Global helium market update – Market shifting to oversupply by mid-2020s

Published on 5 May 2021
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Global helium market update

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Market shifting to oversupply by mid-2020s

Despite the pandemic weighing heavily on demand, the helium market remains under-supplied in 2021, as it has been since 2018. From 2022, significant additional supply should enter the market from Qatar and Russia which could see the start of a significant loosening of the market. By 2026, these two countries alone could add 3.8bcf/year to global supply, causing >20% oversupply out to 2030, based on 2% pa demand projections. We would expect significant pricing pressure by the mid-2020s unless demand surprises on the upside. For security of supply, it is concerning that by the late 2020s, 75% of global helium supply will come from Qatar, Russia and Algeria (up from 50% in 2020). Some customers may be willing to pay a premium to secure supply of helium from outside of these three countries.






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COVID-19 accelerates helium market balancing

We estimate that global helium demand was down 10% in 2020 due to the impact of the ongoing pandemic. In 2021, we believe demand will rebound to recoup half of the reduction seen in 2020. As a result of this and based on our bottom-up helium supply model, we estimate the global helium market remains tightly balanced during 2021 (4% undersupply), as it has done since 2018. If it were not for the pandemic, and instead demand had stayed flat at 2019 levels (6.2bcf), we estimate there would have been 13% undersupply in 2020 (rather than 3% undersupply) and 9% in 2021.

Significant oversupply likely from mid-2020s

During 2022, significant supply should come online from the start-up of mega-gas/liquefied natural gas (LNG) projects in Qatar (Ras Laffan) and Russia (Amur), which could see the start of a significant loosening of the market, even as demand accelerates above 2019 levels. By 2026, these two countries alone should add 3.8bcf/year to global supply (resulting in global supply of 9.2bcf), and the market could experience nearly 30% oversupply (in 2026), based on our base case 2% pa demand scenario. The significant oversupply persists into 2030, where it would still be above 20%. Demand would need to grow above 4% pa for the oversupply to be more manageable. Otherwise, we expect significant pricing pressure by the mid-2020s. However, due to concerns over security of supply, with 75% of global helium coming from Qatar, Russia and Algeria from 2027, some customers may be willing to pay a premium to secure helium from outside of these three countries.

Climate targets will have a profound impact

From 2030, due to global net zero carbon targets (by 2050) and in order to limit global warming to 1.5 degrees, the market dynamics will shift profoundly. Very little or no new natural gas production will be required and as currently >95% of helium is produced as a by-product of gas or LNG production, substantial new helium production forms will be required outside of traditional methods; otherwise, a wind-down of traditional gas fields (by 2050) will destroy the supply. We see significant opportunity for pure-play helium producers during this period.

Key findings

COVID-19 accelerates helium market balancing; expect price support into 2022

We estimate that global helium demand was down 10% in 2020 due to the impact of the ongoing pandemic. Party balloons, which account for up to 10% of global helium demand (15% in the United States), will have been massively affected due to national lockdowns. Most other segments are linked to the global economy, so will also be significantly affected, although there are pockets of robust growth in areas such as semi-conductors and aerospace. In 2021, we believe demand will rebound to recoup half of the reduction seen in 2020. As a result of this and based on our bottom-up helium supply model, we estimate the global helium market will remain tightly balanced during 2021 (4% undersupply), as it has been since 2018 (see Exhibit 2). If it were not for the pandemic, and instead demand had stayed flat at 2019 levels (6.2bcf), we estimate there would have been 13% undersupply in 2020 (an increase from 10% undersupply in 2019), rather than 3% undersupply, and 9% in 2021 (rather than 4% undersupply). This excludes withdrawals from private helium reserves at the Bureau of Land Management (BLM) storage facility, which are typically used to better balance the market. We note that data on global helium supply/demand and prices are not widely disclosed, which creates uncertainty around exact estimates.

Based on limited data from public auctions for strategic reserves in the United States and other anecdotal evidence, prices have been increasing from 2017 as the market moved into undersupply. BLM auction prices increased by 11% in 2018 (to $119/mcf) and then by 135% in 2019 (to $280/mcf) as Air Products won all 12 lots (equating to 210mmcf) in the final auction. Only three of the over 10 chemical companies competing at the auction were willing to bid above $130/mcf, indicating that, due to increasing scarcity, the prices may be distorted above a going market rate. Anecdotally, we have seen that for some consumers prices continued to increase into 2020. We believe this is the last leg up for this cycle, and that balanced supply-demand suggests current prices will be supported into 2022. During 2022, significant supply should come online from the start-up of mega-gas/liquefied natural gas (LNG) projects in Qatar and Russia, which could see the start of a significant loosening of the market, even as demand accelerates above 2019 levels.

