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ONLINE SPECIAL: Early spring increases urea demand, drives up DEF prices

TORONTO, Ont. -- April showers bring…higher diesel exhaust fluid (DEF) prices? An early end to winter across much of North America has driven up agricultural demand for urea – the key ingredient in DEF – and in many cases has...

This chart, provided by Integer Research, shows the correlation between urea and DEF prices. Pricing is displayed in short ton (ston).
This chart, provided by Integer Research, shows the correlation between urea and DEF prices. Pricing is displayed in short ton (ston).

TORONTO, Ont. — April showers bring…higher diesel exhaust fluid (DEF) prices? An early end to winter across much of North America has driven up agricultural demand for urea – the key ingredient in DEF – and in many cases has translated into higher DEF prices.

“An early planting season in some areas of North America has really put a strain on urea suppliers and therefore has pushed prices up quite considerably,” said Monica Bianchi Baker, senior analyst with Integer Research, which through its DEF Tracker Web site ( monitors the fluid’s prices around the world. “The fertilizer business is a highly seasonal business, but the season came earlier than planned so the upward pressure on urea pricing has been very strong.”

About 88% of the urea produced globally is used as fertilizer, with the remaining 12% divided among industrial uses including the production of DEF. Only high-grade urea can be used in the production of DEF, which means not all urea suppliers can meet the demands of DEF producers.

Industrial urea consumers typically take into account the agricultural demand cycles for urea when sourcing product but those expectations went out the window with this spring’s early planting season.

“Normally, industrial users look at the seasonality of the agricultural industry to understand where they could see some pressure on prices during the year, but this year because there’s been a mild end to the winter and an early planting season, the pressure on urea itself has been quite exceptional,” Bianchi Baker explained. “From February onwards we’ve seen prices escalating.”

That hasn’t gone unnoticed by fleets that consume large amounts of the fluid. Rob Penner, executive vice-president and chief operating officer with Bison Transport, said his company is keeping a close eye on the cost of urea and DEF.

“We’re certainly seeing that urea prices have skyrocketed,” Penner told “DEF has lagged a bit but we’re starting to see that come up pretty aggressively to the tune of 10 cents per litre. Given DEF is 2-3% of our actual fuel consumption, it’s certainly significant to see that cost rise so fast.”

Prices appear to be softening now, but Bianchi Baker said another high-demand period is about to begin and so any pricing relief could be short-lived.

“The next planting season in some parts of the US will get underway soon, so we don’t expect prices to crash,” she said.

The fierce competition for urea has translated into higher prices and in turn, has affected DEF prices in the US and Canada, Bianchi Baker explained. Urea makes up 32.5% of diesel exhaust fluid.

“What we have noticed is that in April and May, DEF suppliers have tabled some pretty hefty price increases, which to our knowledge have filtered through to the end users,” she said.

Chris Goodfellow, emissions analyst with Integer Research and editor of DEF News, said price increases generally ranged from 15 to 21 cents per gallon but in Canada, he said, the cost increases were “slightly lower” and with “less uniformity” than in the US.

Bulk DEF prices at US truck stops “at the pump” increased seven cents a gallon between April and May to $2.81, or 73 cents a litre. That’s still seven cents per litre less than the average cost “at the pump” in Canada, Goodfellow pointed out. In the States, there are more than 400 truck stops offering bulk DEF while in Canada there are only five locations – all of them in Ontario and Quebec – with an average price of 80 cents per litre, which has remained unchanged through the spring. By comparison, DEF deliveries to fleets via 1,000-litre totes averaged 65 cents per litre in May while packaged products cost about $2.21 per litre, Goodfellow noted.

“Buying in bulk does offer significant savings,” he said. “A lot of the fleets in Canada at the moment are using the tote solution.”

Carriers looking to protect themselves from pricing volatility can purchase DEF in bulk and negotiate fixed supply contracts with suppliers. While it’s not practical to purchase DEF only when agricultural demand is at a low point, Goodfellow said “Fleets that require higher volumes of DEF are in a position to negotiate medium- or long-term supply contracts to reduce their per gallon costs. In this case the ability to store and take deliveries of larger quantities of DEF will play a factor, and in some cases suppliers may be willing to assist with capital investments for storage facilities in an effort to secure high-volume business.”

Shelly Hubbard, brand manager for H2Blu with Wakefield Canada, said fleets that purchase in bulk are better protected from price swings.

“They need to buy DEF as efficiently as possible and plan their needs,” she said. “If they can get into a bulk supply situation versus a jug, drum or tote, they’d be in a better position to have the best price. Being able to obtain and then dispense their DEF from a bulk container would be in their best interest.”

Suppliers including H2Blu offer large polytanks with several thousand litres of capacity, which can be dropped at a fleet’s yard and then refilled as needed, she explained. This offers better value than the 1,000-litre totes that have become so popular.

John Lounsbury, director of marketing with Terra Environmental Technologies, suggested fleets may also want to ask where their supplier is sourcing its urea.

“Fleet should structure contracts with a producer that actually makes the urea and demonstrates controlled supply chain integrity from production to the tank of the vehicle,” he advised.

Buying DEF at major truck stops is a last resort for most large fleets.

“There’s a significant difference in price when you buy totes to begin with (compared to truck stops) and the retail market changes a lot faster than wholesale,” Bison’s Penner said. “We buy very little of it on the road.”

He added the company is considering installing storage tanks at all its terminals so it can buy DEF in even greater quantities.

The increased competition for urea may have affected prices, but there has not been a shortage of product available. According to the Web site, at the end of April there were 6,796 retail locations offering packaged DEF, including 635 in Canada.

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