Helium prices rise as Qatar LNG shutdown exposes fragile supply chains
The Iran war has caused disruptions in Qatar's natural-gas processing, which have pushed helium prices up sharply. This exposes the fragility of this small but important market that supports industries ranging from semiconductors to imaging.
According to Phil Kornbluth of Kornbluth Helium Consulting's president, the spot price for helium has?doubled in recent months as buyers scrambled to secure supplies.
QatarEnergy - the second largest LNG exporter in the world - announced a production stop at its 77 million ton per annum (mtpa),?facility, last week. It also declared force majeure for LNG shipments due to the conflict.
Helium is a by-product of the natural gas processing process. Any disruption in LNG production directly affects helium supplies.
Qatari Energy Minister Saad Al-Kaabi said to the Financial Times that even if the war ended immediately, it would still take weeks or months for the deliveries to resume normal.
Qatar is not a marginal supplier, but a pivotal one.
The U.S. Geological Survey estimates that the U.S. will produce 63 million cubic metres of helium by 2025. This is out of 190?million cubes of helium produced globally. This represents about one third of the world's supply.
If these conditions (supply disruptions) continue, the market will be missing about 5.2 millions cubic meters of Helium each month, said Alexander Romanenko, CEO at IndexBox, a market research firm.
The disruption is reverberating throughout a market that has limited spare capacity and storage. This leaves buyers with very few alternatives in the short term.
Iwatani, Japan's leading helium supplier, said that it had been able to maintain a stable supply of helium for customers such as semiconductor manufacturers. This was partly due to the fact that the company also sources helium in the United States. It also keeps stockpiles both in Japan and the U.S.
A MARKET BUILT ON CONTRACTS, NOT TRANSPARENCY
Helium markets are very different from other commodities.
The majority of supply is sold via long-term contracts, rather than on a transparent spot marketplace. This means that price signals are often slow to emerge even when supply tightens.
The?opacity of the market makes it difficult to determine prices, but there are already signs that supply is tightening.
Anish Kapadia is the CEO of market-research firm AKAP Energy. He said that early indications indicate a 50% increase in spot prices.
In a prolonged disruption, the prices could increase sharply. They may even reach past shortage peaks that were more than $2,000 for every thousand cubic feet.
Romanenko said that a 30-day interruption could increase delivered helium by 10% to 20 percent, and a 60 to 90-day disruption could raise prices by 25 to 50 percent, especially for those without long-term contracts.
Helium's properties pose a further constraint. The gas is usually shipped in liquid form, and slowly evaporates during transportation.
Chris Bakker is the CEO of Avanti, a developer of helium.
When you liquefy the product, which is how it's shipped worldwide, you have 45 days to deliver it to the final user.
CRITICAL INDUSTRIES FIRST in Line
If the supply continues to tighten, suppliers will typically prioritize key?sectors in allocating volumes when force majeure occurs.
Kornbluth stated that industries like medical MRI and rocket ship manufacturers would likely receive 100% of 'their needs', while semiconductor producers might?receive a 95%.
The cuts would be more severe for lower-priority items, such as welding, diving gear, and party balloons.
Kim Young-bae, a lawmaker from South Korea's ruling Party, warned last week that the U.S. and Israeli war against Iran could disrupt supply of key semiconductor manufacturing material, citing helium as an example.
Helium is a key element in many technologies, where there are few substitutes.
According to Kapadia, industrial gas companies that source helium from Qatar such as Air?Liquide and Linde, are most vulnerable to supply shock.
Air Products stated that it would take steps to ensure the continuity of supply, but provided no further details.
Linde refused to comment, while Air Liquide stated that it relied upon multiple?sources on different continents as well as its storage caverns in Europe.
Kornbluth & Bakker also said that Iwatani Japan is exposed.
If disruptions continue, producers outside of the region may benefit.
Kapadia said that Exxon Mobil, North American Helium, and smaller developers like Helix Exploration, Blue Star Helium, and Canada's North American Helium, could all see a stronger demand.
(source: Reuters)