Exhibit 1: Estimated global supply/demand forecast (bcf)


Source: Edison Investment Research based on various sources

A flood of large projects means significant oversupply likely from mid-2020s

We estimate new phases to mega-projects in Russia and Qatar should start ramping up from 2022. Gazprom updated the market in December that Amur is progressing well, and the final phase should start production by end-2024 (sooner than its previous guidance of 2025). Qatar Petroleum has announced that it will add a fourth helium plant to the Ras Laffan (RL) facility (RL 4), which adds another 1.2bcf/year by 2028 (above our previous projections, published in February 2019). By 2026, these two countries alone should add 3.8bcf/year to global supply (of which 3.5bcf/year is from the two mega projects), and the market could experience nearly 30% oversupply, based on our base case 2% pa demand scenario (see demand section for definition). RL 4 (1.2bcf/year by 2028) along with incremental new production in Russia and Algeria (0.8bcf/year in aggregate) are the main reasons that the market swings from being tightly supplied (as per our previously published view) to being significantly oversupplied. We discuss, in more detail, the key differences between our new and previous projections in the Global supply section. The significant oversupply persists into 2030 (still above 20% oversupply). We would expect significant pricing pressure by the mid-2020s unless demand surprises on the upside. Due to very limited historical pricing data, we do not offer price projections; however, we note that BLM conservation (private sector) prices were at least 30–70% lower during the last period of oversupply in 2013–14 (which was not as severe as the projected oversupply from 2026).

Exhibit 2: Global helium surplus/(deficit) (LHS, bcf) versus % surplus/(deficit) (RHS)


Source: Edison Investment Research based on various sources. Note * Excluding changes in private storage (from supply).

Demand would need to grow in line with our 4% pa demand scenario (see demand section for definition), which is not inconceivable given strong Asian market growth potential particularly in semi-conductors, for the oversupply to be more manageable. Under this scenario, the market would see looseness over 2026–28, peaking at 13%, before tightening again in 2029–30. Our projections do not factor in the possibility of rebuilding private storage levels at the BLM reservoir, which could decrease oversupply by up to 3 percentage points (assuming all volumes from the Hugoton-Panhandle (H-P) complex are stored).

For security of supply, it is concerning that from 2027, 75% of global helium supply will come from Qatar, Russia and Algeria (up from 50% in 2020). While helium production is at two separate locations in Algeria, it is at one location in each of Qatar and Russia. During 2017, multiple Arab states closed their borders to Qatar, disrupting helium production and transportation for several weeks, affecting 30% of global supply, until alternative supply routes were established. This Saudi-led embargo was lifted in early 2021. More recently, the temporary blocking of the Suez Canal (in March) due to a huge container ship running aground highlights issues. Russia is the biggest unknown; its Amur facility, which should come online over four stages from 2022, will see its share rise from 2% today to more than 25% from 2025. Disruption to Qatari or Russian supply sources could see a period of market tightness even under our 2% pa demand growth profile; thus, we believe that some industrial gas companies might be prepared to pay a premium to secure supply of helium from outside of these three countries. As a recent example, in March, South African helium producer Renergen signed a 10-year take or pay (conditional) contract for substantial volumes from its phase 2 helium production, which is scheduled to commence in 2024.

Climate targets will have a profound impact on the helium market post-2030

Under all our supply-demand scenarios, oversupply peaks in the mid-2020s. From 2030, due to global net zero carbon targets (by 2050) and in order to limit global warming to 1.5 degrees, the market dynamics will shift profoundly. Very little or no new natural gas production will be required (with existing production left to decline) and as currently >95% of helium is produced as a byproduct of gas or LNG production, substantial new helium production forms will be required outside of traditional methods; otherwise, a wind-down of traditional gas fields (by 2050) will destroy the supply. There is a need for helium-focused producers, where the primary economic driver is not methane extraction, to emerge in the coming years to replace existing supply. There are favourable helium resources in the United States, Canada, South Africa and Tanzania, with helium-rich gas deposits of up to 10% helium. Helium-focused companies operating in these geographies include:

  • United States: Blue Star Helium, Desert Mountain Energy, Tumbleweed Midstream
  • Canada: North American Helium, Royal Helium
  • South Africa: Renergen
  • Tanzania: Helium One, Noble Helium

Some of these companies expect commercial production to start ramping up in the 2020s, with massive growth potential into the 2030s.

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