Helium supply a risk factor for MR OEMs and operators
September 12, 2018
By Phil Kornbluth
It is common knowledge within the medical imaging community that liquid helium is critical to the operation of superconducting MR systems. For that reason, scanner manufacturers and system operators need to keep an eye on what is going on with respect to helium supply, especially given the increasingly volatile helium market that we have experienced in recent years. The cost of liquid helium should also be a concern, but given the increasingly efficient helium usage of newer generation MR systems, the cost of helium should be a secondary issue.
Liquid helium is the coldest substance on the planet, with a boiling point of -452 degrees Fahrenheit (-269 degrees Centigrade). Due to its very cold temperature, it is utilized to cool the niobium titanium wire that is utilized in superconducting MR magnets down to temperatures where the wire loses its resistance to electricity and becomes superconductive. After a superconducting magnet receives its initial charge of liquid helium, the liquid helium that cools the niobium titanium wire gradually vaporizes over time and must be replenished periodically to avoid quenching the magnet. While early generation MR magnets required bi-monthly top-off, the latest generation magnets might only require replenishment on an annual basis. During periods of severe helium shortage, there is increased risk that helium deliveries could be delayed, increasing the risk of a magnet quench. When a magnet quenches, there is the potential to damage it, disruption to patient flow while the magnet is being repaired or cooled down to helium temperatures, as well as the cost to replace the helium.
Helium supply situation
From 2011 – 2013, the helium business experienced the most severe and extended shortage in its history. Throughout that three-year period, there was an average 20 percent shortage of helium supply worldwide and all of the major helium suppliers allocated supply to their customers. Due to the shortage, it was a seller’s market and helium suppliers increased prices by at least 2 times. Helium supply was a headache for the MR OEMs during this period and there were many unpleasant interactions between them and the helium suppliers.
The shortage turned to an oversupply situation in early 2014 when a major new helium source began production in Qatar and a couple of other less important sources also entered the market. The supply and demand returned to a healthy balance, with markets stabilizing during 2016 and the first half of 2017.
Helium supplies have been relatively tight since June 2017, when Saudi Arabia, the UAE, Egypt and Bahrain announced an embargo of Qatar, which resulted in the temporary loss of almost 30 percent of the world’s helium supply from the market. While Qatar production restarted after an outage of about three weeks, helium markets have remained relatively tight since then and the markets flipped into a shortage situation in February 2018 as demand picked up after the seasonally slow holiday period and several plant maintenance outages negatively impacted supply.
So where are we today? Two of the five major global helium suppliers have been allocating supply to their customers since late winter, and all of the other suppliers are experiencing tight supply. The global helium supply chain is much more “fragile” than it used to be, as the U.S. government’s Federal Helium Stockpile is nearing depletion and the Bureau of Land Management’s (BLM) Crude Helium Pipeline and Storage System is no longer capable of providing significant flex capacity to stabilize the helium market.
Depending upon who you rely on for supply, you might experience shortages or helium allocations. Fortunately, helium supply to the MR market segment, due to its medical importance, is given a higher priority than other applications (e.g., party balloons) where a lack of supply would have less dire implications (unless you own the party store).
Given the tight supply, it is again a seller’s market, and the price of helium will again be trending higher. It is also not a bad time to take a close look at the security of your helium supplier’s supply portfolio and to consider dual sourcing if you want to reduce your exposure to supply allocations or disruptions.
Future supply outlook
Unfortunately, helium markets are expected to remain tight for the next couple of years, as there is modest growth in demand, continued loss of capacity from sources connected to the BLM Pipeline and no major new sources of supply expected to enter the market until the Qatar 3 source commences production (hopefully) in mid-2020. During this period, helium markets will likely experience occasional periods of shortage, especially when production is reduced due to plant maintenance outages. Helium prices are likely to trend higher during this period.
In mid-2021, Gazprom is expecting to commence production from a very large new source in Siberia that has the potential to restore a heathy balance between helium supply and demand and possibly create an oversupply situation as it ramps up production. The Amur Plant will eventually produce 2.1 billion standard cubic feet (BCF) of helium per year from three 700 million standard cubic-foot helium liquefiers. The first of these liquefiers is expected to start up in 2021, with the second unit expected to start up in 2022 and the third unit expected to start up in 2026/2027. To put this in perspective, current helium supply is approximately 7 BCF per year, so a 2.1 BCF increment is quite significant.
Merger between Praxair and Linde
A discussion about helium supply would not be complete without mentioning the pending merger of equals between Praxair and Linde, which is scheduled to close in October. Along with Air Liquide and Air Products and Chemicals, Praxair and Linde are two of the world’s four largest helium marketers. Not surprisingly, both the U.S. FTC and European regulatory authorities are requiring major divestitures of helium assets.
While nothing is final at this time, indications are that a partnership between the private equity firm CVC and the German industrial gas company Messer, will acquire the assets divested in the U.S., while the Japanese-based Taiyo Nippon Sanso Corporation (TNSC) will be acquiring the assets divested in Europe. While specifics have yet to be announced, it is possible that helium customers currently supplied in both the U.S. and Europe by Linde or Praxair could be transitioned to one of the purchasers of the divested assets. Also, Messer should become a significant competitor in the U.S. while TNSC should become a significant competitor in Europe.
