Predicting The Next Shortage

First it was argon, then helium and, more recently, acetylene. What’s next?

Predicting The Next ShortageOver the last five years, the gases and welding industry has faced many challenges, not the least of which has been the supply of raw materials. Often, what initially appeared to be a shortage turned out to be a sourcing challenge. Every time, the industry adapted, finding new supply sources and alternate products. Almost inevitably, a new shortage seems to pop up every few years. Which begs the question: What’s next?

A Brief History
In the Fourth Quarter 2006 issue of Welding & Gases Today, we got to the bottom of an argon shortage. Following hurricanes Katrina and Rita, large steel producers operated at reduced capacities, meaning reduced demand for oxygen. Dave Marek, vice president, distributor marketing at Praxair, explained, “Argon being the co-product of oxygen production, when one goes down, both go down. As the economy began to recover, the demand for argon increased, especially in the stainless steel and electronics industries. With less production in some areas and more demand for product in others, the demand for argon surpassed the argon supply.” As suppliers adjusted, argon supplies bounced back.

In 2007, word got around about a helium shortage. Phil Kornbluth, executive vice president, global helium at Matheson, told NPR that several factors led to a supply shortage (listen to full interview below). For one, an Exxon helium plant in Wyoming was operating at partial capacity due to an operating issue. Meanwhile, the U.S. Bureau of Land Management had placed restrictions on six helium refineries as to how much crude helium they could extract from pipelines. As with any commodity shortage, prices rose, and users looked for answers. Welders using helium turned to other shielding gases; industrial and medical users found ways to recycle and recover used helium. In short, the industry adapted.

Most recently, when a furnace fire put one of the country’s only suppliers of calcium carbide temporarily out of commission this spring, distributors faced the challenge of keeping their customers operational when acetylene was not readily available. Inventories were allocated, alternatives were promoted, and distributors turned to other sources for their raw materials. Jack Butler, president at Butler Gas (Pittsburgh, PA), explained in “What To Do When The Sky Is Falling,” “In reality, there is no shortage of calcium carbide. There’s plenty of carbide—it’s just not all in the U.S.A. Distributors have to re-learn how to source materials.”

What’s Next?
With the emphasis on alternative fuel gases in response to acetylene supply strain, were suppliers ready to handle the increase? And what about the accessories required for alternatives? Arcet Equipment Company (Richmond, VA) General Sales Manager Greg Groome explains, “As soon as this situation occurred, the availability of alternative fuel gas cylinders became very spotty while customers and competitors rushed to buy them.” Although some people used alternative gases while acetylene was in short supply, many users made the switch for good. This could be an area to keep an eye on as demand increases.

Copper is certainly a candidate for supply chain challenges. On July 11, 45,000 unionized workers at Chile’s state-owned Codelco mine staged a 24-hour strike to protest modernization plans that they fear will lead to privatization of the mine. The mine produces 9 percent of the world’s copper, and suffered an estimated $40 million in one day of lost copper production. While the crisis was temporarily averted, workers have threatened to strike again if they are left out of negotiations. This is a situation to watch. In a country that controls a third of the world’s copper, labor unrest and work stoppages would certainly mean price increases of welding consumables that use copper.

What do you think will be the next supply challenge?

Gases and Welding Distributors Association