America’s dominance of the global helium market is ending

America’s dominance of the global helium market is ending

Sep 28th 2013 |From the print edition

NOT every commodity contributes both to the gaiety of existence and life-saving technology. Helium does not just fill balloons and render voices squeaky. In gaseous form the inert, lighter-than-air gas is used in a range of applications from welding and fibre-optic technology to deep-sea diving. Super-cold liquid helium is essential to making and running the superconducting magnets for MRI scanners and to manufacturing electronic devices from TVs to phones. The world stands on the edge of a “helium cliff” precisely because the gas has always proved so useful.Unless American politicians can come to an agreement by October 7th, supplies could face a sudden and dramatic shortfall. A third of the world’s helium comes from an underground reservoir in Texas built up under government auspices and run by the Bureau of Land Management. Such was the supposed strategic value of helium, a by-product of natural gas, that a reserve was created in 1925 to supply the gas to inflate airships. So jealously did America guard its helium that other countries had to fill dirigibles with flammable hydrogen—the Hindenburg was one of dozens that went up in flames as a result.

Once airships had drifted out of fashion, helium remained crucial to the space race and nuclear-weapons development. Nonetheless overall demand tapered. By the mid-1990s the cost of running the Federal Helium Reserve, which bought all the helium that gas firms could produce, was too steep to justify a buffer that was not needed. Lawmakers decided to close it and sell most of the accumulated helium to pay off debts of $1.4 billion.

Because these debts are now paid, federal funding will be cut unless Congress agrees on a deal before October 7th to keep financing the reserve. Such a deal ought to be doable: the Senate agreed to keep the reserve going on September 19th. But given the bitter fight over the entire federal budget, helium may be overlooked. If so, supplies of 2.1 billion cubic feet a year until the reserve is emptied in 2019, out of a global market of 6.3 billion, will stop.

A sudden shortfall would be painful. Helium demand has grown by around 5% a year since 2000 with the advent of new applications, such as MRI scanners. Prices have doubled over the past five years. America’s conventional gasfields, the source of most helium, are depleting and ways to plug the gap left by the rundown of the reserve have proved difficult to develop. New plants in America and Australia are producing the gas but mishaps and technical difficulties at other new refineries in Qatar and Algeria have crimped supplies. This has encouraged firms such as Siemens and GE to look for substitutes for helium. As a result demand may expand by only 2.5% a year for the next decade or two, according to John Raquet of Spiritus Group, a consultancy.

Relief for the helium market seems destined to come from Russia, long a minor producer. The country has the wherewithal to create a reserve of its own. Gazprom appears to be gearing up to become a big supplier by 2018, just as America’s reserve is set to run dry (if it secures the cash to continue past October). Not everyone will be pleased that an arm of the Russian state may in future hold sway over their medical treatment and their children’s parties.