yet reached commercial acceptance.– Absorbed on a salt matrix: Amminex– As ammonium bicarbonte: Tenneco

Urea fluid standardised globally

• 32.5% urea solution – allows freezing of vehicle tank• Names: AdBlue / Diesel Exhaust Fluid (DEF) / ARLA‐32 

• ISO 22241 standard defines the quality requirements– biuret and formaldehyde limits mean that fertilizer urea cannot be used– water must be de‐ionised

• This standard was originally defined by truck industry in discussion with catalyst suppliers and urea producers, then adopted by non‐road equipment and car manufacturers.

• 40% urea solution for marine applications because tank freezing is not an issue

VEHICLE, SCR AND DEF FORECAST

While the majority of commercial vehicles in North America are equipped with a diesel engine, the share of diesel passenger cars and light-duty vehicles is still small compared to other regions

98.6%

95.7%

93.0% 7.0%

8.31.4%

8.94.3%

0.4 million vehiclesMDV/HDV

LDV

PC

diesel non-diesel

Source: Integer, WardsAuto, ACT

Million vehicles

The commercial vehicle SCR fleet is expected to be six times bigger in 2025 compared to 2013

Source: Integer

7 50

30

0

40

0

2

1

320

6

5

4

10

20252020

6.1

2024202320222021

3.8

201920182017201620152014

1.4

2013

1.0

Class 4-7 fleetClass 8 fleet

Million vehicles %

More than 11 million passenger cars and light-duty vehicles are forecast to be on the road in North America by 2025

Source: Integer

million vehicles

6.0

7.5

0.0

3.0

1.5

12.0

4.5

10.5

9.0

20212019

6.6

2023 20242017 20252018 202220202013

11.9

2014

1.4

2016

2.0

2015

SCR-equipped passenger carsSCR-equipped light-duty vehicles

Our base-case scenario shows DEF consumption is expected to reach 1 billion gallons in North America by 2019

billion gallons of DEF

Source: Integer Research

3.0

1.5

0.5

1.0

0.5

2.0

0.00.0

2.5

1.5

1.0

2.0

2014

0.36

2013

0.23

2025

1.86

20242023202220212020

1.22

20192018201720162015

HDOff-highway

MDUREAPC

LD

Million tons of urea

DEF MARKET, CURRENT AND OUTLOOK

DEF logistics: It’s all about the water

• 67.5% of AdBlue/DEF is water• Supply chain options account for transport optimisation:

• End-user prices reflect supply chain requirements

About 65% of total DEF consumption in 2013 originated from domestic urea production

Solutionizing & dilution plants13%

DEF imports

23%

64% Domestic urea production

DEF production from urea plants in North America totalled 147 million gallons in 2013

Truck fleets

Truck stops

OEM dealers

Gas stations

Retailers

Domestic urea

production

Urea imports

Solutionizing& dilution

DEF import terminals

DEF distributors

DEF Concentrated urea solution Prilled urea AUS50

Key:

26 million gallons7 ktons

147 million gallons

29 million gallons

13 ktons

54 million gallons

230 million gallons

Midwest, Gulf Coast and Canada have the highest shares of DEF coming from domestic urea plants

21%

58%

87%

69%59%

35%

74%64%

46%

45%

19%

13%

22% 41%

38%

17%

23%54%

34%23%

10%

27%

9% 13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

North America

Canada

PADD 5 (West Coast)

PADD 4 (Rocky

Mountains)

PADD 3 (Guld Coast)

PADD 2 (Midwest

)

PADD 1C

(Lower Atlantic)

PADD 1B

(Central Atlantic)

PADD 1A (New

England)

DEF Imports Domestic urea productionSolutionizing & dilution plants

What to expect for 2020?

• Urea plants coming online – domestic DEF production will remain strong

• More efficient logistics – urea plants producing more concentrate solution and distributing to solutionizing & dilution plants across the country and closer to the main consumption markets

• Prilled urea imports – likely to maintain an important growth, specially in California, where the gap between supply and demand will increase

Thank you!Fabricio.cardoso@integer-research.com

www.integer-research.com

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