The announcement that China National Offshore Oil Corp. (CNOOC) has declared force majeure due to the impact of coronavirus on its demand for LNG, provides a reminder that helium markets are also likely to feel at least a temporary impact from the coronavirus pandemic.
Helium markets may be impacted in two ways. As helium is produced as a by-product of LNG production at five plants located in Qatar, Algeria and Australia, any curtailment of production at the LNG plants that also produce helium would also reduce helium production. Of the LNG plants that produce helium, the plants in Ras Laffan in Qatar are by far the most significant to helium supply, with approximately 30% of the world’s helium produced in Qatar. Qatar is known to be one of China’s long-term suppliers of LNG. While some impact on Qatar’s LNG and helium production seems likely, Kornbluth Helium Consulting expects the impact on Qatari production to be fairly minor, based on China’s relatively modest share of Qatari LNG production. The more significant impact is likely to be a temporary reduction of China’s demand for helium. The Chinese market is believed to represent at least 12% of global demand for helium. A significant curtailment of industrial activity due to coronavirus could reduce global demand for helium by as much as 2% – 3%. While this would not be enough to end the global helium shortage, softer demand in China would bring modest, temporary relief to helium markets, at a time when they continue to struggle to cope with Helium Shortage 3.0. Whether coronavirus represents a small blip to helium markets or something more significant ultimately depends on the severity of the coronavirus pandemic, how long it hangs around and how significantly it impacts the Chinese economy. For now, it seems like coronavirus is likely to have a modest positive impact on the balance of helium supply versus demand.