At this meeting, we received (and what too many people missed) a whole lot of information. Some of it surprising, much of it made perfect sense and some of it was downright upsetting.
If you need it in a nutshell, here it is:
a. The shortage has not been contrived.
b. Expect more price increase; as many as two or three a year until perhaps 2012.
c. There is almost NOTHING we can do about this problem but hang on for the ride.
Make sense? Surprised? Upset? You should be all three.
The meeting hosted by The International Balloon Association (IBA) brought together a number of manufacturers, distributors, decorators, party store owners and others. The keynote speaker of this meeting was Phil Kornbluth. Mr. Kornbluth is the Executive Vice-President of Global Helium, Matheson Tri-Gas. His company supplies bulk and specialty gases and gas handling equipment. His company is one of only six companies in the world today that refines and supplies helium.
Let me repeat that:
His company is one of only six companies in the whole world today that refines and supplies helium!
And here is something else startling – there are only 15 sources of helium in the entire world! Ten of those 15 are in the United States.
So, there are very few sources for helium and even less refiner/suppliers of the gas. One little hiccup in the supply of helium at the source, in refinement or in distribution and everything goes haywire. In 2006, the United States Bureau of Land Management started hiccupping and the whole world got indigestion. Mr. Kornbluth called this the beginning of the “perfect storm” not only for us, but for everyone on our planet that needs and uses helium today.
The Bureau of Land Management (BLM) is THE major supplier of crude helium to refiners in the United States, who market and sell pure helium throughout the world. Managing the nation’s "federal helium reserve" was a quiet federal program until 2006 when temporary shortages made news around the world.
Mr. Kornbluth said the #1 cause of our shortage problem was the BLM losing pressure in two of its three compressors in 2006. This caused outages to supply the helium and the shortages began. And because America supplies 75% of all the helium in the world and the BLM holds most of the helium, pretty much every helium supplier experienced tight supply,
2006 was just a real bad year for helium. Beside the BLM issues, there were capacity utilization problems in both Algeria and Qatar. This impacted 8% of the worldwide supply. Planned shutdowns and unplanned outages occurred in four other plants as well.
2007 really wasn’t much better as price increases continued, surcharges were employed by suppliers and almost every supplier of the gas was put on “allocation” (i.e. they were being rationed). Added to these issues was trouble at the huge ExxonMobil plant throughout much of the year. First, production was off 15% from April-September because of a CO2 removal problem. Then in October their output was reduced by 50% while repairs were being made to fix the initial problem.
This brings us to 2008. While supply shortages have eased somewhat, there is still so much that could go wrong to create more troubles for not only price increases but supply shortages as well.
TRUE or FALSE??
When a crisis of any kind occurs in our world today, there seems to be a propensity to want to twist the facts to either make a better story (in the media) or cause more of a stir. The very same holds true when talking about helium and the predicament we are in because of the short supply of this most necessary gas for our industry. Here is a little quiz you can take to see just how much you think you really know about helium in the world today:
The world is going to run out of helium by 2015.
The U.S. government’s strategic stockpile will be largely sold off by 2015. The world still has tremendous unexploited helium reserves.
Helium price increases are the result of price gouging by suppliers who are making excessive profits.
Despite the price increases, helium profitability is not much different from other gases. Helium profitability has recovered after a series of cost shocks and reduced margins earlier in the decade.
Helium is the only gas on earth that is lighter than air.
Helium is the second lightest element and second smallest molecule behind only Hydrogen. This acronym 4H MEDIC ANNA will help you remember all the lighter than air gases:
H – Hydrogen
H – Helium
H – Hydrogen Cyanide
H – Hydrogen Fluoride
M – Methane
E – Ethylene
D – Diborane
I – Illuminating Gases
C – Carbon Monoxide
A – Acetylene
N – Neon
N – Nitrogen
A – Ammonia
Helium is the only gas used to lift balloons.
Many of the gases listed above are not practical for use in balloons, but they have been used. The following combine poor lift with objectionable properties: carbon monoxide, hydrogen cyanide, hydrogen fluoride, diborane, ethylene and acetylene. Nitrogen has negligible lift. Neon is harmless and offers a modest degree of lift; however it costs roughly the same as helium, another noble gas with far superior lift. The four remaining gases (ammonia, methane, helium, and hydrogen) have been used as balloon gases.
Ammonia has sometimes been used to fill weather balloons. Due to its relatively high boiling point (compared to helium and hydrogen), ammonia could potentially be refrigerated and liquefied aboard an airship to reduce lift and add ballast (and returned to a gas to add lift and reduce ballast).
Methane (the chief component of natural gas) is sometimes used as a lift gas when hydrogen and helium are not available. It has the advantage of not leaking through balloon walls as rapidly as the small-moleculed hydrogen and helium. (Most lighter-than-air balloons are made of aluminized plastic that limits such leakage; hydrogen and helium leak rapidly through latex balloons.).
Helium is used primarily for balloon sales.
Helium is a very, very strategic element and has many different uses other than for balloons. 20% of the entire world’s output of helium is used for MRI machines. These medical machines you find in nearly every hospital in our world, and in special MRI centers and doctors offices, use more helium than any other single category of helium user on Earth today. And therein lays a huge problem for the balloon industry. When the going gets tough for helium distribution, the medical, military and high tech fields will get first crack at the gas long before it is distributed for party balloons or parades.
Balloons fall in the helium usage category of “Lifting,” along with parade balloons, scientific and weather observation, the military, DEA and border surveillance craft (e.g. Unmanned Aerial Vehicles – UAV’s), blimps for advertising and TV broadcasting, heavy lifting and automotive air bags. All of these items together form the “Balloon/Lifting/Inflation category for helium usage.
Surely all of these lifting items together use a huge amount of the worldwide supply of helium?
This category of “Lifting” usage for helium only uses 8% of the world’s supply of helium. We are mightily beaten by the previously mentioned MRI (20%); welding (17%) and lab work (10%) categories.
Chemically speaking, helium’s most valuable property is that it is a lighter than air gas.
Though it’s lighter than air quality is fairly unique and very useful, today helium is used in many different applications because of its other special qualities. These days, it is most sought after because it can get so incredibly cold and not freeze.
• Colorless, odorless, tasteless gas
• Chemically and radiologically inert – helium is non-reactive and does not become radioactive
• Second lightest element and second smallest molecule
• Helium has the lowest condensation point of any substance (–452°F)
• Helium remains liquid even at absolute zero (-459F/-273C)
• Helium gas has very high specific heat and thermal conductivity
So what’s the up and coming product for helium usage and who is using it? There is actually a clue in this story. Find it if you can!
You won’t believe it when we tell you…
Tune in for Part 2 of our helium article in the next issue of BALLOONS Parties Magazine ONLINE! to find out.