While there may be some negative impact on helium production due to Covid-19, so far the impact on helium demand has been much greater.
What does all of this mean to helium market participants? Of course, we are in uncharted waters with respect to this coronavirus. We don’t know how long the pandemic will last, how deep a recession could be, how long social distancing will be practiced, or the choices that our governments will make between personal safety and restarting our economies.
“If that is close to being correct, helium markets would transition from shortage to a tight balance between supply and demand in Q2 2020 – and Helium Shortage 3.0 will wind down two quarters sooner than it would have…”
The basis for my outlook is an assumption is that the world will experience a sharp recession that will last at least through Q2 (second quarter) and Q3 2020, before we start to rebound during Q4. My expectation is that helium demand will drop by at least 10-15% during Q2/Q3 before beginning to rebound in Q4.
If that is close to being correct, helium markets would transition from shortage to a tight balance between supply and demand in Q2 2020 – and Helium Shortage 3.0 will wind down approximately two quarters sooner than it would have without the occurrence of Covid-19.
In fact, the US Bureau of Land Management (BLM) lifted its allocation of crude helium from the BLM System on 26thMarch, for the first time since June 2017, providing a clear indication of reduced demand.
By the time this helium demand does begin to rebound, hopefully by Q4, new supply from an expansion of the Arzew, Algeria source and/or the third plant in Qatar is expected to have entered the market. This would facilitate a continued balance between supply and demand, instead of a return to shortage, even if helium demand rebounds sharply during Q4.
Meanwhile, I continue to expect the start of production from Gazprom’s Amur Project in Eastern Siberia to restore a healthier balance between supply and demand by the middle of 2021.
In summary, Kornbluth Helium Consulting believes that Covid-19 will cause Helium Shortage 3.0 to ease approximately two quarters earlier than it would have had we not experienced a global pandemic. I would characterise this as an ‘optimistic’ or ‘realistic’ forecast, with greater risk to the downside (lower demand) if the pandemic lasts longer or causes a deeper worldwide recession.