About the author: Phil Kornbluth is the president of Kornbluth Helium Consulting LLC. Kornbluth Helium Consulting offers high-quality consulting services related to all commercial aspects of the Global Helium Business. Phil has worked in the Helium Business for the last 35 years, including stints running the global businesses of both BOC Gases and the Matheson subsidiary of Taiyo Nippon Sanso Corporation.
It is common knowledge within the medical imaging community that liquid helium is critical to the operation of superconducting MR systems. For that reason, scanner manufacturers and system operators need to keep an eye on what is going on with respect to helium supply, especially given the increasingly volatile helium market that we have experienced in recent years. The cost of liquid helium should also be a concern, but given the increasingly efficient helium usage of newer generation MR systems, the cost of helium should be a secondary issue.
Liquid helium is the coldest substance on the planet, with a boiling point of -452 degrees Fahrenheit (-269 degrees Centigrade). Due to its very cold temperature, it is utilized to cool the niobium titanium wire that is utilized in superconducting MR magnets down to temperatures where the wire loses its resistance to electricity and becomes superconductive. After a superconducting magnet receives its initial charge of liquid helium, the liquid helium that cools the niobium titanium wire gradually vaporizes over time and must be replenished periodically to avoid quenching the magnet. While early generation MR magnets required bi-monthly top-off, the latest generation magnets might only require replenishment on an annual basis. During periods of severe helium shortage, there is increased risk that helium deliveries could be delayed, increasing the risk of a magnet quench. When a magnet quenches, there is the potential to damage it, disruption to patient flow while the magnet is being repaired or cooled down to helium temperatures, as well as the cost to replace the helium.
Helium supply situation
From 2011 – 2013, the helium business experienced the most severe and extended shortage in its history. Throughout that three-year period, there was an average 20 percent shortage of helium supply worldwide and all of the major helium suppliers allocated supply to their customers. Due to the shortage, it was a seller’s market and helium suppliers increased prices by at least 2 times. Helium supply was a headache for the MR OEMs during this period and there were many unpleasant interactions between them and the helium suppliers.
The shortage turned to an oversupply situation in early 2014 when a major new helium source began production in Qatar and a couple of other less important sources also entered the market. The supply and demand returned to a healthy balance, with markets stabilizing during 2016 and the first half of 2017.
Helium supplies have been relatively tight since June 2017, when Saudi Arabia, the UAE, Egypt and Bahrain announced an embargo of Qatar, which resulted in the temporary loss of almost 30 percent of the world’s helium supply from the market. While Qatar production restarted after an outage of about three weeks, helium markets have remained relatively tight since then and the markets flipped into a shortage situation in February 2018 as demand picked up after the seasonally slow holiday period and several plant maintenance outages negatively impacted supply.
So where are we today? Two of the five major global helium suppliers have been allocating supply to their customers since late winter, and all of the other suppliers are experiencing tight supply. The global helium supply chain is much more “fragile” than it used to be, as the U.S. government’s Federal Helium Stockpile is nearing depletion and the Bureau of Land Management’s (BLM) Crude Helium Pipeline and Storage System is no longer capable of providing significant flex capacity to stabilize the helium market.
Depending upon who you rely on for supply, you might experience shortages or helium allocations. Fortunately, helium supply to the MR market segment, due to its medical importance, is given a higher priority than other applications (e.g., party balloons) where a lack of supply would have less dire implications (unless you own the party store).
Given the tight supply, it is again a seller’s market, and the price of helium will again be trending higher. It is also not a bad time to take a close look at the security of your helium supplier’s supply portfolio and to consider dual sourcing if you want to reduce your exposure to supply allocations or disruptions.
Future supply outlook
Unfortunately, helium markets are expected to remain tight for the next couple of years, as there is modest growth in demand, continued loss of capacity from sources connected to the BLM Pipeline and no major new sources of supply expected to enter the market until the Qatar 3 source commences production (hopefully) in mid-2020. During this period, helium markets will likely experience occasional periods of shortage, especially when production is reduced due to plant maintenance outages. Helium prices are likely to trend higher during this period.
In mid-2021, Gazprom is expecting to commence production from a very large new source in Siberia that has the potential to restore a heathy balance between helium supply and demand and possibly create an oversupply situation as it ramps up production. The Amur Plant will eventually produce 2.1 billion standard cubic feet (BCF) of helium per year from three 700 million standard cubic-foot helium liquefiers. The first of these liquefiers is expected to start up in 2021, with the second unit expected to start up in 2022 and the third unit expected to start up in 2026/2027. To put this in perspective, current helium supply is approximately 7 BCF per year, so a 2.1 BCF increment is quite significant.
Merger between Praxair and Linde
A discussion about helium supply would not be complete without mentioning the pending merger of equals between Praxair and Linde, which is scheduled to close in October. Along with Air Liquide and Air Products and Chemicals, Praxair and Linde are two of the world’s four largest helium marketers. Not surprisingly, both the U.S. FTC and European regulatory authorities are requiring major divestitures of helium assets.
Phil Kornbluth
About the author: Phil Kornbluth is the president of Kornbluth Helium Consulting LLC. Kornbluth Helium Consulting offers high-quality consulting services related to all commercial aspects of the Global Helium Business. Phil has worked in the Helium Business for the last 35 years, including stints running the global businesses of both BOC Gases and the Matheson subsidiary of Taiyo Nippon Sanso Corporation.