Download Report IHS CEH Report : Helium (Chemical Economics Handbook 2019)

PDF by S&P Global Commodity Insights; IHS Markit
Information
Format: PDF Language: English Pages: 123 Publisher: S&P Global Commodity Insights; IHS Markit Publitshion date: 2019 ISBN: 105907
Description
Helium is a scarce resource with some unique properties, making it irreplaceable for certain applications, mainly because of its extreme physical parameters, including extremely low density, lowest boiling point of all known substances, one of the tiniest atoms (only the hydrogen molecule is smaller), and excellent heat conducting capabilities. There is no substitute for helium for supercooling applications, which is a requirement for superconducting magnets used in MRI and NMR machines. On the other hand, the extreme properties of helium make its handling and transportation tricky and expensive. As there are only a handful of countries with significant helium reserves and production capabilities, a large amount of the global helium supply is traded. Of the 26 helium plants in operation, five fields alone supply about 80% of the world’s helium; namely the Cliffside storage field operated by the US Bureau of Land Management (BLM), the LaBarge field in the Riley Ridge area in southwest Wyoming, the Hugoton field in Kansas and Oklahoma (all United States), the Hassi R’Mel field in Algeria, and the North field in Qatar. Production outages or slowdowns from one of these five fields will have a severe impact on the global helium supply, making the helium supply chain sensitive to shock. The high cost of liquefaction (helium liquefies at -269°C) makes storing large volumes in liquid form highly uneconomic, and inventories at plants are limited. Therefore, helium is essentially a just-in-time product, and the industry’s flexibility is limited. Factually, most of the helium industry’s inventory is contained in the mobile ISO containers being shipped around the world to so-called helium trans-fill stations, where the helium gets decanted to smaller vessels for distribution to the final customer location. Due to logistical challenges, the distribution of the helium is controlled by a relatively small number of industrial gases players. Overall, the helium industry has oligopolistic characteristics and is highly nontransparent. Both long-term offtake agreements (so-called take-or-pay contracts) and supply contracts are often negotiated privately, and terms are not available to the general public. This leads to an opaque price setting. Shocks to the supply chain are exacerbated by the poor transparency of helium plants, which rarely report outages on a timely basis, as well as communicated estimates on key variables such as helium concentration, production capacity or timelines for expansion that vary broadly even when coming from the same company source. On top of this, official trade figures do not match with production and consumption figures as published; e.g., by the US Geological Survey (USGS). This lack of transparency, combined with artificially low helium prices set by US Government sales prices (BLM auctions), reduces incentives for the exploration of new helium resources. Prior to the most recent price increases starting in 2010, the helium price was not based on any market fundamentals, as this is typically the case with commodity materials. Helium pricing was instead simply the result of dividing the BLM reserves left in the Cliffside Field by the accumulated US Government department (created by the Helium Act of 1960) and adjusted by the Consumer Price Index. A US Government study published in 2010 (Selling the Nation’s Helium Reserve) recommended the placement of a real market price on government helium, and a new price of $106 per thousand cubic feet was implemented in 2015 as a result of the study. US helium reserves were previously sold at an artificially low price by the sell-off of the US strategic helium reserve to a limited number of buyers at a severe discount to fair market value. Any supply interruptions, such as the temporary shutdowns due to LNG plant maintenance or the Qatari trade blockage in June 2017, can have a large impact on the global supply/demand balance for a long period of time, even if the outage is only for a couple of weeks. Helium storage fields such as the Cliffside Field near Amarillo, Texas, United States, can serve as a buffer when supply interruptions are taking place. The United States managed to balance global helium supply and demand for decades by either selling helium or building helium inventory from or at the so-called National Helium Reserves at the Cliffside Field, operated by the US Bureau of Land Management (BLM). However, because of the Helium Privatization Act (HPA), the Cliffside storage dwindled and its buffer capabilities for the world market faded. Supply from the BLM system for the private market ends on 30 September 2021 and will need to be replaced by other sources. The last helium auctions took place in 2018. Air Products contracted to buy over 75% of the 2018 volume in the July 2017 BLM helium auctions, and 100% of the 2019 volume in the August 2018 auction, which was the final auction. The average price increased from $119 per thousand cubic feet ($3,130 per thousand cubic meters) in 2017 to $280 per thousand cubic feet ($7,365 per thousand cubic meters) in the 2018 auction.
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