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new-sourcing-on-the-horizon-demand-growth-optimistic
new-sourcing-on-the-horizon-demand-growth-optimistic

New sourcing on the horizon, demand growth optimistic

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Our assessment of the worldwide supply of helium is about 5.9 billion cubic feet (Bcf) for 2021. The pandemic took the helium business from tight to surplus supply in late March 2020 when the global economies shut down and closed borders disrupting global helium demand and supply. As economies opened up and business got back to work mid-late 2020, we estimate that the impact of the pandemic took about 450 million cubic feet (MMcf) out of the market during 2020. The BLM, once again serving as the flywheel, stopped allocations on the pipeline, but was still forced to reinject produced helium back into the reservoir to the tune of 165 MMcf, leaving net production at just 435 MMcf for the year. 2021 is on track for just slightly higher volumes where they have already reinjected almost 30 MMcf into the pipeline during the first four months of the year.

In 2021, helium demand and supply seemed to be back to normal and on track. However, the perfect storm hit the helium business once again reminding us that the helium supply chain is fragile. The Skikda plant in Algeria shut down on June 11 due to a sudden failure of a gas turbine control mechanism. The Keyes helium plant in Oklahoma also went down in June. Finally, on July 1, the BLM had a safety shutdown that they estimate will last into mid-August. The Skikda plant is coming back on-stream, but all totaled, this could take ~80-90 MMcf/month of helium off the market – straining logistics workarounds and putting 2021 helium supply at about 5.9 Bcf for 2021. With the Covid-19 Delta variant surging in regions across the globe, the end of the year could present a more negative picture. Although this current shortage appears temporary, it is not unusual for those who have been in this business for a long time.

Demand for helium can only grow when sufficient supply exists. The 2021 worldwide helium demand is estimated by Intelligas Consulting at 5.9 Bcf and grew about 200 MMcf from 2013, a growth of less than 1% per year due to the two shortages in this past decade and the onset of Covid-19. True demand is closer to 6.2 Bcf but could not be met due to the deficit in worldwide supply. This demand (eg, natural demand) would have been slightly higher if there had been enough global supply available. The largest end-uses of helium include liquid helium for Magnetic Resonance Imaging (MRI) manufacturing and service, gaseous helium for lifting (balloons, airships, etc), and electronics (semiconductor and fiber optics for 5G). According to Lita Shon-Roy, CEO of TECHCET CA LLC, “Helium demand for semiconductor production is expected to grow ~6% per year over the next three years from 2022 to 2024. Helium demand for semiconductor has grown throughout the pandemic and is heating up this year. Strong growth is expected over the next several years.” Helium usage in electronics will most likely surpass MRI consumption by the end of this period.

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