Covid-19 has been dominating the news for the last few weeks and it is safe to say that most businesses have been impacted in some way. While there have certainly been businesses who have benefited from the pandemic, far more of them – and the economy as a whole – have been hurt.
The most obvious and significant impact has been reduced demand. Initially, demand from China, the world’s second-largest helium market, was reduced significantly when the Chinese economy was put on lockdown.
While China has begun to recover, Covid-19 has now spread to all of the world’s developed economies and the overall impact on helium demand has gotten considerably larger.
Certain applications, such as party balloons and diving gas, will be particularly hard hit. Demand for party balloons, which represents as much as 15% of the US helium market and up to 10% of global demand, has dropped precipitously due to the implementation of mandatory ‘social distancing’ efforts in many locations. Another helium segment that will likely experience sharp declines (after a bit of a time lag) is the offshore market, where a price war between Saudi Arabia and Russia has resulted in the lowest oil prices in 18 years. This will prove the catalyst for a sharp reduction in diving and oil service activity.
If we consider that most other applications impacted less directly by Covid-19 will experience reduced demand due to a global recession, my expectation is that worldwide helium demand has temporarily dropped by at least 10-15% due to this pandemic.
While Covid-19 may have reduced the demand for helium, it has also created significant disruption for the helium supply chain.
As the Chinese economy went into lockdown, manufacturing and export activity were sharply reduced, many outbound sailings (from China) were cancelled, and ports were bottlenecked due to a shortage of manpower. This made it unusually difficult for the major helium suppliers to get empty containers out of China and back to sources in Qatar and the US for refilling.
Even with lower demand, the constraints on container shipping made it difficult to maintain continuity of supply as suppliers were forced to scramble to secure empty containers for refilling.
As roughly 95% of the world’s helium is produced as a by-product of natural gas processing or LNG production, reduced demand for LNG would also result in lower production of helium to the extent that natural gas throughput at the plants where helium is produced is reduced.