The Iran war is threatening supplies of helium, a vital and already scarce gas used in the manufacturing of semiconductors, medical imaging systems and other key industries.
Iranian strikes have forced Qatar to shut down liquefied natural gas production, directly impacting the supply of helium, which is extracted as a by-product of natural gas processing.
“The market is currently missing about 5.2 million cubic metres of helium per month for as long as Qatar-linked production remains offline,” Aleksandr Romanenko, founder and chief executive of market research firm IndexBox, told The National.
“That is a large enough disruption to tighten the global market very quickly.”
Endangered element
Helium is the lightest noble gas and the second most abundant element in the universe. On Earth, most of it is found beneath the crust alongside other natural gases.
Qatar is the second-largest producer of helium after the US, accounting for about one-third of global supply. The US Geological Survey estimates US helium production at 81 million cubic metres, while Qatar's production stands at 63 million cubic metres.
Liquid helium boils off and can be captured and recycled by re-liquefying it. However, once helium is released in the atmosphere, it will continue rising until it escapes into space. making it the only truly unrecoverable element, according to the American Chemical Society.
Thus, “helium in recoverable quantities is found in only a few locations around the world, and these sources are being rapidly depleted”, making it irreplaceable and “endangered”, according to the Washington-based ACS.
Phil Kornbluth, president of New Jersey-based Kornbluth Helium Consulting, said helium supply was plentiful going into the conflict. He expects that when Qatari production returns to normal, helium supplies will return to the previous level.
But he warned that “as soon as pre-crisis inventories are consumed and as long as supply from Qatar is shut down, the helium market will experience a significant shortage”.
There are alternative sources: production from Russia's Amur 2 plant, which was recently commissioned by Gazprom, can replace 600 million to 700 million cubic feet (MMcf), while a storage facility in Germany can replace roughly 300 MMcf, Mr Kornbluth added. Helium from US storage caverns can also add some additional supply there.
But, “only around half of the lost supply from Qatar can be replaced”, Mr Kornbluth cautioned.
Struck down
On March 2, Iran attacked Ras Laffan Industrial City in northern Qatar, which has production capacity of 77 million tonnes of LNG. Following the attack, Qatar suspended exports of LNG to global markets, which also impacted helium supplies.
“Qatar is not only the second-largest producer by current output; it is also one of the most important helium resource holders globally, which reinforces its structural importance to the market,” Mr Romanenko said.
The Iran war has not only disrupted oil flow from the Middle East but it also impacted supply of fertilisers and other oil products to global markets.
The conflict started on February 28 after the US and Israel launched attacks on Iran, with Tehran carrying out retaliatory strikes on the Middle East's energy infrastructure and civilian sites.
Shipping traffic through Strait of Hormuz also came to a virtual halt as Iran attacked vessels passing through narrow waterway between it and Oman, which carries about 20 million barrels of oil per day.
Apart from Qatar, energy infrastructure in the UAE, Bahrain, Saudi Arabia, Kuwait, Iraq and Oman was also affected by Iran's retaliatory strikes, with Gulf countries announcing reductions in oil production.
Chips could be down
Helium is used in a wide variety of specialised industries, according to the UK's Royal Society of Chemistry.
These include helping weather balloons and airships fly, creating a protective atmosphere for the manufacturing of fibre optics and semiconductors, acting as cooling agents for medical apparatus such as MRIs, and, when mixed with oxygen, providing an artificial atmosphere for deep-sea divers and others working under pressurised conditions. It was also used to cool instruments on the Apollo space missions.
Of these, arguably the biggest sector that would take a hit are semiconductors, which are the backbone of modern technology and the current artificial intelligence boom.
“Helium may sound like a simple industrial gas, but its properties make it indispensable in semiconductor manufacturing,” said Tareq Aljaber, founder and chief executive of San Francisco-based AI firm Averroes.
“And if the current conflict in the Middle East continues to escalate, the next semiconductor disruption may not come from silicon shortages or chip demand. It may come from a gas most people only associate with balloons,” he said.
Helium prices surge
Helium prices also shot up amid Qatar's production stoppage, with prompt delivered helium for uncontracted volumes going up by roughly 10 per cent to 15 per cent, Mr Romanenko said.
If the disruption lasts to the end of March, prices are expected to be up about 10 per cent to 20 per cent on pre-crisis levels, he added.
If it lasts two months, the likely range is 25 per cent to 40 per cent and if it stretches to three months, a 40 per cent to 60 per cent increase becomes plausible, “along with genuine physical shortages outside the best-buffered regions, especially in Europe and parts of Asia”, he said.
The industries most affected would be semiconductors and fibre optics, MRI and other medical cryogenic applications, laboratories and research, and aerospace. Welding-related industries are also expected to be hit if the shortages persist.
“These sectors are most vulnerable because they require both high purity and continuity of supply, and in some cryogenic uses helium has no practical substitute,” Mr Romanenko said.
Spot prices, which only represent a small slice of helium sales, have gone up by 70 per cent to 100 per cent, or more, very quickly. With the exception of a surcharge implemented by one of the major helium suppliers, contract prices have not moved yet.
