By Will Talbot, Analyst at Integer Research, An Argus Media Company
The past year has been one of contrasts for the global automotive-grade urea (AGU) markets. The introduction of tighter emissions standards in key developing markets has strongly contributed to AGU consumption growth in those regions, whereas in Europe and North America, greater pressure on diesel engines has intensified uncertainty about the future of AdBlue/DEF.
We estimate global AGU demand grew to 3.3 million tonnes in 2018, up by 24% compared to 2017. This is not a case of rising demand in developing markets propping up decline in established ones: in absolute terms, consumption growth was driven by Europe and North America, where volumes in 2018 rose by around 15% year-on-year. The reason for this is that new heavy-duty trucks remain almost entirely powered by diesel, and stringent NOx limits in Europe and North America mean nearly all of them are equipped with SCR.
Growth has also been noted in major maturing markets, where the introduction of emission standards driving the use of SCR was more recent than in Europe or North America. AGU demand in India and China has risen at steep rates this year, and the upcoming Euro VI-equivalent standards planned for 2020/2021 in both countries will expand the number of truck models with SCR. We forecast that AGU demand will soar to 650,000 tonnes in India and 1.8 million tonnes in China by 2028.
But challenges regarding the future of diesel engines became more evident last year. In Europe, a phase-out of diesel light vehicles by 2040 is still on the table, and the ambitious CO2 targets for trucks recently voted by the European Parliament will push manufacturers to invest in hybrid and electric models. In North America, ultra-low NOx?
Standards for commercial vehicles, in the pipeline for California in 2024 and at a federal level in 2027 will also encourage electrification in the on-road sector, or at least the use of alternative NOx abatement technologies that would reduce DEF consumption compared to today’s trucks.
These upcoming standards conflict with current technologies and customer preferences. Efforts to electrify the fleet have not yet been commercially viable and switching to gasoline has only been successful for lighter trucks. As a result, we expect long-haul trucks to remain diesel-powered and relying on AdBlue/DEF for the foreseeable future.
Other markets – several Asia Pacific and Latin American countries, Russia, Turkey – also had increases in AGU consumption in 2018. The market is now truly global, with changes in AGU trade having repercussions around the world. This was evident throughout the year, but particularly in Q4. Chinese urea prices had risen sharply in Q4 2017 – Q1 2018 and remained high throughout the year. Urea production has also been severely limited in Brazil during 2018, with the country now dependent on imports, with most AGU coming from Russia.
With such changeable markets, rigorous and thorough analysis is crucial, as is access to the most up-to-date information. Therefore, we update our Global Automotive Grade Urea Forecast Service quarterly. This report informs the reader about AGU supply, demand, trade and pricing to reflect the consequences these dynamics have on the production of AGU and AUS 32 worldwide. Subscribers gain invaluable insights into the competitive landscape and can put the report to practical use to find alternative sources of high quality AGU at lower prices. To see a typical table of contents from the report, click here
If you have any questions about the global AGU market, or to find out more about The Global Automotive Grade Urea Forecast Service, email firstname.lastname@example.org and a member of the team will be in touch.
More background on AGU…
OEMs have been using Selective Catalytic Reduction (SCR) aftertreatment systems to meet NOx standards since the implementation of Euro IV in Europe and EPA 2010 in North America. Over the years, more and more countries have enforced emissions standards stringent enough to require the use of SCR systems, so it comes as no surprise that global SCR sales are expected to rise over the next ten years.
SCR technology requires AUS 32 to operate and therefore the demand for AUS 32 rises as SCR adoption becomes more widespread. Also known as AdBlue®, DEF or ARLA 32 – AUS 32 is an aqueous solution that is produced by mixing automotive grade urea (AGU) and deionized water to a urea concentration of 32.5wt%. It’s a high-quality urea solution defined by ISO 22241-1.
As more AUS 32 is required in line with increased SCR use, the spotlight lands firmly on the AGU market, the production of which is relied upon to meet rising AUS 32 demand.