Amid the third major shortage of helium in the last 15 years, procurement professionals are facing ballooning demand, deflating supply and pressure-filled price volatility. Demand for the gas is set to outpace the global supply, which has been falling due to a variety of political and economic factors.
While party balloons are certainly the most visible everyday indicator of disruptions in the helium supply chain, other businesses are affected by these shortages, particularly industrial, technology and health care.
Helium’s Uses and Sources
According to a 2018 report from the U.S. Geological Survey (USGS), 30 percent of domestic helium consumption comes from the operation of magnetic resonance imaging (MRI) machines used to generate images of organs in the body. Helium’s supercooling abilities allow MRI magnets to generate the very strong magnetic fields crucial to their operation. Another 14 percent of available helium is used as lifting gas in blimps and party balloons. Other uses include analytical and laboratory applications (14 percent), welding (9 percent), engineering applications (6 percent), leak detection (5 percent) and semiconductor manufacturing (5 percent).
Most of the shortages are due to the current limited sources of helium and the high cost of extracting the gas. Three-quarters of the world’s helium originates from just three places: an ExxonMobil-owned site in Wyoming, Ras Laffan Industrial City in Qatar and the U.S. National Helium Reserve near Amarillo, Texas. The supply issues have mostly stemmed from the Qatar and Texas sites.
In 2017, Saudi Arabia and the United Arab Emirates implemented an embargo on Qatar. As a result, the small country’s helium industry, which accounts for about 28 percent of global supply, was temporarily shut down. During that time, the U.S. government began selling off its strategic supply to cover the shortage.
Moreover, the National Helium Reserve’s fields are depleting, and the U.S. government is on track to exit the helium business by 2021. Further compounding issues, ExxonMobil plans to partially shut down its Wyoming plant this summer for maintenance. Due to these factors, helium prices have been rising at 1.6 percent per year for private buyers, according to February USGS data. However, as the government auctions off the last of its helium reserves through 2021, large buyers are beginning to frantically bid for what’s left. The entire stock of 2019 helium auctioned in August 2018 was won by Air Products, at prices that were 135 percent higher than the prior year’s auction.
Supply managers can use strategies to mitigate some of these risks. Some industries can switch to helium alternatives: Argon can be substituted in welding, hydrogen could be a viable option as a lifting gas, and nitrogen may be used in some cooling systems.
Potential new suppliers could emerge. As international vendors vie to replace the U.S.’s production, new helium plants are expected to open in Canada, Russia and Qatar. Also, price volatility can be mitigated through longer-term contracts with suppliers. Lastly, an on-site supply model, where helium is piped directly into the purchasing organization’s facilities, provides more direct access to suppliers’ stocks.
If these current trends persist, supply managers should not expect easy access to helium and should thus make plans to ensure their needs are met.
By Ben Kempenich
Sign up to our newsletter
Suez Canal Crash Further Destabilizes Global Supply Chains
While it’s unlikely to disturb this year’s projected economic growth, the Suez Canal blockage is yet another wake-up call to prioritize supply chain resilience.
Procurement and the Labor Market in 2021
Procurement professionals and hiring managers who closely follow trends in the labor market will be better equipped to contend with the growing deployment of a temporary workforce, increasing costs of attrition, mounting shortages of skilled labor and worsening labor market inequality.