DEF Supply – From Long to Short
Marketers have reported that the Dakota Gasification Company informed them earlier this month about an incident involving the implosion of a million-gallon diesel exhaust fluid (DEF) storage tank at its Beulah, North Dakota, facility. While the definitive cause of the incident is still under investigation, marketers have received information indicating that early assessments point to cold weather as a contributing factor. Fortunately, there were no injuries, and the product in the tank was contained; however, the damage to the tank led to interruptions in DEF production and loading operations.
Given that the Beulah plant accounts for approximately 5% of the total 1.4 billion gallons of DEF consumed in the United States, some DEF marketers expressed immediate concern upon hearing the news.
The incident, coupled with severe weather affecting loading operations at other DEF suppliers’ terminals, shifted the market dynamics from a relatively long to a short position. As a result, those holding supply agreements with Dakota Gasification Company were urgently seeking alternative sources in a market where a significant portion of DEF supply is already committed through contracts.
Marketers had anticipated that a constrained supply of DEF, which some industry leaders expected to persist throughout much of 2025, would result in more spot market buying and increasing prices. However, they received some positive news yesterday that suggests potential relief from this situation. Dakota Gasification Company has reportedly developed a solution to continue DEF production and loading without relying on the damaged tank. Consequently, they can produce and load some 32.5% and 50% grade DEF. While Dakota Gasification Company’s supply is expected to remain constrained for now, marketers have been notified that the plant is investigating alternative rail solutions to alleviate the effects of the tank issue.
This development is a welcome piece of news and instills some hope that the supply disruptions may not be as severe as previously thought. However, it is important to acknowledge that the DEF market is evolving from a strong supply in 2024 to a more restricted condition anticipated in 2025. Furthermore, as winter progresses and the demand for nitrogen-based fertilizers (urea) increases with the upcoming planting season, the availability of DEF is likely to become more limited, which could lead to higher prices.