DEF and Urea Shortage Is Another Casualty of Supply Chain Crisis

Mohit Oberoi, CFA - Author

May 25 2022, Published 9:10 a.m. ET

Shortages of industrial and daily use grocery products have become a part of life amid the global supply chain crisis. Urea and DEF (diesel exhaust fluid) have also joined the list of products many are finding hard to buy. Why is there a shortage of DEF and urea?

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While urea is used for fertilizers, DEF is used in diesel vehicles. DEF is used to break harmful emissions from diesel vehicles and is used in SCR (Selective Catalytic Reduction) system. DEF is stored separately and isn't mixed with diesel. The DEF tank usually has a blue filer cap and DEF is also marketed as AdBlue.

Urea is used in DEF production.

Urea accounts for almost a third of the DEF solution, while the remaining two-thirds is de-ionized water. DEF is used in diesel vehicles that were produced after 2010. A vehicle’s DEF usage depends on its mileage and the number of miles driven.

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The urea shortage is a global issue.

There's a global shortage of urea. While the ongoing supply chain issues are also to blame for the urea shortage, the situation got worse after Russia invaded Ukraine. Russia is a major fertilizer exporter and the country has banned fertilizer and urea exports.

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China, which is also among the major urea exporters, has put restrictions on exports. Urea prices have surged over the last year, which is leading to high fertilizer prices. To ensure the domestic supply of fertilizers at a time when there are real risks of a global fuel shortage, countries have been looking to curb exports and prioritize domestic consumption. Natural gas is the key raw material in urea production.

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The shortage and soaring energy prices have increased the cost of production. China, which faced a severe power shortage, had to ration power supplies among different industries. This impacted production of several goods including urea.

Why is there a DEF shortage?

Since urea is a key input for DEF, the shortage is having a negative impact on the DEF supply. Also, Europe, which is among the major DEF exporters to the U.S., is battling higher prices and natural gas shortages.

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Rising fertilizer prices could impact food inflation.

The rising prices of fertilizers including urea could mean that global food inflation might continue to run at elevated levels. Policymakers across the world have been worried about an impending food crisis. The shortages are no longer about some of the packaged food products, but even some staples have been in short supply.

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The Russia-Ukraine war has led to a global shortage of wheat. India was expected to make up for at least some of the shortfalls, but the country had to limit exports because its wheat crop yield is expected to fall in 2022 due to unusually hot weather. The country is also restricting sugar exports to tame spiraling inflation at home.

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The AdBlue shortage has a global impact.

Coming back to the AdBlue shortage, many users on social media have vented their anger on how it isn't as widely available as they were used to. The shortage has also been reported in countries like Australia that have mandated DEF.

According to Discover DEF, “If the truck is allowed to run out of DEF the engine's power is reduced, a solid red warning will be displayed and the vehicle speed will be limited to 5 mph until the DEF tank is refilled.” If the DEF shortage gets worse, it could ground commercial fleets since they mainly run on diesel.


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