Categories: General Market Commentary- DPC
Topics: General Market Commentary- DPC

The Helium Party is Just Getting Started for Investors

Imagine… rushing your loved one to the hospital with a life-threatening condition such as a potential stroke only to find out the medical staff can’t confirm your suspicions because the MRI machine is inoperable due to lack of a critical element: helium. 

That’s just one poignant example of the type of daunting scenario the world may soon face due to the global helium shortage.

Helium (He), a nonrenewable element, is found deep within the Earth’s crust and is currently in short supply due mainly to decreased output from major producers.

According to the gas industry, the world is presently in the grip of “Helium Shortage 4.0” which can be blamed on declining and unreliable production from existing sources, including Russia and right here in the United States.

It’s the fourth time in two decades the world has found itself facing a dire helium shortfall.

Russia, a key culprit, has systematically curtailed helium production ever since it invaded its peaceful neighbor, and there have been unforeseen supply disruptions there as well. 

The country’s Amur helium plant, which is owned by Gazprom, caught fire early last year leading to a catastrophic explosion and indefinite shutdown (see below).

Around that same time, a major leak at the Cliffside crude helium enrichment plant in Amarillo, Texas, put a temporary clamp on the flow of helium. 

Supply disruptions such as these are a very big deal for a number of industries, including medical and tech.

Hospitals — which utilize liquid helium to cool superconductive magnets in MRI machines — make up about a third of global helium demand. 

And that’s only the tip of the iceberg. 

Helium is critical to a wide range of applications that require extremely low-temperature environments (below minus 429 degrees F) that are only attainable at the frigid temperatures delivered by liquid helium.  

Aerospace engineers use liquid helium to pressurize the structure of rockets prior to blastoff.

And because helium is non-reactive to most other elements (and, subsequently, provides an inert protective atmosphere), it’s ideal for the growing of silicon crystals needed for wafers used in semiconductors. 

Other applications are as varied as weather and party balloons, automobile airbags, fiber optics, microscopes, and even as a coolant for the world’s expanding fleet of nuclear reactors.

For processes requiring temperatures below minus 429 degrees Fahrenheit, there simply is no substitute for the second lightest element on Earth.

We’ve all gotten used to the reliability of weather reports… and there’s a reason for the noticeable increase in accuracy over the last decade or two. Weather balloons, which are powered by helium, are typically released twice daily from some 900 locations worldwide, including around 100 launch sites across the US and Canada (see below).

Last year, due to a worsening helium shortage, the US National Weather Service in Florida had to cut its weather balloon launches from twice to once daily — causing critical disruptions to weather forecasting services.  

As supply continues to be constrained, helium demand is only going to go up as new applications are being developed primarily in the medical and industrial sectors. 

As a result, industry analysts expect the growing supply/demand imbalance to support higher helium prices and demand growth through 2028 where the market could balloon — no pun intended — to US$6.5 billion.

Numerous investment opportunities are popping up as a result, including right here in the United States. That’s because the US, by far, has the world’s largest reserves of helium at an estimated 8.5 billion cubic meters; other top producers include Algeria, Qatar, and Russia. 

The question is, with such massive reserves, how did the United States — and the world for that matter — find itself facing such a severe helium shortage?  

First, for decades, the US government dominated the global helium business through its Federal Helium Program (FHP) wherein the Bureau of Land Management was tasked with gathering and storing the lion’s share of the world’s helium. 

Those were the salad days, so to speak, where the federal government viewed helium as a natural resource deemed critical to national security.

Then, in 1996, Congress — like so many other critical miscalculations on natural resources by the US government — directed the FHP to sell off most of its helium stockpile and, years later, in 2013, made moves to essentially privatize its remaining helium storage and pipeline infrastructure.  

Those mandates, of course, completely backfired, resulting in lower helium prices, making it difficult, if not impossible, for private companies to attract investment capital into the space. And, thus, a period of severe underinvestment in the exploration and production of helium ensued. 

It’s important to note that almost all of the world’s helium production comes from natural gas reservoirs, many of which were discovered and developed decades ago, and that only a tiny fraction of those reservoirs have helium in a high enough concentration for economical extraction to occur. 

And that’s essentially how we got to where we are today.  

So the question is… Is the helium party over? 

The answer is… No, not by a longshot!

With rising demand and dwindling supply, quite the opposite is true… particularly from an investment standpoint. 

Stay tuned as we’ll be exploring a number of unique investment opportunities in the helium space in the coming weeks and months… This party’s just getting started!

Mike Fagan
Editor, Daily Profit Cycle